The Orissa High Court has ruled that an employee cannot be asked to pay tax again if the employer has failed to deposit the income tax deducted from their salary or has not provided correct details regarding the deduction.
A Division Bench of Justice Sanjeeb K. Panigrahi and Justice Murahari Sri Raman said that employees must not face problems due to the employer’s failure to deposit tax deducted at source (TDS) with the Income Tax Department.
“As it is a specific case of the petitioner that the TDS amount has not been correctly reflected by the deductor(s), the petitioner should not be made to suffer double jeopardy. The assessing authority, in such situation, may call for confirmation from the employer(s)/deductor(s) and/or issue summons to produce concerned records showing deductions made from payments made to the petitioner at the relevant period. The deducting authority is obligated to make deposits of the amounts of tax deducted at source,” the court stated.
The case concerns Nirupama Nanda, a former college lecturer in Odisha, who contested outstanding income tax demands despite claiming that her employer had already deducted tax from her salary.
Nanda had served across multiple colleges in the state. As outlined in the writ petition, the Principal of Salepur College deducted Tax Deducted at Source (TDS) from her salary for assessment years 2010-11 to 2013-14, but failed to accurately reflect these deductions in the returns submitted to the Income Tax Department.
In 2012, she was transferred to Sri Jayadev College of Education and Technology. For AY 2013-14, Rs 3,92,913 was deducted from her salary as TDS, but the Principal did not accurately declare the amount in the return.
Consequently, the deductions were either missing or wrongly shown in her Form 26AS, which records tax deducted and deposited against a taxpayer’s account.
Nanda approached the Income Tax Officer and asked for rectification of tax demands for assessment years 2009-10 to 2013-14. She stated that she had filed salary certificates and TDS details; however, the department had not addressed her requests.
The Income Tax Department claimed that TDS credit can be granted only when the deducted amount has been deposited with the Central Government and is reflected in Form 26AS.
The court referred to Sections 191, 201, 203 and 205 of the Income Tax Act, 1961, noting that employers who deduct tax but do not deposit it can be considered as taxpayers in default and face statutory consequences.
It specifies that Section 205 restricts recovery from employees to the extent tax has already been deducted from their income. The Bench placed reliance on Kartik Vijaysinh Sonavane v. CIT, Chintan Bindra v. CIT and Malay Kar v. Union of India.
The Court asked Nanda to provide the supporting documents within 15 days. The jurisdictional authority should check the deductions, summon employers if required, and correct the outstanding demands if the claims are proved. The exercise should be finished within 3 months of her first appearance.
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The Court disposed of the petition without outright rejecting the demands.
| Case Title | Nirupama Nanda vs. State of Odisha & Ors. |
| Case No. | W.P.(C) No.12607 of 2026 |
| For the Petitioner | M/s. Kshirod Kumar Rout, S.K. Rout, S.K. Baral, P.N. Pattnaik, T.S. Swarj, S. Sthitaprajna and S. Nath |
| For Opposite Party No.5 | Mr. Avinash Kedia |
| For Opposite Party No.6 | Mr Satya Narayan Pattnaik |
| Orissa High Court | Read Order |
