TDS Benefit to Be Granted Even on Non-production of Form 16A if Assessee Established Deduction of Tax At Source | HC

Case Details: Incredible Unique Buildcon Private Limited v. ITO - [2023] 155 taxmann.com 603

Judiciary and Counsel Details

• • Rajiv Shakdher & Girish Kathpalia, JJ.
  • Prakul Khurana & Ms Vrinda Lakhotia, Adv. for the Petitioner.
  • Abhishek Maratha, Sr. Standing Counsel & Akshat Singh, Jr. Standing Counsel for the Respondent

Facts of the Case

The assessee provided services to a company. Such company deducted tax at source from the payments made to the assessee but failed to deposit the tax with the Government. During the assessment, Assessing Officer (AO) raised demand against the assessee, contending that the assessee had not furnished Form 16A with respect to the deduction of tax at source.

The matter reached before the Delhi High Court.

High Court Held

The Delhi High Court held that there was no dispute that it was the mandatory duty of the deductor to deduct tax at source qua the payments made to the assessee. Further, as per section 205, where the tax is deductible at source, the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from his income.

No doubt, Form 16A is a piece of evidence that can establish the deduction of tax at source. However, Form 16A is not the only piece of evidence in that regard. If the assessee can show reliable material other than Form 16A and prima facie establish the deduction of tax at source, then the assessee cannot be denied the benefit of the provisions of section 205. The assessee cannot be left at the mercy of the tax deductor, who may not issue Form No. 16A or deposit the deducted tax for multiple reasons.

In the present case, the assessee admittedly declared in his return of income the tax deducted at source by the deductor and supported the same with his ledger account. It is not obvious that the ledger account is not conclusive evidence. But at the same time, there was no reason found for failure on the part of the AO to carry out any inquiry if they were not satisfied with the truthfulness of the claim of the assessee qua the tax deducted at source.

Moreover, the assessee even filed a complaint dated 25.01.2017 with the revenue authorities, alleging that the deductor had deducted but not deposited the tax deducted at the source.

From the language of section 205, it is clear that the bar operates as soon as it is established that tax has been deducted at source. It is wholly irrelevant whether tax deducted at source is deposited or not and whether Form No. 16A has been issued or not.

List of Cases Reviewed

• • Yashpal Sahnivs Rekha Hajarna v. ACIT 2007 SCC OnLineBom 1315 [Para 12] – followed