Answer any two out of the following sub-parts viz (i), (ii) and (iii): (i) Mr. Arjun, a resident individual, electronically filed his income tax…

(i) 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. Arjun 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. (ii) Issue Involved: The issue under consideration is whether penalty u/s 271C and interest u/s 201(1A) both are leviable on late deposit of TDS. Provisions applicable: Section 271C (1) (a) provides that if any person fails to deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B, then, such person is liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct. Section 201(1A) provides that in case a tax has been deducted at source but is subsequently remitted belatedly, such a person is liable to pay interest as provided under section 201(1A). Analysis and Conclusion: On a plain reading of section 271C (1) (a), no penalty would be leviable on belated remittance of TDS after it is deducted by the assessee. Similarly, section 276B speaks about prosecution for failure to pay the tax deducted at source to the credit of the Central Government within the prescribed time. The words "fails to deduct” in section 271C (1) (a) cannot be read as “failure to deposit/pay the tax deducted”. Accordingly, no penalty would be leviable under section 271C on delay in remittance of the tax deducted at source after deducting it on time. However, interest u/s 201(1A) for late deposit of TDS is leviable. Note – The above answer is based on the rationale of the Supreme Court in US Technologies International Pvt. Ltd. v. CIT [2023] 453 ITR 644. (iii) The issue under consideration is whether, for the purpose of computing limitation period under section 143 (2) , the relevant date is the date of filing of the original return of income or the date of removal of defects in response to a notice issued under section 139 (9) . The same issue came up before Supreme Court in DCIT vs Travel Designer India Pvt. Ltd. vs (2025) 482 ITR 283. In this case, the High Court noted that since the return was defective, the assessee was called upon to remove such defects, which was removed on 19th May, 2024, which is within the time allowed by the Assessing Officer. Therefore, upon such defects being removed, the return would relate back to the date of filing original return i.e., 15th September, 2023. Consequently, the limitation for issuance of notice under section 143 (2) would be 30th June, 2024 i.e., three months from the end of the financial year in which the return under section 139 (1) was filed. In the present case, notice under section 143 (2) has been issued on 21st June, 2025, which is much beyond the period of limitation. Therefore, such notice is barred by limitation and cannot be sustained. Accordingly, the notice issued under section 143 (2) is not a valid notice.