DEACON INFRASTRUCTURE PVT. LTD. vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1 INCOME TAX OFFICE AND ORS

9-wp-1223-2023.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 1223 OF 2023 Deacon Infrastructure Pvt. Ltd. .. Petitioner Versus Deputy Commissioner of Income Tax Circle 1 Income Tax Office and Others .. Respondents Mr. Devendra Jain a/w. Mr. Shashank Mehta, for the Petitioner. Mr. A. K. Saxena, for the Respondents / Revenue.

CORAM: B. P. COLABAWALLA & FIRDOSH P. POONIWALLA, JJ. DATE: AUGUST 07, 2026 P. C. 1. Rule. Respondents waive service. With the consent of parties, Rule made returnable forthwith and heard finally. 2. By the present Petition, the Petitioner has challenged the Notices of Demand issued under Section 156 of the Income Tax Act, 1961 (for short, "the Act") raising a demand for Assessment Years 2010-11 and 2011-12, and the consequential Recovery Notices and to allow the legitimate tax credit for Assessment Years 2010-11 and 2011-12 and to issue refund of taxes for Page 1 of 10 AUGUST 07, 2026 Mamta Kale MAMTA AMAR KALE Digitally signed by MAMTA AMAR KALE Date: 2026.08.21 17:19:53 +0530

9-wp-1223-2023.doc various years wrongfully adjusted against the demand for Assessment Years 2010-11 and 2011-12. 3. The Petition has been heard on several occasions. The Affidavit- in-Reply filed by the Respondents, the Rejoinder Affidavit filed by the Petitioner, and the Additional Affidavit, have been taken on record and duly considered. 4. The challenges raised in the present Writ Petition are two-fold: a. Firstly, in respect of Assessment Year 2010–11, the tax was duly deducted at source (TDS) by the payer i.e., M/s. Tricom Fruit Products Ltd (Respondent No.4) but was not deposited to the credit of the Central Government. It is the Petitioner's case that, in view of Section 205 of the Act, such tax deducted cannot be recovered from the Petitioner and the credit for the tax so deducted should be granted to it. b. Secondly, in respect of Assessment Year 2011–12, the Petitioner's grievance is that though a demand was communicated by the Intimation dated 6th March 2014 issued under Section 245 Page 2 of 10 AUGUST 07, 2026 Mamta Kale

9-wp-1223-2023.doc of the Act (Exhibit I1), the intimation under Section 143(1) of the Act giving rise to such demand was never served upon the Petitioner and, in the absence of any such intimation [under Section 143(1)], the Petitioner was unaware of the basis and source of the alleged demand. 5. Brief facts of the case are that the Petitioner is a company engaged in the business of infrastructure development. For Assessment Year 2010–11, Respondent No. 4 deducted TDS amounting to Rs. 31,32,325/-, but deposited only Rs. 1,41,625/- to the credit of the Central Government. The balance TDS was not deposited by Respondent No.4 to the credit of the Central Government. Hence, in the Assessment Order dated 22nd March 2013, passed under Section 143(3) of the Act, credit for the said TDS was not granted to the Petitioner on account of the deductor [i.e. Respondent No.4] having failed to deposit the same to the credit of the Central Government. A confirmation was also given by the deductor [Respondent No.4] confirming that the tax deducted at source could not be deposited owing to the non- availability of funds (Page No.92 Exhibit O2). The Petitioner thereafter filed an Application under Section 154 of the Act seeking rectification of the demand, requested stay of recovery and made repeated representations for grant of TDS credit. However, recovery proceedings were initiated against it, Page 3 of 10 AUGUST 07, 2026 Mamta Kale

9-wp-1223-2023.doc followed by a Recovery Notice for Assessment Year 2010-11 and 2011–12 and adjustment of the Petitioner's refund for subsequent Assessment Years against the outstanding demand for Assessment Year 2010-11 and 2011-12. It is the Petitioner's case that no intimation under Section 143(1) of the Act for Assessment Year 2011–12 was ever served upon it. Despite pursuing its grievance through various representations, including on the CPGRAMS portal, no relief was granted. Aggrieved thereby, the Petitioner has preferred the present Writ Petition. 6. Insofar as the first issue is concerned, the controversy is no longer res integra. The issue of credit for tax deducted but not paid to the credit of the Central Government was the subject matter of the dispute before various High Courts. While deciding a batch of Writ Petitions before us, with the lead matter being Manohar Ramabtar Jhunjhunwala vs Principal Commissioner of Income Tax 17, Mumbai [Writ Petition No. 2063 of 2025, decided on 5th August 2026], we have held that where an Assessee establishes that tax has in fact been deducted at source from its income, the Department cannot deny credit thereof merely because the deductor has failed to deposit such tax to the credit of the Central Government. We have further laid down the procedure to be followed by the jurisdictional Assessing Officer in such cases. The directions given by us in Writ Petition No. 2063 of 2025 shall Page 4 of 10 AUGUST 07, 2026 Mamta Kale

9-wp-1223-2023.doc govern the present Petition and apply mutatis mutandis to the facts of the present case, in so far as Assessment Year 2010-11 is concerned. 7. At this stage, Mr. Saxena, the learned Counsel appearing for Respondent No.1, relying on Para 4.10 of the limited Affidavit-in-Reply filed by the Resolution Professional of Respondent No.4 (Page No.181), submitted that the Petitioner had lodged a claim before the Resolution Professional, which stood admitted, including the TDS component. It was further contended that once the Petitioner's claim has been admitted, the Petitioner cannot simultaneously seek credit of the said TDS from the Income Tax Department. Per contra, Mr. Devendra Jain, the learned Counsel for the Petitioner, relying on page 212 of the limited Affidavit-in-Reply filed by the Resolution Professional of Respondent No.4, submitted that the claim admitted by the Resolution Professional pertains to the unpaid dues receivable from Respondent No.4 and not to the TDS amount already deducted from the payments made to the Petitioner. It was further submitted that the Petitioner could not have lodged a claim in respect of the TDS amount as the corresponding amount had already been paid to the Petitioner after deduction of tax at source and it is Respondent No.1 who is entitled to lodge a claim for such TDS Amount from Respondent No.4. We agree with Page 5 of 10 AUGUST 07, 2026 Mamta Kale

9-wp-1223-2023.doc the submission of Mr. Jain, and hence, reject the objection of Mr. Saxena in this regard. 8. Insofar as the second issue is concerned, the learned Counsel for the Petitioner submitted that for Assessment Year 2011–12, the outstanding demand first came to the Petitioner's notice only upon receipt of a communication dated 6th March 2014, issued under Section 245 of the Act, proposing the adjustment of the refund for Assessment Year 2012–13 against the alleged outstanding demand for Assessment Year 2011-12. It was submitted that no intimation under Section 143(1) of the Act had ever been served upon the Petitioner despite the Petitioner's objections seeking a copy of the intimation and demand notice on several occasions, including their letters dated 11th March 2014 (Page No.62 Exhibit I2) and 1st May 2015 (Page No.84 Exhibit M). 9. Mr. Jain further submitted that the Affidavit-in-Reply dated 25th January 2025, initially filed by Respondent No. 1, was evidently silent on the issue of issuance or service of the intimation under Section 143(1) of the Act for Assessment Year 2011–12. Accordingly, by Order dated 27th January 2025, this Court directed the Respondents to place on record the details regarding the demand raised for Assessment Year 2011–12 and to specifically Page 6 of 10 AUGUST 07, 2026 Mamta Kale

9-wp-1223-2023.doc clarify whether any intimation giving rise to the said demand had been issued or served upon the Petitioner. Pursuant thereto, Respondent No. 1 filed an Additional Affidavit dated 14th February 2025, wherein it was stated that the proof of communication in respect of the service of imitation under Section 143(1) was not traceable. In this regard, it is the contention of the Petitioner that no demand can be enforced against it without service of the intimation under Section 143(1) of the Act. In this regard, Mr. Jain, the learned Counsel for the Petitioner, placed reliance upon the recent decision of this Court in Udyan Nair v. Union of India [2026] 183 taxmann.com 47 (Bombay), the relevant extract whereof is reproduced hereunder:- “18. We observe that clause (d) of Section 143(1) requires that the intimation should be prepared/generated and be sent to the assessee specifying the sum determined to be payable by the assessee or the sum due as refund to the assessee. Further, the second proviso to Section 143(1) [as applicable to A.Y.2010-11] reads as under:- "Provided further that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the return is made." 19. Further, sub Section (1) of Section 156 of the Act reads as under:- "156. (1) When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the Assessing Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable : Provided that where any sum is determined to be payable by the assessee or the deductor or the collector under sub-Section (1) of Section 143 or sub-Section (1) of Page 7 of 10 AUGUST 07, 2026 Mamta Kale

9-wp-1223-2023.doc Section 200A or sub-Section (1) of Section 206CB, the intimation under those sub- sections shall be deemed to be a notice of demand for the purposes of this section." 20. Sub Section (1) of Section 156 mandates the service of notice of demand upon the assessee so as to enforce it. The proviso to Section 156(1) provides that in case of demand raised pursuant to intimation under Section 143(1) the said intimation itself would be considered as the notice of demand. Thus, when the intimation under Section 143(1) is to be considered as a notice of demand as referred to in Section 156, then as per sub Section (1) of Section 156, it is mandatorily required to be served upon the assessee. The use of the words "shall" in Section 156(1) emphasize on mandatory service. 21. Admittedly it is now the case before us that even though it is claimed by the Respondents that the intimation under Section 143(1) was issued for the relevant Assessment Year 2010-11, however the Respondents have failed to bring on record any such intimation claimed to have been issued under Section 143(1) or the notice of demand claimed to have been served upon the Petitioner. Even the Petitioner had asked for the same from the Respondents vide his rectification application dated 07.11.2017 but the same was never furnished to the Petitioner. Even in the affidavit in reply dated 01.12.2025, Respondent No.1 has not produced the intimation under Section 143(1) which he claims is issued. It was not produced even before the Commissioner of Income Tax (Appeals) or the Tribunal. 22. Thus, we are of the view that in the absence of any intimation under Section 143(1) raising the demand or any independent notice of demand, recovery of such non-existent demand cannot be made against the Petitioner.” 10. Since in the present case also Respondent No.1 has accepted the fact that there is no proof of service of the intimation under Section 143(1) of the Act, the demand for Assessment Year 2011–12 cannot be enforced against Page 8 of 10 AUGUST 07, 2026 Mamta Kale

9-wp-1223-2023.doc the Petitioner. Accordingly, the recovery of such demand, including adjustment of refunds under Section 245 of the Act, cannot be sustained. 11. In view of the foregoing discussion, we pass the following order:- i. For Assessment Year 2010–11, Respondent No.1 shall verify the Petitioner's claim in accordance with the directions issued by this Court in the Judgment rendered in the case of Manohar Ramabtar Jhunjhunwala vs Principal Commissioner of Income Tax 17, Mumbai [Writ Petition No. 2063 of 2025 decided on 5th August 2026], and upon such verification, grant the Petitioner appropriate credit of TDS together with all consequential reliefs in accordance with law. ii. For Assessment Year 2011–12, the alleged demand is quashed and set aside, and the Respondents are directed not to recover the same or adjust any refund against the said demand. If the said demand is already adjusted, refund shall be issued, together with applicable interest, strictly in accordance with the provisions of the law within a period of 1 month of uploading of this order on the High Court Website. Page 9 of 10 AUGUST 07, 2026 Mamta Kale

9-wp-1223-2023.doc 12. Rule is made absolute in the aforesaid terms and the Writ Petition is also disposed of in terms thereof. However, there shall be no order as to costs. 13. This order will be digitally signed by the Private Secretary/ Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order. [FIRDOSH P. POONIWALLA, J.] [B. P. COLABAWALLA, J.] Page 10 of 10 AUGUST 07, 2026 Mamta Kale