Facts of the Case

The petitioner, Incredible Unique Buildcon Pvt. Ltd., filed a writ petition concerning Assessment Year 2011–12. The petitioner had provided services to Clutch Auto Ltd., which deducted tax at source (TDS) amounting to ₹24,96,199. However, only a small portion of this amount was deposited with the revenue authorities.

Despite deduction of TDS, the petitioner was neither given credit for the same nor paid the remaining dues. Instead, a tax demand of ₹15,24,840 was raised against the petitioner. Consequently, the petitioner sought a refund of ₹11,39,870.

The High Court allowed the writ petition and directed refund. The Revenue thereafter filed a review petition with delay, which was condoned.

Issues Involved

  1. Whether the assessee can be denied TDS credit due to non-deposit of tax by the deductor.
  2. Whether Form 16A is mandatory proof for claiming TDS credit.
  3. Whether the Revenue can recover tax from the assessee despite deduction at source.
  4. Whether the earlier judgment required review due to alleged error.

Petitioner’s Arguments

  • Tax had already been deducted at source by Clutch Auto Ltd.
  • Non-deposit of TDS by the deductor cannot prejudice the assessee.
  • Section 205 bars recovery of such tax from the assessee.
  • The petitioner relied on the principle laid down in
    Sanjay Sudan v. Assistant Commissioner of Income Tax
    and
    Yashpal Sahni v. Rekha Hajarnavis

Respondent’s Arguments

  • The petitioner failed to produce Form 16A as proof of TDS deduction.
  • Without Form 16A, the Revenue could not verify whether tax was actually deducted.
  • Therefore, the benefit of Section 205 should not be extended.

Court’s Findings / Order

  • The Court held that Section 205 clearly bars recovery of tax from the assessee once tax is deducted at source.
  • Form 16A is not the only evidence to prove TDS deduction.
  • The assessee may rely on other material such as ledger accounts and surrounding circumstances.
  • The Revenue failed to conduct proper inquiry despite available information.
  • The Court reaffirmed reliance on
    Sanjay Sudan v. Assistant Commissioner of Income Tax
    and agreed with
    Yashpal Sahni v. Rekha Hajarnavis

Final Order

  • Review petition dismissed
  • Earlier order directing refund of ₹11,39,870 upheld

Important Clarifications

  • TDS credit cannot be denied merely due to non-deposit by deductor.
  • Form 16A is not mandatory; alternative evidence is acceptable.
  • Assessee cannot be penalized for default of deductor.
  • Revenue cannot indirectly recover tax barred under Section 205.

 Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/60803102023CW77972023_123248.pdf

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