Mr. Baljit, a resident individual, e-filed his return of income for assessment year 2024-25 on 30.07.2024, offered entire interest income of 25…

Deduction of taxes at source is one of the methods of collecting tax. The tax deducted at source is part of the assessee's income and therefore, the gross amount is included in the total income and offered to tax. It is on this premise that the tax deducted at source would have to be treated as tax paid on behalf of the assessee. Section 205 provides for restriction against direct demand on assessee to the extent to which tax has been deducted from that income. Thus, no recovery of TDS can be made from the deductee. Further, the amount retained against remittance made by the payer is nothing but tax which the assessee/deductee has offered for tax by grossing up the remittance. If credit is not given, the Department would end up doing indirectly what they cannot do directly i.e., recover tax directly from the deductee. The assessee had followed the regime put in place in the Act for collecting tax albeit, through an agent (deductor) of the Government. The recovery proceedings could only be initiated against the deductor, as the deductor, an agent for collecting tax, had failed to deposit the tax with the Government. Therefore, the deductee should be given credit for TDS though it was not reflected in Form 26AS and no recovery towards TDS could be made from the assessee in terms of the provisions of section 205. Thus, in the present case, the Department's action in recovering the tax due from Mr. Baljit on the ground that it is not reflected in Form 26AS, is bad in law Note – The facts given in the question are similar to the facts in BDR Finvest Pvt. Ltd. v. DCIT [2024] 462 ITR 141 (Delhi). The above answer is based on the rationale of the Delhi High Court ruling in the said case.