Employee Cannot Be Penalized: TDS Credit Allowed Despite Employer's Default

-

Delhi ITAT Upholds Tax Credit Based on Salary Slips, Overruling Form 26AS/Form 16 Denial.

A recent ruling by the Delhi Income Tax Appellate Tribunal (ITAT) delivers crucial relief to employees facing denial of Tax Deducted at Source (TDS) credit due to non-compliance by their former employer. The Tribunal confirmed that the Revenue cannot deny tax credit to an employee if the employee can provide substantive evidence (like salary slips) showing that tax was actually deducted from their salary, regardless of the employer's failure to remit the tax or issue Form 16.

Background of the Dispute

  • The Facts: The assessee (an ex-employee of TLPL) received gross salary and had TDS deducted under Section 192. However, the employer neither provided Form 16 nor remitted the TDS amount to the government account.
  • Disallowance: The assessee claimed the TDS in their ITR based on salary slips. The tax authorities (AO during processing under Section 143(1) and CIT(A)) denied the credit because the amount was neither reflected in Form 26AS nor supported by Form 16.

ITAT’s Decisive Ruling and Rationale

The Principle of Justice:

The Tribunal held that the assessee cannot be penalized for the mistakes of the employer.

  • Evidence Admissible: Even though no Form 16 was provided, the assessee successfully presented relevant salary slips to demonstrate that the tax was deducted from his salary.
  • Revenue's Duty: The Revenue could not deny the tax credit merely because the employer failed to comply with Chapter XVII of the Act (TDS provisions).

The Tribunal relied on judicial precedents, including the Gujarat High Court case of Kartik Vijaysinh Sonavane and the Karnataka High Court case of Smt. Anusuya Alva, confirming the entitlement of the employee to the TDS credit.

Key Takeaway 💡

This judgment is vital for employees, especially those who are ex-employees or whose employers are non-compliant or defunct. It establishes that substantive proof of deduction (via pay slips or bank statements) overrides the lack of procedural documents like Form 16 or reflection in Form 26AS. Taxpayers must meticulously preserve all salary slips as primary evidence of tax deducted from their income.

Case Citation: Mani Madhukar Bansal vs. ACIT/DCIT, International Taxation [2025] 180 taxmann.com 645 (Delhi - Trib.)

Statutory Reference: Section 192 and Chapter XVII of the Income-tax Act, 1961

Comments

Post a Comment

Popular posts from this blog

Partner Remuneration is Business Income: Expenses (Including Depreciation) Allowed

-
Image
Partner Remuneration is Business Income: Expenses (Including Depreciation) Allowed Delhi ITAT Confirms Section 28(v) Classification and Upholds Consistency Rule. The Delhi Income Tax Appellate Tribunal (ITAT) has provided critical clarity for partners of professional firms, confirming that remuneration received is classified as Business Income , not 'Salary'. This classification under Section 28(v) of the Income-tax Act, 1961 , allows the partner to claim legitimate business expenditures against that income. The Dispute: CA Partner's Expense Claim The case involved an assessee, a chartered accountant partner, who received remuneration/salary from his partnership firm (Assessment Year 2018-19). The dispute arose over the treatment of expenses: Assessee's Action: Claimed business-related expenses, including depreciation on a motor car, again...
Read more

🏠 Section 54 Exemption: Investment in Spouse's Name is Valid, Rules ITAT

-
Image
Section 54 Exemption: Investment in Spouse's Name is Valid, Rules ITAT Ahmedabad Tribunal Remands Case for Ignoring High Court Precedents. A recurrent legal challenge under the Income-tax Act revolves around the validity of claiming capital gains exemption when the new residential property is purchased in the name of the assessee’s spouse. The Ahmedabad ITAT recently addressed this issue, reiterating a consistent judicial view and underscoring the necessity for tax authorities to consider binding High Court precedents. The Core Dispute and Disallowance The case (Assessment Year 2012-13) involved an assessee who sold a residential house and reinvested the sale proceeds in a new residential property, claiming exemption under Section 54 . Disallowance Rationale: The Assessing Officer (AO) and the Commissioner (Appeals) disallowed the exemption solely on the...
Read more