The Delhi High Court held that the bar under section 205 of the Income Tax Act, 1961 effects when it was established that the tax has been deducted at the source and dismissed the review application.
The revenue, respondent originally filed a writ petition seeking review of the order the court whereby the writ petition was finally allowed, thereby directing the respondent/revenue to refund a sum of Rs. 11,39,870/- to the writ petitioner, Incredible Unique Buildcon Private Limited. Being hit by a delay of about 45 days, the review applicant has also applied to Section 151 CPC for condonation of delay.
On notice, the non-applicant writ petitioner entered appearance through counsel, who in the interest of expeditious disposal opted not to oppose the delay condonation application, which explains the delay in filing the review application broadly on the ground of administrative rigmaroles.
Mr Abhishek Maratha, counsel, who appeared on behalf of the respondent/revenue, accepts notice. The petitioner provided services to an entity going by the name of Clutch Auto Ltd. (CAL). The value of the service provided amounted to Rs.8,50,26,199/-. The said entity, i.e., CAL, deducted tax at source amounting to Rs.24,96,199/-. It is the petitioner’s stand that the tax at source deducted by CAL was not completely deposited with the respondent/revenue.
The petitioner also claimed that the balance amount, after deducting tax at source, was also not remitted to it by CAL. Insofar as this aspect is concerned, the petitioner claimed that it is an issue which is being agitated before the concerned bench of the National Company Law Tribunal (NCLT).
CAL only deposited Rs.69,897/- towards tax deducted at source, resulting in a deficit of Rs.24,26,302/-. This aspect is not disputed by the respondent/revenue. The grievance of the petitioner is that it has not been given credit for the tax deducted at source by CAL, which was not deposited with the respondent/revenue.
The petitioner has approached the court with a prayer to issue mandamus or any other appropriate writ/ order/ direction to the effect directing the Respondent to issue the refund amounting to Rs. 11,39,870 I- due to the Petitioner for AY 2011-12”
It was the mandatory duty of Clutch Auto Ltd to deduct tax at source qua the payments made to the nonapplicant/assessee. Also not in dispute is the legal proposition that vides Section 205 of the Income Tax Act, 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.
Form 16A is amongst others, a piece of evidence which can establish the deduction of tax at source. In a case where the assessee can show reliable material other than Form 16A and prima facie establish the deduction of tax at source, the assessee cannot be denied the benefit of the provisions of Section 205 of the Act.
A division bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia observed that “the non-applicant/assessee admittedly declared in his return of income the tax deducted at source by Clutch Auto Ltd and supported the same with his ledger account. There was no reason for failure on the part of the review applicant to carry out any inquiry if they were not satisfied with the truthfulness of claim of the nonapplicant/assessee qua the tax deducted at source.”
The review applicant being the State and the non-applicant/assessee being the citizen, the latter cannot be burdened with the responsibility to somehow procure Form 16A to secure the benefit of the provision of Section 205 of the Act.
Further held that “from the language of Section 205 of the Act, it is clear that the bar operates as soon as it is established that the tax had been deducted at source and it is wholly irrelevant as to whether the tax deducted at source is deposited or not and whether Form No. 16A has been issued or not.”
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