ARCHANA AGARWAL vs. INCOME TAX OFFICER WARD 67 1 DELHI & ANR.

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W.P.(C)/2471/2025HC DelhiDLHC01009857202527 February 2025Bench: HON'BLE CHIEF JUSTICE DEVENDRA KUMAR UPADHYAYA,HON'BLE MR. JUSTICE TUSHAR RAO GEDELA3 pages
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What did the High Court hold?

The Delhi High Court allowed the petition. The Court held that the demands for AY 2011-12 and AY 2012-13, raised per notices dated 14.12.2021 and 09.12.2021 respectively, were quashed. The Revenue was found not entitled in law to adjust these demands against any other AY. Consequently, the Court restrained the Revenue from adjusting any refund due to the petitioner against any demand reflected for AYs 2011-12 and 2012-13. Furthermore, the Court directed the refund of Rs. 24,470/- for AY 2018-19, Rs. 1,200/- for AY 2021-22, and Rs. 80,620/- for AY 2024-25, which had been adjusted against the illegal demands. The reasoning was based on the Revenue's concession and the precedent set in Sanjay Sudan v. The Assistant Commissioner of Income Tax & Another. The ratio decidendi is that demands arising from an employer's failure to deposit TDS, where tax was deducted at source, cannot be enforced against the employee, especially when Section 205 of the Act is invoked, and such demands cannot be used to offset refunds due for other years.

What were the facts?

The petitioner, Archana Agarwal, filed a writ petition before the Delhi High Court challenging letters dated 09.12.2021 and 14.12.2021, and demand references for Assessment Years (AY) 2011-12 and 2012-13. The petitioner contended that these demands arose due to defaults by her employer, Kingfisher Airlines Limited, which failed to deposit tax deducted at source. The petitioner also sought quashing of adjustments of refunds for AY 2018-19, AY 2021-22, and AY 2024-25 against these demands, and a direction to extinguish the demands for AY 2011-12 and 2012-13 under Section 205 of the Income Tax Act, 1961, and to restrain further adjustments.

What were the issues?

1. Whether the demands created for AY 2011-12 and AY 2012-13, arising from the employer's failure to deposit TDS, are illegal and contrary to the provisions of the Income Tax Act, 1961, particularly Section 205, and thus liable to be quashed? (Question of law and fact) 2. Whether the Revenue is entitled to adjust refunds due to the petitioner for other assessment years against the disputed demands for AY 2011-12 and AY 2012-13? (Question of law) Assessee's Arguments: The petitioner argued that the demands for AY 2011-12 and AY 2012-13 were due to the employer's failure to deposit TDS, not her own default. She relied on Section 205 of the Act, which prohibits demands against an assessee when tax has been deducted at source. She also sought the refund of amounts adjusted from AY 2018-19, AY 2021-22, and AY 2024-25. Revenue's Arguments: The Revenue's counsel fairly submitted that the prayers made by the petitioner should be allowed, as the issue was covered by this Court's decision in Sanjay Sudan v. The Assistant Commissioner of Income Tax & Another ([2023] 148 taxmann.com 329 (Delhi)).

Which sections of the Income-tax Act were involved?

Section 205

AI-generated summary — verify with the full judgment below

$~70 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 2471/2025 & CM APPL. 11657/2025

ARCHANA AGARWAL

.....Petitioner Through: Mr. Nikhil Goyal and Mr. Bankim Garg, Advocates.

versus

INCOME TAX OFFICER WARD 67 1 DELHI & ANR. .....Respondents Through: Mr. Sunil Aggarwal, Senior Advocate with Mr. Shivansh Pandya, Ms. Priya Sarkar, Mr. Viplav Acharya, JSCs and Mr. Utkarsh Tiwari, Advocate.

CORAM:

HON’BLE THE CHIEF JUSTICE

HON’BLE MR. JUSTICE TUSHAR RAO GEDELA

O R D E R %

27.02.2025 CM APPL. 11658/2025 1. Exemption allowed subject to all just exceptions. 2. The application stands disposed of. W.P.(C) 2471/2025 & CM APPL. 11657/2025 3. The petitioner has filed the present petition, inter alia, praying as under: “(i) Issuance a writ in the nature of Certiorari for quashing of letter dated 09.12.2021 (Annexure P-13) and letter dated 14.12.2021 (Annexure P-14) being illegal and contrary to the provisions of the Act;

(ii) Issue a writ in the nature of Certiorari for quashing, demand reference 2012201110010943176T in AY 2011-12 and demand reference 2013201237012599334T in AY 2012-13 (Annexure P-12), created by the Respondents being illegal and contrary to the provisions of the Act; This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/07/2025 at 21:26:14

(iii) Issue a writ in the nature of Certiorari quashing the following adjustments of refunds due to the Petitioner against the demand for Assessment Year 2011-12, being illegal, and bad in law and directing the refund of the adjustments with applicable interest under the Act: a) Adjustment of refund of Rs 24,470/- for Assessment Year 2018-19 on 12.10.2018 as reflected in Form 26AS for AY 2011-12 (Annexure P-6); b) Adjustment of refund of Rs 1,200/- for Assessment Year 2021-22 communicated vide intimation dated 09.12.2021 (Annexure P-9); c) Adjustment of refund of Rs 80,620/- for Assessment Year 2024-25 on 28.10.2024, as reflected in Form 26AS for AY 2011-12 (Annexure P-6);

(iv) Issue a writ in the nature of Mandamus directing the Respondents to extinguish the demand created against the Petitioner for AYs 2011-12 and AY 2012-13 in terms of section 205 of the Act;

(v) Issue a writ in the nature of Mandamus restraining the Respondents adjusting any· refund due to the petitioner against any demand reflected for the AYs 2011-12 and 2012-13;

(vi) Issue of any other appropriate writ or direction which this (vii) Hon'ble Court may deem fit and proper in the circumstances of the case.”

4.

It is the petitioner’s case that demands in respect of AY 2011-12 and AY 2012-13 are reflected as due from the petitioner on account of defaults committed by its employer (Kingfisher Airlines Limited). The petitioner submits that although the tax was deducted by the employer, it had failed and neglected in depositing the same at the material time. 5. The learned counsel appearing for the Revenue fairly submits that the prayers made by the petitioner be allowed as the issue involved in the present petition is covered by the earlier decision of this Court in Sanjay Sudan v. The Assistant Commissioner of Income Tax & Another reported in [2023] 148 taxmann.com 329 (Delhi); Neutral Citation: 2023: DHC:1342. 6. Thus, for the foregoing reasons, we also hold that the demands for AY 2011-12 and AY 2012-13 raised as per notice dated 14.12.2021 and This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/07/2025 at 21:26:14

09.12.2021 respectively are quashed. Respondents/Revenue are not entitled in law to adjust the demand raised for AY 2011-12 and AY 2012-13 against any other AY. It is ordered accordingly. 7. In view of the above, the present petition is allowed and the Revenue is restrained from adjusting any refund due to the petitioner against any demand reflected for the AYs 2011-12 and 2012-13. 8. The petitioner has adverted to the fact that an amount of Rs.24,470/- for AY 2018-19, Rs.1,200/- for AY 2021-22 and Rs.80,620/- for AY 2024- 25 is liable to be refunded because of adjustment of demands. 9. As the amounts of Rs.24,470/- for AY 2018-19, Rs.1,200/- for AY 2021-22 and Rs.80,620/- for AY 2024-25, irrespectively have been adjusted, the said amounts are directed to be refunded to the petitioner. 10. The petition is disposed of in the aforesaid terms.

DEVENDRA KUMAR UPADHYAYA, CJ

TUSHAR RAO GEDELA, J FEBRUARY 27, 2025 yrj This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/07/2025 at 21:26:14

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