TDS Credit entitlement where deductee proves deduction; credit allowed after verification and recovery lies against deductor.

Where tax was deducted at source but not reflected in the deductor's Form 26AS, the assessee nevertheless is entitled to TDS credit if it proves deduction by admissible documentary evidence and has offered the income to tax; the assessing officer must verify the documents, afford an opportunity of hearing and allow the credit if verification confirms the deduction. Section 205 bars direct recovery of deducted tax from the deductee; any recovery for non-deposit must be pursued against the deductor under the statutory recovery machinery. Revenue's mere reliance on absence from Form 26AS is not a sufficient basis to deny credit.

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Issues: Whether an assessee is entitled to credit for tax deducted at source (TDS) in the return and before the Tribunal where the TDS is not reflected in Form 26AS of the deductor, but the assessee has offered the income to tax and produced documentary evidence of deduction and receipts net of TDS.

Analysis: The Tribunal examined the statutory scheme for collection and recovery under Chapter XVII of the Income-tax Act, 1961 including Sections 15 to 17, 192, 199, 200, 203, 201, 205 and related provisions. The Court reviewed documentary evidence submitted by the assessee (returns, computation, invoices, bank entries showing net receipts, communications to deductors and Form 26AS) and noted absence of any adverse finding by Revenue disputing that tax was in fact deducted at source. The Tribunal considered precedent authorities (including decisions applying Section 205) holding that once tax has been deducted at source, the revenue cannot call upon the assessee to pay the same again and that statutory machinery exists to recover unpaid deducted tax from the deductor. The Tribunal also noted that Revenue had not shown steps taken against the deductors for non-deposit and had relied solely on the technical ground that TDS did not appear in Form 26AS.

Conclusion: The assessee is entitled to credit for the TDS claimed after verification by the AO of the documents produced. The AO is directed to examine the relevant documents, allow the claimed TDS credit if verification confirms deduction, afford the assessee opportunity of hearing, and, if the deductors have not deposited the deducted tax, to pursue recovery or other action against the deductors under law. The appeal is allowed in favour of the assessee.

Ratio Decidendi: Where tax has been deducted at source and the assessee proves such deduction by admissible documentary evidence and has offered the income to tax, Section 205 of the Income-tax Act, 1961 bars direct recovery of that deducted tax from the assessee and the deductee is entitled to TDS credit subject to verification; recovery for non-deposit lies against the deductor under the statutory machinery.

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