TDS protection under section 205 bars double recovery, but actual deduction must be verified on evidence.

Section 205 of the Income-tax Act prevents recovery of tax from an assessee to the extent the relevant tax has already been deducted at source. Where the fact of deduction is disputed, the finding must rest on evidence and verification, not on assumptions such as the assessee's failure to pursue the deductor. The matter therefore requires fresh examination of whether tax was deductible on the payment, whether it was actually deducted, and, if so, the resulting bar on recovery under section 205.

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Issues: Whether the assessee was entitled to protection under section 205 of the Income-tax Act, 1961 against recovery of demand if tax had been deducted at source on the relevant receipts.

Analysis: Section 205 bars the Revenue from calling upon an assessee to pay tax to the extent tax has been deducted at source. The record, however, showed a factual dispute on whether TDS had in fact been deducted by the payer, and the material placed on record was not independently verified. The conclusion that no tax was deducted, based only on the absence of follow-up action by the assessee against the deductor, was found to be unsupported by evidence. The factual position therefore required fresh examination by the Assessing Officer, including whether TDS was deductible on the payment, whether it was actually deducted, and, if so, the consequence under section 205.

Conclusion: The assessee was entitled to have the issue re-examined in the light of section 205, and the matter was restored to the Assessing Officer for fresh adjudication after verification.

Final Conclusion: The appeal succeeded only for statistical purposes, with the disputed TDS credit issue sent back for reconsideration.

Ratio Decidendi: Where tax has in fact been deducted at source, recovery of the same tax cannot be enforced against the assessee under section 205 of the Income-tax Act, 1961, and a disputed factual finding on deduction must be verified before demand is enforced.

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