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Denial of benefit of TDS in absence of such TDS in form 26AS


General Problem

  • Deductor has deducted the TDS, but not deposited to government
  • Deductor has deducted the TDS, also deposited to government, but failed to furnish TDS Return

Consequences to Deductee

In both the cases above, deductee is denied benefit of TDS as it does not reflect in Form 26AS of the deductee. When return is processed online by CPC, following consequences occurs –

  • Either Reduction in refund claimed in the return of income
  • Or results in a demand when return was filed claiming no refund

Rescue to Deductee

In such a case where TDS is deducted but not deposited, section 205 of the IT Act 1961 comes to the rescue of the deductee. Below is the brief of Section 205 -:

Section 205 – Bar against direct demand on assessee

“Where TDS is deducted, the assessee shall not be called upon to pay the tax himself to the extent to which TDS has been deducted from that income”.

Action by CBDT

To reiterate the rights of the Assessee in such situations, CBDT has issued directions to the field officers vide reference number 275/29/2014-IT-B dated 01/06/2015 to comply with Section 205 of the Act as the Act itself puts a bar on direct demand against the assessee in such cases and the demand on account of tax credit mismatch cannot be enforced coercively.

CBDT in this regard again issued an Office Memorandum on 11/03/2016 vide reference number F.No.275/29/2014-IT(B) to order field officers to comply with Section 205.


From the above two clarifications by CBDT, one may conclude that TDS deducted but not deposited cannot be enforced from the deductee.

Right available to deductee/Practical Solution

In any deductee is facing such type of harassment, they should bring the facts of above two circulars by CBDT before the officer who is raising demand.

(Circular as referred above is attached for the kind perusal of readers)

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