High Court Supports Employees in TDS Case

High Court Supports Employees in TDS Case
Says Employees Receiving Income Tax Notices Are Not Liable if Employer Deducted but Did Not Deposit Tax

In a recent decision, the Delhi High Court ruled in favour of employees facing income tax (I-T) demands due to their employer's failure to deposit tax deducted at source (TDS) with the government. This judgment provides relief to employees who have been issued tax demand notices, sometimes amounting to significant sums, because their employer deducted TDS from their salaries but failed to deposit it.
The case involved a former pilot of the defunct Kingfisher Airlines, Sat want Singh Sanghera, who received a tax demand notice for over ₹11 lakh due to non-deposited TDS. Sanghera argued that the tax was indeed deducted from his salary, as evidenced by his Form 16A, but was not remitted to the government.
The High Court ruled that the tax authorities cannot recover the amount from Sanghera or deny him future I-T refunds due to the airline's failure. This ruling aligns with Section 205 of the I-T Act, which bars authorities from recovering TDS directly from employees if the employer has already deducted it. The court also ordered that all disputed tax demands against Sanghera be withdrawn and directed the I-T department to process any eligible refunds.
Chartered accountant Ketan Vajani noted that this decision reinforces judicial support for employees in cases where employers fail to remit deducted taxes. The ruling serves as a reminder to the Central Board of Direct Taxes (CBDT) to address practical issues faced by affected employees and to take remedial measures.