Facts of the Case

The petitioner, Ashish Chopra, filed a writ petition challenging a notice dated 31.01.2020 issued under Section 221(1) of the Income-tax Act, 1961, tax demands raised for Assessment Years 2009–10, 2010–11 and 2011–12, and multiple adjustments of refunds made against such demands for subsequent assessment years.

The petitioner’s case was that the impugned demands arose solely on account of failure of the employer to deposit tax deducted at source, despite the tax having been duly deducted from the petitioner’s salary. It was contended that in view of Section 205 of the Act, the petitioner could not be treated as an assessee in default, and the Department was barred from recovering such demand or adjusting refunds.

Issues Involved

Whether tax demands can be enforced against an assessee where tax has already been deducted at source but not deposited by the employer, whether refund adjustments against such demands are permissible, and whether the Income Tax Department is required to remove such demands from the online portal.

Petitioner’s Arguments

The petitioner argued that once tax had been deducted at source, the bar contained in Section 205 of the Income-tax Act squarely applied and the Revenue could not recover the same tax again from the assessee. It was further submitted that repeated adjustments of refunds against such unlawful demands were illegal.

Reliance was placed on earlier Delhi High Court decisions, including Raj Kumar vs. Assistant Commissioner of Income Tax and Sanjay Sudan vs. Assistant Commissioner of Income Tax, wherein similar demands arising out of employer default were quashed and the Revenue was restrained from effecting recovery or adjustment.

Respondents’ Arguments

The Revenue, through its Senior Standing Counsel, placed on record an email dated 03.09.2025 received from the jurisdictional Assessing Officer stating that the demands for Assessment Years 2009–10, 2010–11 and 2011–12 had been stayed in the ITBA-Recovery system, no further refunds would be adjusted against such demands, and refunds already adjusted would be issued to the petitioner.

The Revenue further assured the Court that follow-up action would be taken within six weeks.

Court Order / Findings

The Delhi High Court recorded the statement made on behalf of the Revenue that the impugned demands had been stayed and that refunds adjusted earlier would be issued to the petitioner. The Court noted the petitioner’s additional grievance that the demands continued to be reflected on the income-tax portal.

Relying on its earlier judgments in Raj Kumar vs. Assistant Commissioner of Income Tax and Sanjay Sudan vs. Assistant Commissioner of Income Tax, the Court held that where tax is not recoverable from the assessee due to the bar under Section 205, such demand cannot be reflected or enforced in any manner.

The Court categorically directed that since the amounts were not recoverable from the petitioner, the same shall not be depicted on the portal and must be removed forthwith.

Important Clarification

The Court clarified that once tax has been deducted at source, the assessee cannot be treated as an assessee in default merely because the employer failed to deposit the tax. In such cases, the Revenue’s remedy lies against the deductor, and not against the deductee.

Final Outcome

The writ petition was disposed of. The Delhi High Court directed that the tax demands for Assessment Years 2009–10, 2010–11 and 2011–12 shall not be recovered from the petitioner, that no refunds shall be adjusted against such demands, that refunds already adjusted shall be issued to the petitioner, and that the impugned demands shall be removed from the income-tax portal forthwith. Pending applications were dismissed as infructuous.

Link to download order- https://www.mytaxexpert.co.in/uploads/1769682496_ASHISHCHOPRAVsASSISTANTCOMMISSIONEROFINCOMETAXANR..pdf

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