Facts of the Case

The present writ petition pertains to Assessment Year (AY) 2019–20. The petitioner, Siemens Industry Software NV, was subjected to reassessment proceedings triggered due to an error in the Tax Deducted at Source (TS) return (Form 26Q) filed by Axiscades Engineering Technologies Limited (AETL).

The incorrect TDS return reflected that the petitioner had received an amount of ₹1,09,94,821/- from AETL. However, in reality, the payment was made to a different entity, namely Siemens Industry Software (India) Pvt. Ltd. (SISPL).

Subsequently, AETL rectified the error by revising the TDS return. The updated Form 26AS, downloaded by the petitioner on 24.04.2023, confirmed that:

  • The error had been corrected; and
  • No withholding tax relating to the said transaction was reflected in the petitioner’s records.

Despite this correction, reassessment proceedings had already been initiated, leading to the present writ petition.

Issues Involved

  1. Whether reassessment proceedings can be sustained when they are triggered solely due to an incorrect TDS entry, which is subsequently rectified.
  2. Whether continuation of such proceedings amounts to lack of jurisdiction or absence of valid material.
  3. Whether the impugned reassessment notices/orders are liable to be set aside after correction of Form 26AS.

Petitioner’s Arguments

  • The reassessment proceedings were initiated solely due to an erroneous TDS return filed by AETL.
  • The error stood fully rectified through a revised return.
  • The updated Form 26AS clearly shows no income or TDS attributable to the petitioner.
  • Therefore, the very basis for reopening the assessment ceased to exist, rendering the proceedings unsustainable.

Respondent’s Arguments

  • The Revenue, represented by the learned senior standing counsel, did not dispute the corrected position.
  • It was fairly conceded that in light of the revised Form 26AS, the relief sought by the petitioner would have to be granted.
  • The respondent chose to argue based on the existing record without filing a counter-affidavit.

Court’s Findings / Order

  • The Court acknowledged that the reassessment proceedings were triggered due to an incorrect TDS entry.
  • It noted that:
    • The error had been subsequently rectified, and
    • The revised Form 26AS showed no tax deduction related to the petitioner.
  • In view of this undisputed position, the Court held that:
    • The impugned reassessment notices and orders cannot be sustained.
  • Accordingly:
    • Impugned orders and notices were set aside.
    • The Assessing Officer (AO) was granted liberty to take steps in accordance with law, if deemed necessary.

Important Clarifications

  • The judgment reinforces that:
    • Reassessment cannot survive when its foundational basis is factually incorrect and later corrected.
    • Revenue authorities must rely on accurate and updated records, particularly Form 26AS.
  • The Court did not bar future action but clarified that:
    • Any further steps must be taken strictly in accordance with law and on valid grounds.

Sections Involved

  • Income Tax Act, 1961:
    • Section 147 – Income escaping assessment (Reassessment)
    • Section 148 – Issue of notice for reassessment
    • Provisions relating to TDS reporting (Form 26Q / Form 26AS)

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/RAS17072023CW93132023_182840.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.