Employee Cannot Be Penalised for Employer's Failure to Deposit Deducted TDS: Patna High Court
Overview of the Case
The Patna High Court, in a significant ruling, addressed two connected writ petitions dealing with a recurring and serious compliance failure — situations where employers deduct Tax Deducted at Source (TDS) from employee salaries but subsequently neither deposit the deducted amount with the Income Tax Department nor file the mandatory TDS statements. The judgment in Md. Shahid Ahmad Siddiqui Vs PCIT (Patna High Court), arising from Civil Writ Jurisdiction Case No. 20499 of 2025 (decided on 10/09/2026), alongside the connected CWJC No. 6441 of 2026, lays down clear legal positions on the rights of employees and obligations of defaulting employers under the Income Tax Act, 1961.
Background and Facts
CWJC No. 20499 of 2025
In this petition, respondent nos. 5 and 6 filed a counter affidavit asserting that steps had been taken to file and upload TDS deduction statements and deposit the corresponding tax amounts into the Treasury. Paragraph 12 of the counter affidavit specifically stated that all pending TDS returns for the relevant assessment years had been filed, updated, and uploaded on the Income Tax Department portal, leaving no further action pending on their part.
Since the Commissioner of Income Tax (TDS), Patna was not originally a party to the proceedings, the Senior Standing Counsel for the Department requested that this authority be impleaded to independently verify the assertions made in the counter affidavit. The Court accordingly directed that the Commissioner, Income Tax (TDS), Patna, Central Revenue Building, Veerchand Patel Marg, Patna be added as respondent no. 9.
With respect to respondent nos. 7 and 8, the Court noted with concern that despite the matter having been heard on two previous dates, no counter affidavit had been filed. The Court expressed its displeasure at this approach and, by way of a final indulgence, granted two weeks' time to file the counter affidavit and take remedial measures. The Court made it clear that failure to comply would lead to the imposition of costs at the next hearing date.
The Commissioner, Income Tax (TDS), Patna was additionally directed to examine the cases of other employers in the matter — particularly respondent nos. 7 and 8 — who had deducted TDS but had allegedly neither deposited the amount nor submitted the required returns.
CWJC No. 6441 of 2026
In this connected petition, respondent no. 4, namely the Sub-Divisional Animal Husbandry Officer, Bhabhua, Kaimur, filed a counter affidavit taking a fundamentally different position from the approach of the same Department in CWJC No. 20499 of 2025. Respondent no. 4 contended that in view of the amendment introduced in Section 200(3) of the Income Tax Act, 1961, which prescribes a time limit for corrections and amendments, it was no longer possible to carry out modifications in respect of periods prior to Assessment Year 2023-24. The argument was that the six-year limitation period introduced for filing amended statements or making corrections had effectively foreclosed the possibility of rectifying the records maintained on the Income Tax portal.