Mumbai: In a relief to salaried taxpayers, the Mumbai bench of the income tax appellate tribunal (ITAT) has held that an employee cannot be denied tax deducted at source (TDS) credit merely because the employer failed to deposit the deducted tax with govt.The tribunal directed the income tax (I-T) officer to grant TDS credit to the salaried taxpayer after verifying that the deduction reflected in her salary records (such as monthly salary vouchers and Form 16).The taxpayer had filed her I-T return for FY 2018-19 and had declared an income of Rs 18.4 lakh. She had claimed a TDS credit of Rs 3.9 lakh. However, while processing her I-T return, the Central Processing Centre (CPC) allowed a credit of only about Rs 79,000, resulting in a tax demand of nearly Rs 3.4 lakh.The short credit arose because the employer, an IT services company, had deducted tax from the employee’s salary but had allegedly failed to remit the entire amount to govt. Consequently, the full TDS credit was not reflected in the taxpayer’s Form 26AS (which provides details of tax deducted/collected at source and advance tax payments).The taxpayer pursued rectification proceedings before the CPC for several years. When those efforts failed, she filed an appeal, which was dismissed by the commissioner (appeals) as time-barred.Before the ITAT, the taxpayer produced salary slips, Form 16, bank statements and other documents to demonstrate that tax had indeed been deducted from her salary and that only the net salary had been paid to her.The tax tribunal observed that the delay in filing the appeal ought to have been condoned by the commissioner (appeals) as the taxpayer had been diligently pursuing rectification before the CPC. More importantly, it held that the taxpayer could not be made to suffer for the employer’s default in depositing TDS.Relying on precedents set by Supreme Court and a high court, the ITAT held that no tax demand could be raised against an employee where tax had already been deducted from the salary. The bench directed the I-T officer to verify the taxpayer’s claim and allow full TDS credit.
