Credit for TDS deducted by an employer cannot be denied to an employee merely because the employer failed to deposit it.

By | September 8, 2026
0 Comment
Credit for TDS deducted by an employer cannot be denied to an employee merely because the employer failed to deposit it.
Issue
Whether an employee can be denied credit for Tax Deducted at Source (TDS) under Section 199 and subjected to a tax demand under Section 143(1) when the employer deducted the tax from the employee’s salary but failed to deposit it with the Central Government.
Facts
  • Assessee’s Profile: The assessee was an employee of Kingfisher Airlines during Assessment Year 2011-12.
  • TDS Deduction: The employer, Kingfisher Airlines, deducted TDS amounting to ₹14.66 lakhs from the assessee’s salary.
  • Non-Deposit by Employer: Kingfisher Airlines failed to deposit the deducted TDS amount into the credit of the Central Government.
  • Intimation under Section 143(1): An intimation was issued under Section 143(1) raising a tax demand of ₹19.06 lakhs on the assessee due to non-reflection/non-grant of credit for the TDS deducted.
  • Assessee’s Stand: The assessee contended that once tax is deducted at source from his salary, he cannot be held responsible for the employer’s default in depositing it.
Decision
  • In Favor of Assessee: The assessee cannot be blamed or held responsible for the non-deposit of TDS by the employer, nor can he be deprived of his legitimate right to claim TDS credit.
  • Demand Quashed: The intimation under Section 143(1) was quashed and set aside to the extent it denied the credit for TDS deducted by Kingfisher Airlines and raised the consequential tax demand.
Key Takeaways
  • Protection of Employees: Tax recovery mechanisms for non-deposit of TDS must be directed against the defaulting employer (deductor) and not the employee (deductee) from whose income the tax was already withheld.
  • Grant of TDS Credit: Once tax is actually deducted at source by an employer, the employee is entitled to claim credit for the same under Section 199, irrespective of whether the employer deposits it into the government treasury.
HIGH COURT OF DELHI
Avni Dogra
v.
Assistant Commissioner of Income-tax
Dinesh Mehta and Rajneesh Kumar Gupta, JJ.
W.P.(C)No. 5630 of 2026
CM APPL. Nos. 27598 & 35040 of 2026
AUGUST  19, 2026
Nikhil Goyal, Adv. for the Petitioner. Puneet Rai, SSC, Rishabh Nangia, JSC, Ashvini Kumar, Nikhil Jain and Ms. Nancy Jain, Advs. for the Respondent.
ORDER
1. Learned counsel for the petitioner contended that by way of intimation dated 21.01.2022 under Section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’), a demand of Rs.19,06,310/- was raised against the petitioner because the credit of TDS which Kingfisher Airlines (erstwhile employer) had deducted from the salary of the petitioner amounting to Rs.14,65,787/- was not given.
2. It is contended that the issue involved in the present writ petition is squarely covered by a judgment dated 01.10.2024 of this Court rendered in Satwant Singh Sanghera v. Asstt. CIT  (Delhi)/W.P.(C) 13765/2024 .
3. Mr.Puneet Rai, learned Senior Standing Counsel for the respondent was not in a position to dispute the position of facts and law as stated by learned counsel for the petitioner. He however submitted that the jurisdiction of filing the writ petition is at Bangalore and not in Delhi, because the assessee’s Assessing Authority has not shifted to Bangalore.
4. In response to the preliminary objection, which Mr.Puneet Rai, learned Senior Standing Counsel has raised, learned counsel for the petitioner submitted that when the petitioner filed a writ petition on 17.04.2026, he was resident and assessee in Delhi. However, later, pursuant to the request of the petitioner, who has recently moved to Bangalore, his assessing officer has changed to Bangalore.
5. Heard learned counsel for the parties.
6. So far as preliminary objection raised by Mr.Puneet Rai is concerned, we do not find any substance in the same, because when the assessee had filed return for the Assessment Year (2011-12), admittedly, the petitioner’s assessing authority was at Delhi.
7. That apart the day when the petition came to be filed, the Assessing Authority of the petitioner was at Delhi. Merely because subsequently, it has changed to Bangalore, he cannot be non-suited on the ground of territorial jurisdiction.
8. Adverting to the merit of the case, we are of the view that the respondent could perhaps been justified in disallowing the amount of TDS which was collected by Kingfisher Airlines from the petitioner’s salary, as the same was not deposited by said deductor but the petitioner cannot be blamed for that and deprived of his legitimate right, as has been held by this Court in its judgment Satwant Singh Sanghera (supra).
9. We therefore allow the writ petition and quash and set aside the intimation dated 21.01.2022 to the extent it relates to the non-grant of credit of Tax Deducted at Source by the Kingfisher Airlines.
10. Needless to observe that our order shall confine to the amount which has been deducted by the Kingfisher Airlines and in case there is any other demand raised by the Assessing Officer, the same shall not be effected.
11. The instant petition, alongwith pending applications, stands disposed of in the aforesaid terms.