High Court Orders Refund Despite Form 26AS Mismatch: Taxpayers Not to Suffer for Departmental Delay

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In a significant ruling that safeguards taxpayer rights, the Allahabad High Court in U.P. Rajya Nirman Sahakari Sangh Limited v. Union of India & Others (Writ C No. 16125 of 2018, decided on 8 October 2025) held that a genuine tax refund claim supported by valid Form 16A certificates cannot be denied merely because the corresponding entries are not reflected in Form 26AS.

The Court emphasized that taxpayers should not be penalized for administrative lapses or delays by the deductor or the Income Tax Department in updating TDS data. It ruled that once a taxpayer produces authentic TDS certificates, the Assessing Officer (AO) is duty-bound to verify their genuineness and allow the credit or refund after due verification, rather than rejecting the claim outright.

This judgment reinforces the principle that procedural or technical mismatches cannot override substantive tax entitlements, ensuring fairness and accountability in the refund process. The Court’s direction to process the refund within four weeks marks a crucial step toward preventing prolonged taxpayer hardship arising from departmental inefficiencies.

Facts & Background

  • The petitioner is a cooperative society registered under the relevant Act, claiming exemption under Sec. 80P of the Income Tax Act, 1961.
  • The petitioner had tax-deducted-at-source (TDS) certificates (Form 16A) for certain deduction years (Assessment Years 2009-10 to 2015-16) which they claimed entitled it to refund/credit of the TDS deducted.
  • The Income Tax Department refused to grant the refund/credit on the ground that the amounts claimed by the petitioner did not appear in the petitioner’s Form 26AS (the taxpayer’s consolidated statement of tax credits) — i.e., there was a mismatch between the Form 16A certificates and the entries in Form 26AS.
  • The petitioner challenged this in writ under Article 226 of the Constitution of India, contending that the denial was unfair because the mismatch was not due to any fault of the petitioner (critical point: the fault lay with the deductor or non-uploading of entries by the deductor) and therefore the refund/credit should not be withheld.

Legal Issues

  • Whether a taxpayer can be denied refund or credit of TDS merely because the TDS amount shown in the certificate (Form 16A) is not reflected in Form 26AS.
  • Whether the Assessing Officer (AO) is obliged to process the refund/credit when the taxpayer has valid TDS certificates, even if the deductor has not uploaded the details or the amount has not been reflected in Form 26AS.
  • Whether the taxpayer should bear delay/penalty consequences because of the deductor’s or department’s failure to upload or process the entries.

Decision & Holding

  • The Court held that the taxpayer cannot be left at the mercy of the deductor or assessing officer because of a mismatch between Form 16A and Form 26AS.
  • The Court reaffirmed earlier precedents (e.g., Court on Its Motion v. Commissioner of Income Tax (Delhi High Court) and Rakesh Kumar Gupta v. Union of India (Allahabad HC)) which held that if a taxpayer presents valid TDS certificates, the AO must verify payment of the TDS and cannot refuse credit solely because the amount is absent in Form 26AS.
  • The Court noted that the AO has powers under the Income Tax Act to verify with the TDS circle or the deductor for correction statements, etc., and therefore a mechanical denial simply because of mismatch is impermissible.
  • The Court therefore directed: the petitioner to appear before the relevant assessing authority with all documents; the assessing authority should verify the Form 16A certificates and pass the necessary orders within four weeks.

Implications / Why It Matters

  • It sends a message that a taxpayer should not suffer for the deductor’s or department’s delay or error. If the taxpayer has done what it was required to do (obtained Form 16A and sought the refund/credit), then the department must act and not push responsibility back onto the taxpayer.
  • It emphasises the administrative duty of the department/assessing officer to verify and act rather than deny relief on a technical mismatch (lack of entry in Form 26AS).
  • It reinforces the binding effect of the Central Board of Direct Taxes (CBDT) Instruction No. 05/2013 (dated 8 July 2013) which directs that in a mismatch scenario the AO should verify and credit genuine TDS certificates.
  • It likely gives comfort to cooperatives and other taxpayers whose TDS certificates exist but entries in Form 26AS are missing, that they have recourse to get refunds/credits rather than being denied on that ground alone.
  • The decision also undercuts the strict reliance on Form 26AS as the sole basis — it recognises that technical/IT/administrative lapses happen, and the law should not punish the taxpayer for those.

Specifics of the Order

  • Case: Writ (C) No. 16125 of 2018.
  • Date of decision: 8 October 2025.
  • Bench: Justice Shekhar B. Saraf & Justice Prashant Kumar.
  • The court directed the assessing officer (Opposite Party No.3) to process the refund/credit after verification within a period of four weeks from the date the petitioner appears.
  • The court allowed the petitioner to rely on prior case law and the CBDT Instruction.
  • The court noted that the delay in refund was attributable to the department rather than the petitioner, and indicated that interest may be payable (in line with precedent) though the present order appears directed to processing the claim.

Limitations / Caveats

  • The decision does not say that all claims will automatically succeed. The taxpayer must still produce valid Form 16A certificates, satisfy that TDS was actually deducted, and the AO is at liberty to verify whether the deductor made the payment into government account etc. (i.e., the claim is subject to verification).
  • The mismatch being only the absence of entry in Form 26AS is not by itself a bar — but if the TDS was never deducted or not deposited in government account, the claim may fail after verification.
  • The remedy given was in the nature of a writ direction (mandamus) to the AO to process within four weeks — practical outcome still depends on how the verifying officer acts.

Why the Court Emphasised No Penalty for Departmental Delay

  • The court observed that the fault for non-reflection in Form 26AS often lies with the deductor (for not uploading the TDS statement or correction statement) or with the department’s delay, rather than the taxpayer.
  • It stressed that the taxpayer should not bear the consequences of the deductor’s or department’s fault (“taxpayer cannot be left at the mercy of a deductor or assessing officer”).

  • Therefore, the direction to process refund/credit despite the mismatch is to ensure that taxpayers are not unfairly penalised for administrative lapses of third parties.

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