In W.P. (C) 7797/2023 -DEL HC- Delhi High Court rules Revenue cannot achieve indirectly what it is prohibited from doing directly; Allows refund of Incredible Unique Buildcon’s claim
Justice Rajiv Shakdher & Justice Girish Kathpalia [31-05-2023]

Read Order: Incredible Unique Buildcon Private Limited V. Office of The Income Tax Officer Ward (12) (1) New Delhi

Chahat Varma

New Delhi, July6, 2023: The Delhi High Court has provided relief to Incredible Unique Buildcon Private Limited (petitioner) and stated that the revenue authorities cannot recover the deficit tax at source from the petitioner that was deducted and retained by Clutch Auto Ltd. (CAL). The court emphasized that the revenue cannot achieve indirectly what it is prohibited from doing directly.

In the case at hand, the petitioner provided services to CAL for a value of Rs. 8,50,26,199, and CAL deducted tax at source of Rs. 24,96,199. The petitioner alleged that CAL did not deposit the full amount of tax deducted with the revenue authorities. The petitioner claimed that it was not given credit for the tax deducted at source by CAL, which was not deposited with the revenue authorities. Instead, a demand of Rs. 15,24,840/- was raised against the petitioner. The petitioner approached the court seeking a writ of mandamus or any other appropriate writ/order/direction to direct the respondent to issue a refund of Rs. 11,39,870/- that was due to the petitioner for the assessment year 2011-12.

The division bench of Justice Rajiv Shakdher and Justice Girish Kathpalia placed reliance on Sanjay Sudan v. The Assistant Commissioner of Income Tax & Anr [LQ/DelHC/2023/1172], wherein it was observed that Section 205 of the Income Tax Act, along with the instruction dated 01.06.2015, clearly indicate that the deductee/assessee cannot be compelled to pay tax that has already been deducted at source from their income. The instruction dated 01.06.2015 aligns with the provisions of the Act, stating that since the Act prohibits a direct demand on the deductee/assessee, it cannot be enforced coercively.

Taking these factors into account, the division bench allowed the petitioner's plea and ordered the revenue authorities to refund the amount of Rs. 11,39,870, which was due to the petitioner for the assessment year 2011-12.