Employees cannot be held liable if employer fails to deposit TDS: Bombay HC

The Bombay High Court has held that employee cannot be penalised for employer’s failure to deposit tax deducted (TDS) from salary.

“We find that the mandate of Section 205 is absolutely clear that the assessee shall not be called upon to pay taxes himself to the extent to which tax has been deducted from the assessee’s income. The object and purpose behind the provision is to the effect that when an obligation to deposit the tax as in the present case, is on the employer and if the employer has defaulted, the liability to pay such tax cannot be shifted so as to be foisted on the employee,” the Bombay High Court said in a recent order.

Recently, some employees at Tata Consultancy Services were issued demand notices by the Income Tax department due to discrepancies in tax deducted at source (TDS) claim. The Income Tax department had also sent notices of unpaid TDS to former employees of edtech firm Byju’s.

The Bombay High Court in an order dated September 10 has held that the tax department is not permitted to raise any such demand against the petitioners. In April, the Mumbai bench of the Income-Tax Appellate Tribunal (ITAT) stressed that the accountability of proof of TDS against the salary income is within the employee..