ITAT Shields Employee from Employer’s TDS Default, Allows Credit Despite 26AS Mismatch

The assessee, an individual salaried employee, filed an appeal against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2021–22. There was a delay of 55 days in filing the appeal but the tribunal condoned the delay.

The dispute relates to denial of TDS credit amounting to Rs. 22,20,182 due to mismatch between the TDS claimed by the assessee and the entries reflecting in Form 26AS. The assessee was employed with M/s Mahou India Private Ltd. and had received bonus income of Rs. 83,54,035 during the year, which was duly offered to tax. While TDS on a part of the bonus was deposited by the employer and reflected in Form 26AS, TDS of Rs. 22,20,182 deducted on the remaining bonus amount of Rs. 60,00,000, though shown in salary slips and deducted from payment, was not deposited by the employer and therefore did not appear in Form 26AS.

Issue raised: Whether the assessee can be denied credit of TDS which was deducted by the employer from salary/bonus income but not deposited by the employer with the Central Government, resulting in non-reflection in Form 26AS.

Tribunal Decided: The Tribunal held that once tax has been deducted by the employer from the salary or bonus of the employee, the employee cannot be penalised for the employer’s failure to deposit the TDS with the Government. It directed the Assessing Officer to verify whether TDS was in fact deducted by the employer. If such deduction is established, credit of the TDS must be allowed to the assessee, irrespective of non-deposit by the employer.

The Tribunal further clarified that the Revenue is free to initiate recovery proceedings, including interest and penalty, against the employer in accordance with law, but the employee should not be made to suffer for a default not attributable to her.

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