2020 (6) TMI 302 - HC - Income Tax

Non credit on the tax deducted at source (TDS) - rectification application pending - It is contended that the concerned officer of the Income Tax Department had not taken any call or decision on the rectification applications; particularly when Form 16A had been issued - HELD THAT - Dispose of this writ petition by issuing directions to the 1st respondent to consider and dispose of all the rectification applications at Exts.P2 to P6; the particulars of which have already been given and the status of which is evident from Ext.P12 dated 09.06.2016 after affording an opportunity of hearing to the petitioner by issuing a speaking order as to whether the benefit of the credit on account of Form 16A TDS the petitioner is entitled to or otherwise within a period of two months from the date of receipt of a copy of this writ petition. Till such time the demand raised at Exts.P14 and P14A shall be kept in abeyance. It is also made clear that the interim stay is only till the adjudication of the rectification applications.

Issues involved:
1. Quashing of demand notices raised by the Income Tax Department.
2. Non-credit of tax deducted at source (TDS) as per Section 194 C of the Income Tax Act.
3. Pendency of rectification applications under Section 154 of the Act.
4. Failure of the Income Tax Department to decide on rectification applications.
5. Entitlement of the petitioner to credit on account of Form 16A TDS.

Analysis:

1. The petitioner, a partnership firm engaged in contract work with various clients, including the Southern Railway, sought the quashing of demand notices (Exts.P14 and P14A) issued by the Income Tax Department. The petitioner alleged that despite receiving payments from the Southern Railway with TDS deductions as per Section 194 C, the tax credit was not reflected in the assessment. This issue had persisted since 2008-09, leading to multiple rectification applications under Section 154 of the Act for subsequent assessment years.

2. The petitioner's counsel highlighted the filing dates of the rectification applications (Exts.P1 to P6) and the continuous pendency of these applications, emphasizing the lack of decision or action by the Income Tax Department despite the issuance of Form 16A. The petitioner contended that a decision must be made on the rectification applications in line with the law, especially considering the pending status of the applications and the demand notices received.

3. The Income Tax Department, represented by the Standing Counsel, did not dispute the pendency of the rectification applications but contested the petitioner's entitlement to the tax credit. However, they acknowledged the need for a decision on the pending rectification applications and suggested that the writ petition could be resolved by directing the department to address the applications (Exts.P2 to P6).

4. In the judgment, the court, without delving into the merits of the case, directed the Income Tax Department to review and decide on all pending rectification applications (Exts.P2 to P6) within two months. The court instructed that a hearing be provided to the petitioner and a detailed decision be issued regarding the eligibility of the petitioner for the tax credit based on Form 16A TDS. During this period, the demands raised in Exts.P14 and P14A were to be put on hold, clarifying that the interim stay was contingent on the resolution of the rectification applications.

5. Ultimately, the writ petition was disposed of with the court's directions for the timely adjudication of the rectification applications and the suspension of the demand notices until a decision was reached on the tax credit issue. The judgment aimed to ensure a fair assessment process for the petitioner and the proper consideration of the TDS credit entitlement, emphasizing the importance of a lawful decision by the Income Tax Department.

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