ITAT Grants TDS Credit to Employee despite Employer’s Default; Emphasizes Judicial Discipline and Revenue’s Responsibility for Recovery from Employer

Introduction

The Hon’ble Income Tax Appellate Tribunal, Kolkata (“ITAT”) in the case of Ajay Kumar Goel Vs. DCIT, Circle-52(1), Kolkata[1]upheld that the Assessee cannot be fastened with the responsibility of TDS when it was already deducted by the employer but not deposited into Government account, observing that the Assessee is entitled to the benefit of TDS credit, and Revenue needs to take necessary measures to recover the same from the employer.

ITAT observed basis perusal of the CBDT instruction No.275/29/2014-IT-(B), dated June 01, 2015 and provisions of Section 205 of the Income Tax Act, 1961, once TDS has been deducted from the salary of an employee then it is deemed that taxes to the extent of the TDS deducted has already been paid by the said employee. The ITAT directed AO to grant Assessee the benefit of the TDS and highlighted the importance of judicial discipline, stressing that all subordinate authorities must follow decisions made by higher courts and authorities. Not doing so could lead to a miscarriage of justice, ensuring that the law is applied consistently and fairly.

Facts

• The Assessee and the appellant in this case was Ajay Kumar Goel – the former Chief Financial Officer (“Assessee”) of BYJU’S, an ed-tech company.
• During PY 2023-24, BYJU’S had deducted TDS from the Assessee’s salary as per the applicable tax laws but failed to deposit the deducted TDS with the government, resulting in a mismatch between the TDS shown in the Assessee’s Form 26AS and the amount deducted by the company.
• The Assessee had claimed the benefit of TDS deducted on his behalf by the company when he filed his return of income.
• The Assessing Office (AO) issued an intimation, contending that the credit of the TDS shall not be granted and raised the demand.

Judgements referred

• Hon’ble ITAT, Mumbai in the case of Deputy Commissioner of Income Tax v. Mr. Aditya Ramniwas Dhoot²
• Hon’ble Guwahati High Court in the case of Assistant Commissioner of Income Tax v. Mr. Om Prakash Gattani.³

Assessee’s Contention

• The Assessee appealed against the order passed by the ld. Addl. JCIT(A), Gwalior, dated 02.06.2025 for the assessment year 2024-2025.
• The Assessee was an employee of BYJU’s during FY 2023-24 and had been receiving salary. TDS had been deducted from his salary to the extent of Rs.1.49 Crore. However, BYJU’s had not deposited the deducted TDS to the account of the Central Government. When the Assessee filed his return of income, the Assessee claimed credit of the TDS deducted from his salary.
• The Assessee contended that in view of the Instruction issued by CBDT in Instruction No.275/29/2014 (IT)-(B), dated 01/06/2015, the Assessee should not be put at any inconvenience on account of default of deposit of tax into the Government account by the deductor.
• The Assessee also placed reliance on the Office Memorandum issued by the CBDT dated 11/03/2016 which directs that AO cannot enforce demands created on account of mismatch of credit due to non-payment of TDS amount to the credit of the Government by the deductor.
• It was further contended that in view of the provisions of section 205 of the Act, the Assessee could not be held liable in respect of the TDS which had been deducted from salary but not credited by the employer to the account of the Central Government.

AO’s Contention

AO contended that the credit of the TDS was not granted as the same was not credited to the Government’s account, and a demand was raised against the Assessee in lieu of the credit of the TDS not granted.

Issues raised before the ITAT

1. Whether the Assessee is entitled to claim the TDS credit for tax deducted at source from his salary, despite the employer’s failure to deposit the TDS with the government?
   1. Whether the failure of the Revenue authorities to recover the unpaid TDS from the employer be treated as the Assessee’s fault, affecting his entitlement to the TDS credit?

Decision of the ITAT

1. Whether the Assessee is entitled to claim the TDS credit for tax deducted at source from his salary, despite the employer’s failure to deposit the TDS with the government?
2. The ITAT considered the rival submissions and observed that the provisions of Section 205 of the Income Tax Act, clearly shows that once TDS has been deducted from the salary of an employee, it is deemed that taxes to the extent of the TDS deducted has already been paid by the said employee.
3. Therefore, the ITAT concluded that the said employee cannot be revisited with the said taxes which has already been deducted and directed the AO to grant the Assessee the benefit of the TDS which has been deducted from the salary of the employee.
   1. Whether the failure of the Revenue authorities to recover the unpaid TDS from the employer be treated as the Assessee’s fault, affecting his entitlement to the TDS credit?
4. The ITAT mentioned the view of the provision of Section 201 of the Act, the Revenue can still recover the unpaid TDS from the employer and stated that the failure on the part of revenue to take appropriate action to recover the dues cannot be treated as the failure on the part of the Assessee to face a demand.
5. The ITAT directed the AO to grant the Assessee benefit of the credit of the TDS as claimed.
6. The ITAT also drew attention to the fact that the JCIT(A) incorrectly believed that decisions made by coordinate benches of the Tribunal or even High Courts were not binding on the Revenue if they did not directly relate to the jurisdiction where the Assessee resides or where the case was filed. The ITAT stressed that Judicial discipline requires that when a superior authority passes an order it is mandatory on all subordinate authorities to follow such decisions. Failure to follow judicial discipline, would lead to miscarriage of justice.

Conclusion

The ITAT ruled in favour of the Assessee granting the benefit of the TDS credit despite employer’s failure to deposit the deducted TDS with the government.

Further, the ITAT underscored the importance of judicial discipline and stated that it is mandatory for subordinate authorities to follow the orders passed by senior authorities.

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[1]Ajay Kumar Goel [TS-1569-ITAT-2025(Kol)]