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Facts
The assessee claimed credit for TDS of Rs. 56,80,974/- from salary, but the CPC allowed only Rs. 53,65,051/- because the employer (Srei Infrastructure Finance Limited) did not deposit the full amount due to banking restrictions and Corporate Insolvency Resolution Process (CIRP). The employer admitted to the deduction but explained the reasons for non-deposit. The assessee's rectification petition was rejected as the full TDS was not reflected in Forms 26AS or 24Q.
Held
Following the precedent set by the Gujarat High Court in 'Kartik Vijaysinh Sonavane vs DCIT' and other ITAT decisions, the Tribunal held that the department is precluded from denying TDS credit to the assessee if the tax was indeed deducted by the employer, even if not deposited with the government. The AO was directed to grant the full TDS credit, with the Revenue at liberty to pursue action against the employer for non-deposit.
Key Issues
Whether an assessee is entitled to credit for Tax Deducted at Source (TDS) by the employer, even if the employer fails to deposit the full deducted amount with the government and it is not reflected in Forms 26AS/24Q.
Sections Cited
250, 154, 200(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘D’ BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)- 22, Kolkata [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2021-22 dated 20.12.2024, which has been passed against the rectification order u/s 154 of the Act, dated 20.07.2022. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the action of the AO(CPC) in denying the credit of TDS to the tune of Rs.3,15,923/- deducted against the salary paid by Srei Infrastructure Finance Limited. I.T.A. No.: 368/KOL/2025 Assessment Year: 2021-22 Rakesh Kumar Bhutoria.
For that the Ld. CIT(A) ought to have considered that Srei Infrastructure Finance Limited itself had confirmed that total TDS of Rs.56,80,974/- was deducted against the salary paid to the assessee but only could deposit TDS amounting to Rs.53,65,051/- due to some restriction imposed by the bankers.
That the assessee craves leave to add, alter or delete all or any of the grounds of appeal.”
Brief facts of the case as culled out from the statement of facts filed in Form No. 35 are as under: “I had filed my return of income for the AY 2021-22 claiming credit for TDS on Salary amounting to 56,80,974/- but while processing the return by CPC credit for TDS on Salary was allowed only for 53,65,051/-. Due to such short credit my refund claim for 2,02,400/- resulted in a demand for 1,86,670/ which CPC has adjusted against my refund for the AY 2022-23. Although 56,80,974/- deducted towards TDS from my salary, my then employer M/s. Srei Infrastructure Finance Limited deposited 53,65,051/- only and issued a letter stating that because of restrictions imposed by the bankers it could not deposit the balance TDS amount. It further stated that company has also received the demand for short deduction of TDS from Income Tax Department and in view of commencement of Corporate Insolvency Resolution Process against the company, the NCLT has appointed Administrator to look after the claims of the creditors including of the Income Tax Department for such short deduction of TDS submitted in accordance with the provisions of Insolvency and Bankruptcy Code, 2016. Being aggrieved at the action of the A.O. for not allowing full credit for the TDS I filed rectification petition and submitted all the papers including the verdict of the Hon'ble Gujarat High court in a similar matter (Kartik Vijay Form 26AS nor in Form 240.”
Aggrieved with the order denying credit of TDS made, the assessee filed an appeal before the Ld. CIT(A) who has dismissed the appeal of the assessee by holding as under: “4.1 The appellant filed his income tax return for Assessment Year (AY) 2021-22, claiming a Tax Deducted at Source (TDS) credit of 56,80,974 on his salary. However, while processing the return, the Centralized Processing I.T.A. No.: 368/KOL/2025 Assessment Year: 2021-22 Rakesh Kumar Bhutoria. Centre (CPC) allowed TDS credit of only 53,65,051. As a result, a refund claim of 2,02,400 turned into a demand of 1,86,670, which was adjusted against the appellant's refund for AY 2022-23. The shortfall in TDS credit occurred because the appellant's employer, M/s. Srei Infrastructure Finance Limited, deducted 56,80,974 but deposited only 53,65,051 due to restrictions imposed by its bankers. The employer acknowledged this issue in a letter dated 24-01-2022 and explained that the company was facing (A.O.) rejected the petition vide order dated 23-11-2023 on the grounds that the full TDS amount did not reflect in Form 26AS or Form 24Q. Aggrieved by this rejection, the appellant has filed the present appeal, seeking full credit for the TDS amount deducted from their salary.
2 It is seen that the employer has admitted in the letter dated 24-01-2022 that TDS amounting to Rs. 56,80,974 has been deducted from Salary but could deposit only Rs. 53,65,051 due to some restriction imposed by the bankers. It was further acknowledged that the company has received demand for short deduction of TDs from the Income Tax Department. The appellant has cited many decisions on the issue of default in deposit of TDS in Government account which was deducted from employee including the decision by the hon'ble Kolkata tribunal in the case of Vishal Pachisia in order dated 07-11-2023 in I.T.A No.: 764/KOL/2023. The Courts have held that an assessee cannot be required to pay tax on income if tax has already been deducted at source (TDS) from that income and directed that TDS credit should be allowed to the assessee, even if the deducted amount had not been deposited by the employer.
3 In the case of appellant, it is noted that his name does not appear in Form 24Q filed by the employer Srei Infrastructure Finance Company Ltd. Rule 31A of the Income Tax Rules provides for statement of deduction of tax u/s 200(3) of the Income Tax Act. As per the Rule the statement is to be filed in Form 24Q by the employer to furnish the details of all employees against whom TDS is deducted. Annexure 1 of the Form provides for deductee wise breakup of TDS. In this case Form 24Q shows that TDS of only Rs. 53,65,051 was deducted from the salary of the appellant. Thus, there is no evidence that the TDS of Rs. 56,80,974 was actually deducted from the appellant's salary. In all the case laws cited by the appellant the facts are distinguishable as in those cases TDS was duly deducted by the employer I.T.A. No.: 368/KOL/2025 Assessment Year: 2021-22 Rakesh Kumar Bhutoria. but the same was not deposited with the Government. In the present case there is no evidence that TDS of Rs. 56,80,974 was actually deducted. Therefore, the Id. Assessing officer was correct in allowing credit of TDS of Rs. 53,65,051 which was deducted from appellants salary. The ground of appeal is rejected.
4 In the result the appeal of the assessee is dismissed.”
Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
Rival contentions were heard and the submissions made have been examined. It was submitted that the challan was under the wrong head and the rectification order was incorrectly passed by mentioning that the issue has dividend surcharge issue which as per the order dated 20.07.2022 is stated to be rectified. However, the rectification order is incorrect. The assessee is a salaried employee and TDS of ₹56,80,974/- was made but only an amount of ₹53,65,051/- was deposited by the employer. The Ld. AR stated that the assessee cannot be penalised for the default of the employer and the credit ought to have been given. Before the Ld. CIT(A), the assessee submitted that the TDS of ₹56,80,974/- was deducted but the credit of only ₹53,65,051/- was allowed as the rest of the amount was not appearing in Form No. 26AS nor in Form No. 24Q. The Ld. AR reiterated the written submission which were filed before the Ld. CIT(A) and also relied upon the decision of Hon'ble Gujarat High Court in the case of Kartik Vijaysinh Sonavane vs DCIT R/Special Civil Application No. 6193 of 2021 order dated 15.11.2021 and Order of the Hon'ble ITAT, Kolkata Bench, Vishal Pachisia vs. ITO, ITA No.764/KOL/2023, Order dated 07.11.2023. I.T.A. No.: 368/KOL/2025 Assessment Year: 2021-22 Rakesh Kumar Bhutoria.
We have considered the rival submissions. The Hon'ble Gujarat High Court in the case of Kartik Vijaysinh Sonavane (supra) have discussed various judicial pronouncements and have held as under:
“9. The facts being almost identical, no separate reasoning are desirable and the petition is being ALLOWED. The department is precluded from denying the benefit of the tax deducted at source by the employer during the relevant financial years to the petitioner.
It is given to understand by learned Senior Standing Counsel Mr. Varun Patel that the proceedings have been initiated against the employer. employer.
The credit of the tax shall be given to the petitioner and if in the interregnum any recovery or adjustment is made by the respondent, the petitioner shall be entitled to the refund of the same, with the statutory interest, within eight (8) weeks from the date of receipt of copy of this order.
Petition is accordingly disposed.”
The Coordinate Bench of ITAT, Kolkata in the case of Vishal Pachisia (supra) have also followed the series of decisions namely Incredible Unique Buildcon Private Limited vs. ITO reported in No.- W.P.(C) 7797/2023 order dated 31.05.2023 and Coordinate Bench Pune in the case of Mukesh Padamchand Sogani us. ACIT in ITA No. 29/PUN/2022 order dated 30.01.2023 and allowed the relief.
We have considered the submissions made. In view of the decision of Hon'ble Gujarat High Court in the case of Kartik Vijaysinh Sonavane (supra) categorically spelling out that the department is precluded from denying the benefit of the tax deducted at source by the employer during the relevant financial years to the petitioner and the credit of the tax shall be given to the petitioner and if in the interregnum any recovery or adjustment is made by the respondent, the petitioner shall be entitled to the refund of the same. Thus, respectfully following the decision of the Hon'ble Gujarat High Court, the appeal of the assessee is allowed I.T.A. No.: 368/KOL/2025 Assessment Year: 2021-22 Rakesh Kumar Bhutoria. and the Ld. AO is hereby directed to grant the credit of tax deducted at source which however, was not deposited by the employer. The Revenue shall be at liberty to take any action against the employer for non- deposit of the same in accordance with law.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 12th September, 2025. [George Mathan] [Rakesh Mishra] Judicial Member Accountant Member Dated: 12.09.2025 Bidhan (Sr. P.S.) I.T.A. No.: 368/KOL/2025 Assessment Year: 2021-22 Rakesh Kumar Bhutoria. Copy of the order forwarded to:
Rakesh Kumar Bhutoria, 56, Netaji Subhas Road, Kolkata, West Bengal, 700001. 2. ADIT, CPC, Bengaluru.
CIT(A)-22, Kolkata.
CIT-
CIT(DR), Kolkata Benches, Kolkata.
Guard File. //// By order