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Facts
The assessee claimed TDS credit for Rs.13,26,900 deducted from her salary by her employer, Dunzo Digital Pvt. Ltd. However, the employer failed to deposit this tax with the Income Tax Department, resulting in no credit appearing in the assessee's Form 26AS. The CPC denied credit for these pre-paid taxes.
Held
The Tribunal held that the assessee cannot be denied TDS credit merely because the employer failed to deposit the deducted tax. Relying on various High Court judgments, the Tribunal directed the AO to grant the TDS credit to the assessee.
Key Issues
Whether TDS credit can be denied to an employee if the employer deducts tax but fails to deposit it with the government.
Sections Cited
143(1), 9, IBC, 2016
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI
This appeal is filed by Mrs. Antaash Sheikh (the assessee/appellant) for the assessment year 2024025 against the appellate order passed by the Addl./JCIT(A), Kanpur [ld. CIT(A)] dated 29.3.2025 wherein the appeal filed by the assessee against the order passed u/s. 143(1) of the Income-tax Act, 1961 [the Act] dated 29.1.2025 by the CPC was partly allowed.
Briefly stated the only grievance of the assessee is that deductor of Tax Deduction at Source [TDS] is Dunzo Digital Pvt. Ltd., who has deducted tax at source from monthly salary paid to assessee. However, the deductor has not deposited the tax with Income Tax Department and therefore in Form 26AS of the assessee, no tax credit in form of TDS from salary amounting to Rs.13,26,900 was appearing. This sum was claimed as TDS in the return of income filed by the assessee on 15.1.2025 at a total income of Rs.47,09,760. Assessee has claimed the TDS of Rs.13,14,694 as pre-paid taxes. This return was processed and on 29.1.2025 an intimation u/s. 143(1) of the Act was issued wherein the assessee was denied the credit of pre-paid taxes of 13,14,694.
Against this intimation, assessee preferred an appeal before the ld. CIT(A), who restored the matter back to the file of the jurisdictional AO directing him to verify the claim of the appellant from Form 26AS and ITR and if the claim is found to be correct, an appropriate amount of TDS credit be allowed to the assessee.
Aggrieved with the above order, the assessee is in appeal before us.
The ld. AR submitted that assessee was not issued any salary statement neither in Form 26 nor issued any TDS certificate which prevented the assessee to show before the ld. AO about the TDS. Therefore the above sum could not be reflected in Form 26AS. It was submitted that when the assessee is an employee of that company, who has deducted TDS and the copy of the pay slips clearly show that tax has been deducted from her salary, the assessee must be granted credit of the TDS. He referred to the pay slip placed for the whole year in the Paperbook and also yearly statement at page 107. He further submitted
that merely because the employer has not paid tax after deducting the same, the credit for TDS could not be denied in the hands of the assessee.
The ld. DR vehemently objected to the same and stated that when the employer who has deducted tax at source has not deposited the tax to the credit of the Central Govt., the assessee cannot be allowed the tax credit for the same.
I have carefully considered the rival contentions and perused the orders of the ld. lower authorities. The brief facts show that assessee is an employee of Dunzo Digital Pvt. Ltd. From the verification of the salary slips placed in the PB, it is apparent that tax is deducted from the salary of the employee by the employer. The employer has not deposited the tax to the credit of the Central Govt. Due to this, there was no credit appearing in Form 26AS of the assessee. Due to this, credit was denied by the CPC.
On appeal before the CIT(A), direction was given to the AO to give credit to the assessee of the TDS to the assessee if it appears in Form 26AS. Naturally when no tax is deposited by the employer after deducting tax from the salary of the employee, it will not appear in Form 26AS of employee. If the employer after deducting the tax does not deposit the same to the credit of the Central Govt., that cannot be a cause for denying the credit to the employee who has suffered the TDS by employer and the employer did not pay the tax. In fact TDS is an onerous responsibility cast upon the payer on behalf of the Govt. of India. In this case, the employer (Dunzo Digital Pvt. Ltd.) had already admitted to CIRP proceedings by order of NCLT u/s. 9 of IBC, 2016 vide order dated 6.8.2025. Therefore there is a moratorium available to the employer. However, the provisions of the penalty and prosecution against the responsible officer are still applicable in this case. In spite of all this, nothing is done by revenue. Assessee employee cannot be denied the credit of taxes, when by filing the conclusive evidence, tax is deducted by the employer.
The Hon’ble Orissa High Court has already decided this issue in the case of Malay Kar v. UOI [2024] 162 taxmann.com 767. According to that decision, when employee shows that TDS from salary as per salary slips which is not deposited by the employer to the credit of Central Govt, credit for the same cannot be denied in the hands of the employee. Honourable Gujarat High court in Gayatri Snehal Rao vs. Income-tax Assessing Officer [2024] 168 taxmann.com 466 (Gujarat)[14-10-2024] and Honourable Kerala High court in Mridul Raj Kunnon vs. Commissioner of Income-tax [2025] 174 taxmann.com 164 (Kerala)[03-04-2025] have also held so.
Accordingly, respectfully following the decision of the Hon’ble Orissa High Court (supra), we direct the ld. AO to grant credit of the above TDS to the assessee within 60 days from the date of receipt of this order.
Accordingly, the appeal by the assessee is allowed.
Pronounced in the open court on this 30th day of September, 2025.