Facts of the Case

  • The petitioner challenged outstanding tax demands raised for Assessment Years 2012–13 and 2013–14.
  • The demand arose despite tax already being deducted at source by the employer.
  • The petitioner also sought:
    • Quashing of impugned notices dated 13.10.2014 and 22.07.2015.
    • Refund for AY 2019–20 (later withdrawn as already received).
    • Quashing of intimation and show cause notice dated 04.02.2020.
  • During proceedings, the petitioner withdrew the relief relating to refund for AY 2019–20 as it had already been granted.

Issues Involved

  1. Whether tax demand can be enforced against an assessee when tax has already been deducted at source by the employer.
  2. Applicability and scope of Section 205 of the Income Tax Act, 1961.
  3. Validity of consequential proceedings including show cause notices based on such demand.

Petitioner’s Arguments

  • The petitioner contended that:
    • Tax had already been deducted at source by the employer.
    • As per Section 205, once TDS is deducted, the same cannot be recovered again from the assessee.
    • The demand raised by the department was unlawful and liable to be quashed.
    • Consequential notices and proceedings were invalid.

Respondent’s Arguments

  • The Revenue, through its counsel, fairly conceded that:
    • In view of Section 205, recovery cannot be made from the assessee once TDS has been deducted.
    • The issue is covered by precedent.

Court Findings / Order

  • The Court held:
    • Section 205 creates a clear statutory bar against recovery of tax from the assessee where tax has already been deducted at source.
    • The issue is squarely covered by the judgment in
      Sanjay Sudan v. Assistant Commissioner of Income-tax
  • Accordingly:
    • The tax demand for AY 2012–13 and 2013–14 was quashed.
    • The show cause notice dated 04.02.2020 automatically collapsed.
    • The writ petition was disposed of in favour of the petitioner.

Important Clarification

  • Section 205 acts as a protective shield for taxpayers:
    • Once TDS is deducted, the liability shifts away from the assessee.
    • The department cannot recover the same tax again from the taxpayer.
  • This judgment reinforces that administrative lapses by deductors cannot prejudice the assessee.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/60831102023CW93082022_181831.pdf

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