TDS Credit Must Be Given Even if Employer Fails to Deposit Tax: ITAT
The Income Tax Appellate Tribunal (ITAT), Delhi, has recently held that the employer should not be punished and denied TDS credit for the employer’s mistake of non-compliance with the Income Tax law.
The assessee, Mani Madhukar Bansal, was an ex-employee of a company named Think & Learn Private Limited (TLPL), which paid him a salary of Rs 1,04,07,665 during April 2023 to August 2023. On this salary, the company had deducted TDS of Rs 37,04,946 under section 192 of the Income Tax Act, 1961. However, it did not provide Form 16 to the assessee. Further, the employer also did not pay any TDS after deducting and neither did they remit the amount to the government nor file any quarterly returns.
When Mani filed his income tax return, he submitted the salary and the TDS amount based on his pay slips to claim the said TDS. However, the Income Tax Department denied the claim, saying there was no such TDS credit against the salary. The assessee appealed before the Commissioner of Income Tax (Appeals) (CIT(A)), which rejected the appeal, claiming that the assessee had not submitted supporting documents like copies of the TDS challan deposited by the deductor and a copy of the TDS return filed by the employer. Aggrieved by this order, the assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT), Delhi.
The Tribunal observed that the pay slips submitted by the assessee clearly mentioned that TDS was deducted from his salary, and based on this, the assessee had claimed the TDS. The assessee did not submit Form 16 as he was not in a position to get it. The Tribunal found that the TDS claim was denied just because the TDS did not show in Form 26AS.
The ITAT concluded that the non-compliance with Income Tax provisions was from the employer’s side, and it is not fair to penalise the assessee for the mistake of the employer. The Tribunal cited the decision of the Hon’ble Gujarat High Court and the Hon’ble Karnataka High Court in the case of Kartik Vijaysinh vs. DCIT (2021) 132 taxmann.com 293 and Smt. Aknusuya Alva vs. DCIT (2005) 147 taxman 152, which also held that the credit for TDS deduction must be given even though the amount is not submitted to the government.
Therefore, the Tribunal ruled in favour of the assessee and allowed the TDS claim.
Case Citation: Mani Madhukar Bansal Vs ACIT/DCIT (ITAT Delhi); ITA No.2637/Del/2025; 12/11/2025; 2024-25
