Case Law Details
Sophia Rick Vs ITO (ITAT Mumbai)
ITAT Grants Full TDS Credit Despite Employer’s Failure to Deposit Tax
The Mumbai ITAT held that an employee cannot be denied TDS credit merely because the employer deducted tax from salary but failed to deposit it with the Government. The assessee had claimed TDS credit of ₹3.91 lakh, whereas CPC allowed only ₹79,030, resulting in a tax demand. The Tribunal noted that the assessee had continuously pursued rectification before CPC and, therefore, the delay in filing the appeal deserved to be condoned.
On merits, the Tribunal observed that the assessee had produced Form 16, salary slips, bank statements and other supporting documents establishing that TDS had indeed been deducted from salary by the employer. The denial of credit occurred only because the employer failed to deposit the tax, causing the credit not to appear in Form 26AS. Relying on the Gujarat High Court decision in Gayatri Snehal Rao, subsequently affirmed by the Supreme Court, the Tribunal held that in view of Section 205 and CBDT Instruction No. 275 dated 01.06.2015, no demand can be raised against the employee where tax has already been deducted at source. The Assessing Officer was directed to verify the documents and grant the full TDS credit to the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. Aforesaid appeal by assessee for Assessment Year (AY) 2019-20 arises out of an order of learned Addl. / Joint Commissioner of Income Tax (Appeals), Agra, [CIT(A)] dated 30.01.2026 in the matter of an intimation issued by CPC u/s 143(1)of the Act on 29.10.2019.
2. The assessee appeared in-person though virtual mode and sought adjudication of appeal on merits. It has been submitted that the assessee was seeking rectification before CPC which ultimately stood rejected which led the assessee to prefer further appeal. However, the appeal stood dismissed on delay. A prayer has been made that the assessee is in a position to lay claim over full TDS credit which is supported by the relevant Form 16, salary vouchers and other documents etc. as placed in the paper-book on record. The Ld. CIT-DR pleaded that the appeal has been dismissed for want of condonation of inordinate delay.
3. It emerges that the assessee was employed with M/s Trimax IT Infrastructure & Services Ltd. The assessee filed return of income at Rs.18.41 Lacs which was processed u/s 143(1) wherein TDS credit of only Rs.79,030/- was allowed as against assessee’s TDS claim of Rs.3,91,241/-resulting in demand of Rs.3,36,373/-. The assessee sought rectification from time-to-time before CPC which did not fructify and finally, the assessee preferred first appeal. However, the first appeal stood dismissed in limine being time-barred. Aggrieved, the assessee is in further appeal before us.
4. It could be observed that the assessee was pursuing rectification before CPC which did not fructify. Left with no option, the assessee preferred further appeal. On these facts, the delay should have been condoned. Nevertheless, we find that full TDS credit has not been granted since assessee’s employer has deducted TDS but has not remitted the same to the revenue. Accordingly, full TDS credit is not reflecting in Form 26AS of the assessee and credit thereof has not been allowed in full to the assessee. In support of her claim, the assessee has furnished salary slips, Form 16, bank statements & other documents in the paper-book which would establish that TDS was deducted by the employer against salary payments and net salary was remitted to the assessee. In such a case, the ratio of decision of Hon’ble High Court of Gujarat in the case of Gayatri Snehal Rao (168 Taxmann.com 466) would squarely apply to the facts of the present case before us. The Hon’ble Court held that wherein the employer of the assessee deducted tax at source from salary income of assessee but did not deposit the same with the government, AO could not have raised any demand against assessee in view of provisions of Sec. 205 read with CBDT’s Instruction No. 275 dated 01-06-2015. This decision has been confirmed by Hon’ble Supreme Court on 06.02.2026 which is reported as 183 Taxmann.com 657. The department’s SLP has been dismissed considering the earlier decision in Shobhan Shantilal Doshi (182 Taxmann.com 555; dated 12.01.2026).Respectfully following the same, we would hold that the assessee would be entitled for full TDS credit as deducted by assessee’s employer. The Ld. AO is directed to verify the same and allow credit of the same to the assessee.
5. The appeal stand allowed.
Order pronounced on 18th June, 2026
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