Section 205 is a protective provision – Once TDS has been deducted and deposited, the assessee cannot be asked to pay tax again
The Gauhati High Court in the case of Dinendra Biswas v. Union of India & Ors. [WP(C)/2260/2023, decided on May 8, 2025] was dealing with the issue as to whether the non-reflection of TDS in Form 26AS disentitles the assessee from claiming credit of TDS under the Income Tax Act?
It has held that section 205 is a protective provision. Once TDS has been deducted and deposited, the assessee cannot be asked to pay tax again merely due to procedural lapses in TDS reporting.
Let us have a Short Overview of the case:
The issue before Hon’ble HC has following issue:-
Denial of TDS Credit in Income Tax Returns and Issuance of Demand Notices under Section 143(1)
Facts:
The petitioner, Dinendra Biswas, a retired Judge of the Gauhati High Court and former Upa-Lokayukta of Assam, had TDS deducted from his salary during his official tenure for several financial years: 2008–09, 2010–11, 2011–12, 2012–13, and 2013–14.
The deducted tax was duly deposited by the respective employers (Gauhati High Court and Lokayukta, Assam) with the Central Government.
However, the TDS amounts were not reflected in the petitioner’s Form 26AS (TRACES) records due to the employers’ failure to correctly file TDS returns.
As a result, the Income Tax Department issued demand notices under Section 143(1), disallowing TDS credit and raising tax demands against the petitioner.
Contentions of the Petitioner:
Invoked Section 205 of the Income Tax Act, 1961, which provides that where tax is deductible at source, the assessee cannot be called upon to pay the tax again if it has already been deducted by the deductor.
Produced documentation and affidavits from the Registrar General of Gauhati High Court and Registrar of Lokayukta, Assam, confirming deduction and deposit of TDS for the disputed financial years.
Legal Issues:
1. Whether the non-reflection of TDS in Form 26AS disentitles the assessee from claiming credit of TDS under the Income Tax Act?
2. Whether demand notices issued under Section 143(1) can be sustained in light of proven deduction and deposit of TDS by the deductors?
Court’s Observations:
• Section 205 is a protective provision. Once TDS has been deducted and deposited, the assessee cannot be asked to pay tax again merely due to procedural lapses in TDS reporting.
The failure of the deductors (employers) to correctly file or update TDS returns cannot be a ground for penalizing the assessee.
The Income Tax Department is expected to reconcile such discrepancies by coordinating with the deductors, rather than raising demands on the taxpayer.
Cited precedents supporting the proposition that the burden of compliance lies with the deductor, and the assessee cannot be doubly burdened:
• ACIT v. Om Prakash Gattani [2000(1) GLT 294]
• Pushkar Prabhat Chandra Jain v. UOI [(2019) 262 Taxman 118]
• Incredible Unique Buildcon (P) Ltd. v. ITO [Delhi HC, 2023]
Decision:
The writ petition was allowed. The demand notices issued under Section 143(1) were quashed. The Income Tax Department was directed to grant credit of TDS deducted and deposited for the relevant financial years irrespective of Form 26AS mismatch.
The copy of the order is as under:
