KHURANA CONSTRUCTION vs. CHIEF COMMISSIONER OF INCOME TAX AND ORS.

By way of present writ petition preferred under Article 226 of the Constitution of India, the petitioner has challenged the order dated 27.01.2016, passed by the Principal Commissioner, Income Tax, Udaipur (hereinafter referred to as ‘Principal Commissioner’), whereby the petitioner’s application under section 119(2)(b) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’) was rejected.

Precisely narrated the facts appertain are that the petitioner furnished his return of income for the assessment year 2009-2010 and claimed credit/adjustment of Tax Deducted at Source (TDS) (Uploaded on 08/09/2025 at 02:31:55 PM) (Downloaded on 28/10/2026 at 12:27:56 AM)

It is the case of the petitioner – assessee that when he furnished the return, a sum of Rs.6,04,026/- only was reflected in the form No.26AS corresponding to a payment of Rs.5,92,56,189/- made by said M/s. F.L. Smith Minerals Pvt Ltd., it had claimed the credit of lesser TDS of Rs.6,04,026/- though the deduction was of higher sum and accordingly, petitioner’s assessment was made.

However, he later realized that said M/s. F.L. Smith Minerals Pvt. Ltd. had deducted higher amount of TDS viz Rs.15,75,379/- against the contract receipt of Rs.7,38,56,810/-. It proceeded to move an application under section 119(2)(b) of the Act of 1961 on 07.03.2012, as the prescribed limitation for filing revised return of income tax had since passed.

The petitioner’s said application came to be rejected by the Principal Commissioner vide its order dated 27.01.2016, inter alia, observing that the petitioner – assessee has failed to produce the books of accounts of the principal (M/s. F.L. Smith Minerals Pvt Ltd.) and on perusal of the copy of the account statement of said firm, it was not clear that the said firm had deducted tax amount on two occasions, viz at the time of payment of advance as also when the corresponding running account bill was submitted by the assessee.

Mr. Khurana, learned counsel for the petitioner contended the fact that a total sum of Rs.15,75,379/- had been deducted (Uploaded on 08/09/2025 at 02:31:55 PM) (Downloaded on 28/10/2026 at 12:27:56 AM)

Learned counsel argued that the Principal Commissioner has tried to conduct a fishing and roving inquiry into the accounts of said M/s. F.L. Smith Minerals Pvt. Ltd., which was not in his domain, while deciding the application under section 119(2)(b) of the Act of 1961 whereby refund of the amount of TDS was claimed.

Learned counsel submitted that the petitioner could claim credit/adjustment of the TDS of Rs.6,04,026/- only, as at the time of filing the return of income tax, such amount alone was reflected in the form No.26AS.

He further submitted that by the time he received the complete details of the amount deducted, TDS certificate, it was already too late and thus, it was a case of genuine hardship to the petitioner. The Principal Commissioner ought to have applied an objective approach, argued learned counsel.

Mr. Bissa, learned counsel for the respondent – Department, on the other hand, submitted that the Principal Commissioner has passed a well reasoned order warranting no interference.

He submitted that the petitioner – assessee failed to produce books of accounts of the awarder of the contract, namely, M/s. F.L. Smith Minerals Pvt. Ltd. and since the onus that the TDS amount was deducted twice from the payment made to the petitioner was (Uploaded on 08/09/2025 at 02:31:55 PM) (Downloaded on 28/10/2026 at 12:27:56 AM)

Mr. Bissa further submitted that the order impugned passed by the Principal Commissioner reveals that on perusal of the record including the statement of accounts of said M/s. F.L. Smith Minerals Pvt. Ltd., he found that the TDS had not been deducted twice as claimed by the petitioner and therefore, the order under challenge is perfectly just and valid.

Heard learned counsel for the parties.

On perusal of the order impugned, more particularly para No.3, it is evident that when the Principal Commissioner summoned a report from the Assistant Commissioner of Income Tax, Circle – 1, Udaipur as forwarded by the Joint Commissioner of Income Tax, Range – 1, Udaipur, the fact that a sum of Rs.7,38,56,810/- had been paid by M/s. F.L. Smith Minerals Pvt. Ltd. whereupon TDS of Rs.15,75,379/- was found to be correct.

The report showed that the petitioner – assessee had shown a total receipt of Rs.5,92,56,189/- in his P & L account (and not Rs.7,38,56,810/-), but the fact that the TDS amount of Rs.15,75,379/- had been deducted has not been disputed.

What is also not in dispute is, the fact that such amount was duly reflected in the form No.26AS, which was issued by none other than the respondent – Department itself.

According to this Court, while exercising power under section 119(2)(b) of the Act of 1961 the Principal Commissioner has been clothed with the power to consider application for refund of claim or give credit of the TDS amount in case of genuine hardship. (Uploaded on 08/09/2025 at 02:31:55 PM) (Downloaded on 28/10/2026 at 12:27:56 AM)

While so doing, he is supposed to consider as to whether there has been a genuine hardship or not; he cannot undertake the exercise of assessment proceeding itself, which had otherwise attained finality. Regardless of above, if the order of Assessing Officer is gone into, it is apparent that at internal page No.13 of the order, the Assessing Officer had dealt with the case of said M/s. F.L. Smith Minerals Pvt. Ltd. and has clearly observed that a sum of Rs.15,75,379/- had been deducted by said firm as TDS, so also the fact that as against this, the petitioner – assessee had claimed TDS of Rs.6,04,026/- only.

According to this Court, once the foundational fact of deduction of tax amount from the payments made to the petitioner is accepted so also the fact that said amount has been deposited by the deductor, consequent whereupon it is reflected in the form No.26AS, the petitioner cannot be deprived of his rightful claim. The denial on the part of respondent – Department amounts to unjust enrichment by the Union of India. The amount of tax deducted from his payment is a right accrued to the petitioner and he can claim credit or adjustment from his total tax liability or claim refund.

Had the limitation for filing the revised return not over, the petitioner could well file a revised return and get refund of the amount in question. The petitioner was thus left with no remedy but to approach the Central Board of Direct Taxes/Principal Commissioner for claiming the refund of the amount. It was a case of genuine hardship to the petitioner as his entitlement of getting (Uploaded on 08/09/2025 at 02:31:55 PM) (Downloaded on 28/10/2026 at 12:27:56 AM)

The Principal Commissioner has rejected petitioner’s rightful claim for the reasons not germane to the issue in hands. Petitioner’s application dated 07.03.2012 has been rejected on irrelevant if not extraneous consideration. The order impugned is thus, violative of Article 14, 19 and 300A of the petitioner’s fundamental and constitutional rights.

The writ petition is, therefore, allowed.

The order impugned dated 27.01.2016 passed by the Principal Commissioner is hereby quashed and set aside and petitioner’s application dated 07.03.2012 is hereby allowed.

The respondents are directed to pay the amount of Rs. 9,71,353/- along with simple interest calculated at the rate of 6% per annum from the date of deduction. Requisite amount be paid within a period of three months from today, failing which the amount shall carry interest at the rate of 9 % per annum. (SANGEETA SHARMA),J (DINESH MEHTA),J 14-akansha/- Powered by TCPDF (www.tcpdf.org) (Uploaded on 08/09/2025 at 02:31:55 PM) (Downloaded on 28/10/2026 at 12:27:56 AM)