Pending Section 154 rectification application must be decided

Pending Section 154 rectification application must be decided within three months while keeping demand in abeyance.

Issue

Whether the tax authorities should be directed to decide a pending rectification application under Section 154 regarding a TDS credit mismatch within a stipulated timeframe, while keeping the outstanding demand in abeyance and without demanding redundant evidence from the assessee.

Facts

The assessee filed a rectification application under Section 154 for Assessment Year 2013, asserting a mismatch in TDS credit.
Along with the application, the assessee submitted the ledger account provided by the debtor as evidence of the TDS deduction.
The outstanding demand continued to reflect on the income tax e-portal despite the pending rectification application.
The assessee was facing pressure/demands while the application remained unaddressed by the tax authorities.

Decision

The court/authority directed the respondent authority to decide the pending Section 154 rectification application within three months from the date of the order.
The outstanding tax demand reflected on the e-portal was ordered to be kept in abeyance until orders were formally passed on the rectification application.
The tax authorities were instructed to pass necessary orders in accordance with law by considering relevant cited judgments.
The assessee shall not be compelled to produce additional evidence to justify non-payment of TDS by the debtor, given that the debtor’s ledger account was already submitted.

Key Takeaways

Timely Disposal of Rectification Applications: Tax authorities are obligated to resolve Section 154 applications regarding TDS mismatches within a reasonable, time-bound period (e.g., three months).
Stay of Demand During Pendency: Outstanding demands arising from processing errors or TDS mismatches should be kept in abeyance while a rectification application is pending.
No Unnecessary Burden on Assessee: Once the assessee provides standard supporting documents (such as the debtor’s ledger account), the authorities cannot demand unreasonable proof justifying the debtor’s default in depositing TDS.

HIGH COURT OF GUJARAT

Arjunkumar Chimanlal Desai

Deputy Commissioner of Income-tax

A.S. Supehia and Ms. VAIBHAVI D. NANAVATI, JJ.

R/SPECIAL CIVIL APPLICATION NO. 13188 of 2025

JUNE 22, 2026

B.S. Soparkar for the Petitioner. Karan G. Sanghani and Rutvij R. Patel for the Respondent.

ORDER

A.S. Supehia, J.- After hearing the learned advocates appearing for the respective parties at length, it has been noticed by us that the Rectification Application filed by the petitioner under Section 154 of the Income Tax Act, 1961 dated 12.03.2025 is not yet decided by the respondent-authorities. Simultaneously, the outstanding amount of Rs.7,54,560/- for the Assessment Year 2013 is still reflected in the e-filing portal of the income tax in the name of the petitioner as on 12.08.2025.

2. It is the specific case of the petitioner that the TDS allowed as per the intimation / acknowledgment as mentioned in the Rectification Application dated 12.03.2015 was of Rs.5,17,060/-, however, the difference of Rs. 4,94,201/- is on account of one of the debtor of the petitioner namely Cambay SEZ Hotels Pvt Ltd. We have noticed that the petitioner along with the Rectification Application has also attached the Ledger Account, pointing out the details of the TDS with its debtor Cambay SEZ Hotels Pvt. Ltd.

3. Learned Senior Standing Counsel Mr. Rutvij Patel as well as learned advocate Mr. Soparkar has submitted that looking to the peculiar facts of the case, the said application may be ordered to decided within a period of three months, so that the issue/controversy raised in the present writ petition may be laid quietus.

4. Learned advocate Mr. B.S. Soparkar has submitted that the competent authority before whom the Rectification Application has been filed may also be directed to consider the Judgments rendered by this Court in the cases of Kartik Vijaysinh Sonavane v. Dy. CIT 440 ITR 11 (Gujarat)(Guj), Milan Arvindbhai Patel v. Asstt. CIT 455 ITR 82 (Gujarat)and Gayatri Snehal Rao v. Income Tax Assessing Officer 2026 488 ITR 670 (Gujarat) .

5. Under such circumstance and in light of aforesaid facts as well as submissions advanced by the learned advocates appearing for the respective parties, we direct the respondent -Deputy Commissioner of Income Tax Circle 1(3), to decide the application dated 12.03.2015 filed by the petitioner within a period of three months. In case, the Rectification Application is to be decided by any other competent authority, the Deputy Commissioner of Income Tax may place the said application before such authority, without asking the petitioner to file a fresh application. We further direct that the petitioner shall not be asked to produce any additional evidence compelling him to justify the non-payment of TDS amount by Cambay SEZ Pvt. Ltd, since along with this application, the petitioner has already produced the Ledger Account submitted by Cambay SEZ. Pvt. Ltd. However, we further clarify that in case, the competent authority is not in possession of the Ledger Account submitted by Cambay SEZ Pvt. Ltd, it will be open for the petitioner to supply the same.

6. We further direct that till the orders are passed on Rectification Application, the respondent department shall not press for the outstanding demand amount as reflected in the eportal. Necessary orders in accordance with law shall be passed by the competent authorities by considering the aforementioned Judgments and the same shall be conveyed to the petitioner forthwith. We further clarify that in case any adverse orders are passed, it will be open for the petitioner to file appropriate proceedings before the appropriate forum.

7. With the aforesaid directions, the present writ petition stands disposed of.