The Allahabad High Court, Lucknow Bench, has delivered a significant ruling, holding that the Income Tax Department cannot deny credit or refund of Tax Deducted at Source (TDS) to an assessee merely because the amount does not reflect in their Form 26AS, provided the assessee furnishes valid TDS certificates (Form 16A) as proof of deduction.
A Division Bench comprising Justice Shekhar B. Saraf and Justice Prashant Kumar disposed of a writ petition filed by U.P. Rajya Nirman Sahakari Sangh Limited, directing the Assessing Officer to process the petitioner’s claim for refund based on the documentary evidence submitted.
Background of the Case
The petitioner, U.P. Rajya Nirman Sahakari Sangh Limited, a cooperative society, approached the High Court under Article 226 of the Constitution. They challenged a notice dated December 5, 2017, issued under Section 226(3) of the Income Tax Act, 1961, by which the Income Tax Department had directed the petitioner’s bank to pay Rs. 3.50 crore from its account to settle an outstanding demand. The petitioner also sought the return of Rs. 1.50 crore that had already been withdrawn based on the said notice.
The central issue stemmed from the department’s refusal to grant credit for TDS deducted for the Assessment Years 2009-10 to 2012-13 and 2015-16. This refusal led to a demand notice dated October 23, 2017, against the petitioner.
Arguments of the Petitioner
Appearing for the petitioner, Senior Advocate Sri D.D. Chopra argued that the cooperative society is exempt from tax under Section 80P of the Income Tax Act and is therefore entitled to a refund of the entire TDS amount. He submitted that despite filing multiple applications for the refund along with the necessary TDS certificates (Form 16A), the department declined to process the claim. The sole ground for refusal was that the TDS amount was not reflected in the petitioner’s Form 26AS.
Court’s Analysis and Cited Precedents
The High Court observed that the legal position on this issue was “clear and categorical.” The bench relied on established precedents from the Delhi High Court and a previous decision by the Allahabad High Court itself.
The court extensively quoted the judgment of the Delhi High Court in Court on Its Motion vs. Commissioner of Income Tax (2012), which held that an assessee cannot be victimized for the deductor’s failure to upload correct TDS details. The Delhi High Court had directed:
“The statutory powers given to the Assessing Officer are sufficient and should be resorted to and the assessee cannot be left to the mercy or the sweet will of the deductors. Therefore, we direct that when an assessee approaches the Assessing Officer with requisite details and particulars, the said Assessing Officer will verify whether or not the deductor has made payment of the TDS and if the payment has been made, credit of the same should be given to the assessee… We do not accept the stand of the Revenue that they can only write a letter to the deductor to persuade him to correct the uploaded entries or to upload the details.”
The bench also referred to its own judgment in Rakesh Kumar Gupta vs. Union of India (2014), which affirmed that if the mismatch in TDS details is not attributable to the assessee, a writ of mandamus for refund is justified.
Furthermore, the court took note of the Central Board of Direct Taxes (CBDT) Instruction No. 05/2013, which was issued in light of the Court on Its Motion judgment. The circular explicitly directs Assessing Officers to verify TDS claims using certificates furnished by the assessee and grant credit if the payment to the government account is confirmed.
In its final analysis, the court unequivocally stated its position:
“In light of the above judgments and the circular, we are of the view that a taxpayer should not be left at the mercy of an Assessing Officer who chooses to delay the payment of genuine refunds. Furthermore, as long as the assessee is able to provide documents proving that tax has been deducted at source, the same has to be accepted by the Assessing Officer, who cannot insist that the amount match the figures in Form 26AS. It is the responsibility of the Assessing Officer to verify the amounts provided by the assessee through the proof of Form 16A.”
Decision of the Court
Concluding that the petitioner is entitled to receive the refund upon acceptance of the Form 16A certificates by the Income Tax Authority, the High Court issued specific directions to resolve the matter.
The court directed the petitioner to appear before the concerned authority (Respondent No. 3) on October 28, 2025. The authority was mandated to examine all documents filed by the petitioner and pass necessary orders in accordance with the law within four weeks from that date.
The writ petition was disposed of with these directions.
