TaxTMI 
TaxTMI 
2026 (1) TMI 1113
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....ource: (a) Copy of leave and license agreement registered with Sub-Registrar's office which defines the monthly rent (b) Copy of Bank Statement evidencing receipt of rent after deduction of Tax of source. 3. The learned CIT(A) failed to appreciate that leave and license, agreement does not provide for any other deduction from monthly rent payable to appellant.: 4. The learned CIT(A) erred in holding that your appellant was obliged to raise the issue before jurisdictional assessing officer or CIT (TDS) exercising the jurisdiction over the deductor. 5. The learned CIT(A) failed to appreciate that your appellant cannot be expected to produce Form 16A when deductor has not deposited the tax deducted at source. 6. The learned CIT(A) further erred in holding that payment of TDS is mätter of bilateral commercial dispute between the parties, and that the appellant cannot escape legal tax liability. Since legally deductor is acting as govt. agent for collection of tax, no liability can be enforced on appellant for deductor's failure. 7. The learned CIT(A) further failed to appreciate that Section 205 of the Income T....
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....ordingly shortfall of taxes in terms of provisions of section 199, the assessee shall not be called upon to pay tax to the extent it has been deducted from his income under the provisions of section XVII, thus the Act puts a bar on direct demand against the assessee in such cases and the demand for such credit mismatch cannot be enforced. It is therefore advised to the CCsIT (CCA) to direct the assessing officers in respective regions to check the facts and if so justified, the assessee's are not put at any inconvenience on account of default of deposit of tax in the Government account by the deductor. 6. Ld AR to support the aforesaid contention further has placed his reliance on the decision of ITAT Mumbai in the case of Naik Naik and Co. Vs. CIT(A) in ITA No. 2915/MUM/2025 dated 30.09.2025, where in the relevant observation of the Tribunal interpreting the issue, are as under: 12. Reliance was placed on CBDT Instruction No. 275/29/2014-IT(B) dated 1.6.2015, wherein the Board clarified that in cases where TDS has been deducted but not deposited by the deductor, the assessee shall not be made to suffer demand on account of mismatch. The Instruction specifically directe....
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....ee, the CBDT Instruction dated 1 June 2015 and the Office Memorandum dated 11 March 2016, and the authorities cited at the Bar. 19. The case turns on a simple but significant proposition. When tax has in fact been deducted at source from the assessee's receipts, can credit be denied merely because the deductor has not deposited the tax or has not correctly reported it and, therefore, the credit does not surface in Form 26AS. In our opinion the answer must be in the negative. Section 205 of the Act erects a clear bar against making a direct demand on the assessee to the extent tax has been deducted at source from his income. The moment deductionis shown on the strength of primary evidence, the embargo of section 205 attaches and the deductee cannot again be called upon to bear the burden. 20. This statutory position is not only plain on the text of the provision but also reinforced by the Central Board of Direct Taxes. In Instruction No. 275/29/2014 IT(B) dated 1 June 2015 the Board recorded that taxpayers were being denied credit because deductors failed to deposit the tax, and directed that in such cases coercive recovery should not be enforced from the deductee.....
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....mong others, deduction by Future Retail Limited of a substantial sum which was not deposited owing to the company's financial condition. In the case of MEP Infraprojects the deposited taxis now reflected on update of 26AS, which only underscores that the mismatch was the consequence of deductor side compliance and not any infirmity in the assessee's claim. For the remaining parties too the Department has not disputed the services rendered or the gross receipts; its sole objection is non appearance in 26AS. That objection, in the face of section 205, the CBDT directions and the binding precedents, cannot prevail. 24. It is important to remember that the assessee has already brought the corresponding income to tax. Denial of credit in the assessee's hands, because the deductor failed to deposit or mis reported the deduction, results in taxing the same income twice. Section 205 is the Parliamentary safeguard against precisely such injustice. The Board's Instruction and Memorandum translate that safeguard into administrative practice. The High Courts have given it judicial benediction. The revenue's proper remedy lies against the defaulting deductor under sections 200 and 201 ....