In a significant judgment restoring balance between system-generated compliance data and statutory protection, the Gauhati High Court has held that the Income Tax Department cannot raise a demand against a taxpayer merely because TDS is not reflected in Form 26AS, if credible evidence establishes that tax has been duly deducted and deposited by the deductor.
The ruling was delivered in the case of Dinendra Biswas v. Union of India [[2025] 175 taxmann.com 534 (Gauhati)] by a Division Bench comprising Chief Justice Vijay Bishnoi and Justice Kaushik Goswami. The High Court allowed the writ petition of a retired judge of the Gauhati High Court who had faced demand notices aggregating ₹8.40 lakhs under section 143(1) for multiple assessment years solely due to non-reflection of TDS in Form 26AS, despite presenting valid certificates and affidavits from deductors.
Background: When Procedural Deficiency Becomes Substantive Demand
The petitioner, a former judge and subsequently the Upa-Lokayukta of Assam, received salary income during the financial years 2008–09, 2010–11, 2011–12, 2012–13, and 2013–14. For these years, the CPC issued demand notices under section 143(1) based on system-generated mismatch reports indicating absence of TDS entries in Form 26AS.
However, the petitioner produced:
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TDS certificates issued by the Gauhati High Court and the Lokayukta Secretariat, Assam.
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Affidavits from the Registrar General of the High Court and Registrar-cum-Secretary of the Lokayukta, confirming both deduction and deposit of tax to the Central Government.
Despite this, the Department declined to grant TDS credit and insisted on tax payment.
Statutory Protection: Section 205 of the Income-tax Act, 1961
The High Court reaffirmed the statutory principle under Section 205, which unequivocally provides:
“Where tax is deductible at source under the provisions of Chapter XVII-B, the assessee shall not be called upon to pay the tax himself to the extent to which such tax has been deducted from his income.”
This section places the entire burden of compliance on the deductor once TDS is effected. The assessee’s liability is extinguished to the extent of TDS, regardless of the deductor’s filing lapse or mismatch in backend reporting.
Court’s Observations and Ruling
The Court categorically held:
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Form 26AS is not the final determinant of TDS deduction or credit eligibility.
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A procedural defect such as non-reflection in Form 26AS cannot override substantive evidence of deduction and deposit.
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The Department’s refusal to grant credit and insistence on tax payment was unsustainable in law.
“The law is well settled that an assessee cannot be forced to pay tax which has already been deducted and deposited by the deductor. The defect of non-reflection in Form 26AS can be cured by the Department in consultation with the deductors.” — Para 14
The High Court quashed the demand notices and directed the Department to allow credit forthwith.
Key Sections Applied
| Provision | Interpretation |
|---|---|
| Section 205 | Protects assessee from demand where tax has been deducted. |
| Section 199(1) | TDS is deemed to be payment of tax by the assessee. |
| Section 143(1) | Intimation based on system mismatch cannot override substantive law. |
Precedents Supporting the Principle
This ruling is in line with multiple decisions across High Courts and Tribunals:
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Yashpal Sahni v. Rekha Hajarnavis, Asst. CIT
[2007] 293 ITR 539 (Bom)
Held: Department cannot recover tax from assessee where TDS was deducted but not deposited. -
Om Prakash Gattani v. Union of India
[2001] 117 Taxman 613 (Gauhati HC)
Section 205 applies even when deductor defaults in depositing TDS. -
Shiv Datt Sharma v. Union of India
[2014] 47 taxmann.com 307 (P&H)
Assessee cannot be faulted where deduction is admitted by the employer. -
Sudarshan S. Mahadik v. Dy. CIT
[2019] 103 taxmann.com 389 (Mumbai - Trib.)
Form 16 and employer confirmation can override Form 26AS in case of mismatch.
Practical Remedies for Taxpayers
Where TDS credit is denied due to 26AS mismatch, the following remedial steps are legally supported:
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Submit a rectification request under Section 154, attaching Form 16/Form 16A and employer’s confirmation.
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File a grievance under e-Nivaran with the Income Tax Department, requesting backend reconciliation.
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Initiate a writ petition before the jurisdictional High Court in cases of persistent administrative inaction.
Concluding Analysis
The judgment in Dinendra Biswas serves as an essential reaffirmation that technical defects in system-generated statements such as Form 26AS cannot defeat the statutory safeguards granted under the Act. The law does not permit duplication of tax liability merely because of backend mismatch.
Tax officers must balance technological processes with legal responsibility—particularly when the deduction and deposit of tax are beyond dispute. The case underscores the constitutional mandate of fair tax administration and calls for urgent standard operating procedures for reconciliation with deductors before coercive demands are raised.
Case Summary
| Particulars | Details |
|---|---|
| Case | Dinendra Biswas v. Union of India |
| Citation | [2025] 175 taxmann.com 534 (Gauhati HC) |
| Bench | Vijay Bishnoi, CJ & Kaushik Goswami, J |
| Sections Involved | Sections 205, 199(1), 143(1) |
| Held | Demand notices quashed; credit to be allowed |
