Mumbai ITAT: Employees Need to Prove TDS Deduction While Making Deposit to Company

Often the employees unfortunately reveal that while the tax has been duly deducted at source (TDS) against their salary income, the same does not get deposited by the employer with the government.

The Mumbai bench of the Income-Tax Appellate Tribunal (ITAT) decision stressed that the accountability of proof of TDS against the salary income is within the employee. To prevent the refusal of the tax already deducted against their salary income, the tax experts stated that the employees must keep handy their salary slips and Form 16A – the TDS certificate handed over by the employer at the finish of the fiscal year.

The employee (assessee) has been favoured by distinct judicial decisions, the opinion is that the TDS must be recovered from the employer who does not deposit the same. The Mumbai ITAT decided the facts of the case were peculiar.

A Dighe in his income-tax returns for FY 2017-18 showed a salary income of Rs 41.2 lakh against which he claimed that Rs 10.45 lakh had been deducted at source. Though the employer, Nirmal Lifestyle, did not deposit the tax so deducted, the IT officer rejected the TDS claim. This measure was upheld by the commissioner (appeals).

Tax experts mentioned that a situation similar to this shall lead to not just refusal of TDS, which is directed that the employee has to bear this tax again, but could indeed direct to tax penalties for the employee for the shortfall in tax dues.

The ITAT bench cites: “No doubt, the contention raised by the taxpayer (the employee) seems to be reasonable and logical. However, the taxpayer is required to discharge its primary onus by producing relevant documents…”

It is subject to the former judicial precedents in which the assessees are enabled to substantiate the tax deducted by producing pertinent documents. In such a matter the assesses losses to provide any. But ITAT provided Dighe a 2nd opportunity by sending the case back to the commissioner (appeals) to enable him to furnish the requisite proof, failing which the TDS deduction shall not be permitted.