Facts of the Case

The petitioner challenged a TDS Certificate dated 01 July 2020 issued under Section 197, alleging that it prescribed a higher deduction rate (1.5%) contrary to earlier directions of the Court which had mandated issuance at 1% for the previous financial year. The petitioner also filed a revision application dated 14 July 2020 under Section 264, which remained pending. The petitioner sought quashing of the impugned certificate and issuance of a fresh certificate at a lower rate.

Issues Involved

  1. Whether the Assessing Officer can issue a TDS certificate at a higher rate without recording reasons under Section 197.
  2. Whether the writ petition is maintainable when a revision application under Section 264 is pending.
  3. Whether the authority is obligated to follow earlier court directions regarding TDS rate.

Petitioner’s Arguments

  • The petitioner contended that the High Court had earlier directed issuance of TDS certificate at 1% and adjustment of excess deductions.
  • Despite binding directions, the respondents issued a certificate at 1.5% for FY 2020–21.
  • It was argued that under Section 197 read with Rule 28AA, the Assessing Officer must provide reasons for acceptance or rejection of an application.
  • The power under Section 197 is not absolute or arbitrary and must be exercised judiciously.

Respondent’s Arguments

  • The respondents accepted notice and relied on the pendency of the revision application under Section 264.
  • They implied that the matter could be appropriately decided within the statutory framework through the revision proceedings.

Court’s Findings / Order

  • The Court observed that the petitioner’s revision application dated 14 July 2020 under Section 264 was still pending.
  • The writ petition was disposed of with a direction to Respondent No.1 to decide the revision application within four weeks.
  • The authority must provide an opportunity of hearing and pass a reasoned order in accordance with law.
  • The Court clarified that it had not adjudicated on the merits of the impugned TDS certificate due to pendency of the revision application.
  • All rights and contentions of both parties were kept open.

Important Clarification by Court

  • The Court expressly stated that it refrained from examining the validity of the TDS certificate dated 01 July 2020.
  • The decision was limited to ensuring expeditious disposal of the statutory remedy under Section 264.

Sections Involved

  • Section 197 of the Income Tax Act, 1961
  • Section 264 of the Income Tax Act, 1961
  • Rule 28AA of the Income Tax Rules, 1962

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:2932-DB/MMH05102020CW74062020_151642.pdf

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