Employee Claimed Rs. 3.91 Lakh TDS Credit in ITR but Got Credit for Only Rs. 79,030; ITAT Grants Relief Despite Employer’s Failure to Deposit TDS

The Income Tax Appellate Tribunal (ITAT) Mumbai observed that the delay in filing the appeal deserved to be condoned since the assessee had been continuously pursuing rectification proceedings before the CPC. Accordingly, the assessee was held entitled to full TDS credit after due verification by the AO.

The assessee, Ms Sophia Rick, filed her return of income for assessment year 2019-20, declaring income of Rs 18.41 lakh. The return was processed under Section 143(1) of the Income Tax Act, 1961, wherein a TDS credit of only Rs. 79,030 was granted against the assessee’s claim of Rs. 391,241, resulting in a demand of Rs. 336,373. The assessee had been pursuing rectification proceedings before the Central Processing Center (CPC). However, when the rectification failed, she preferred an appeal before the CIT(A). The CIT(A) dismissed the appeal on the ground of delay, following which the assessee approached the tribunal.

The Tribunal noted that the assessee had been pursuing rectification proceedings before the CPC, and, therefore, the delay in filing the appeal ought to have been condoned. On merits, the Tribunal observed that the employer, M/s Trimax IT Infrastructure & Services Ltd., had deducted tax at source from the salary payments but had failed to deposit the same to the government revenue. Consequently, the entire TDS amount was not reflected in Form 26AS, and full credit was not granted to the assessee.

The assessee furnished Form 16, salary slips, bank statements, and other supporting documents showing that tax had in fact been deducted from her salary and that only the net amount had been credited to her account.

In terms of Section 205 of the Income Tax Act, 1961, and CBDT Instruction No. 275 dated 1 June 2015, the consequences of non-deposit of TDS by the employer cannot be fastened upon the employee. A delay in filing an appeal deserves to be condoned where the assessee has been bona fide pursuing rectification proceedings before the CPC.

Accordingly, the tribunal directed the AO to verify the documents and grant the assessee full credit for the TDS deducted by the employer. The appeal was allowed.