2023 (10) TMI 625 - HC - Income Tax

Review application - denial of benefit of the provisions of Section 205 - tax at source deducted by company CAL to whom assessee provided services was not completely deposited with the respondent/revenue - non-applicant submitted that the tax deductor did not issue Form 16A, and it was not possible for the non-applicant/assessee to obtain the same - whether this court fell in error apparent on the face of record in placing reliance on the judgment in the case of Sanjay Sudan 2023 (2) TMI 1079 - DELHI HIGH COURT ? HELD THAT - As in the present case, it was mandatory duty of tax deductor to deduct tax at source qua the payments made to the nonapplicant/assessee. Also not in dispute is the legal proposition that vide Section 205 of the Income Tax Act, where the tax is deductable 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 amongst others, a piece of evidence which can establish deduction of tax at source. That said, Form 16A is not the only piece of evidence in that regard. In a case where the assessee can show reliable material other than Form 16A and prima facie establish the deduction of tax at source, in our view the assessee cannot be denied benefit of the provisions of Section 205 of the Act. The assessee cannot be left at mercy of the tax deductor, who for multiple reasons may not issue Form No. 16A and/or may not deposit the deducted tax. In the present case, the non-applicant/assessee admittedly declared in his return of income the tax deducted at source by tax deductor and supported the same with his ledger account. We are not oblivious that ledger account is not the conclusive evidence. But at the same time, we find no reason for failure on the part of the review applicant to carryout any inquiry if they were not satisfied about truthfulness of claim of the nonapplicant/assessee qua the tax deducted at source. Not only this, the non-applicant/assessee even filed a complaint with the revenue authorities alleging that Tax deductor had deducted but not deposited the tax deducted at source. But no action was taken on its complaint, so the non-applicant/assessee had to even seek information by way of his application under the Right to Information Act Despite the aforesaid, concerned officers of the review applicant opted not to quench their baseless doubt by way of detailed inquiry qua deduction of tax at source and came up with this review application raising the unsustainable differentia of Form 16A. 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 benefit of the provision of Section 205 of the Act. We are in respectful agreement with the view taken in the case of Yashpal Sahni 2007 (7) TMI 7 - HIGH COURT , BOMBAY to the effect that from 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. No error as apparent on the face of record found which would persuade us to engage in reviewing the impugned order.

Summary

Issues involved:
The issues involved in the judgment are the review of an order directing the respondent/revenue to refund a sum of Rs. 11,39,870 to the writ petitioner, the condonation of delay in filing the review application, and the dispute regarding the deduction of tax at source by Clutch Auto Ltd (CAL) and its impact on the petitioner's tax liability.

Review of Order and Condonation of Delay:
The revenue sought a review of the order directing the refund, citing a delay of about 45 days. The delay condonation application was allowed as the non-applicant writ petitioner did not oppose it, attributing the delay to administrative rigmaroles. The review application was filed based on a change of mind by revenue officers post the initial judgment. The review applicant contended that the case differed from a previous judgment due to the absence of Form No. 16A as evidence of tax deduction, but no other substantial argument was raised. The court dismissed the review application, emphasizing that reliance on Form 16A alone is not mandatory to establish tax deduction at source.

Dispute over Tax Deduction by CAL:
The writ petition concerned services provided by the petitioner to CAL, with tax deducted at source by CAL but allegedly not fully deposited with the revenue. The petitioner claimed a deficit in tax credit due to CAL's actions. The petitioner's contention was that despite tax being deducted at source, a demand was raised against them. The judgment highlighted the legal provision that the assessee should not be required to pay tax deducted at source from their income. The court held that the revenue cannot indirectly recover the deficit tax or refuse to grant credit for the same, as it would go against the legislative intent of Section 205 of the Income Tax Act.

Conclusion:
The court dismissed the review application, affirming the original order for the revenue to refund the specified amount to the petitioner. The judgment emphasized that the absence of Form 16A does not negate the petitioner's claim of tax deduction at source. It further criticized the revenue's lack of inquiry into the tax deduction issue and upheld the petitioner's right to benefit from tax deduction provisions regardless of Form 16A submission. The court's decision was based on the principle that the assessee should not bear the burden of proving tax deduction solely through Form 16A, especially when other reliable evidence is available.