Nirupama Nanda v. State of Odisha & Ors.
An employee from whose salary tax has been deducted cannot be made to pay again because the employer did not deposit it or reflect it in Form 26AS; under sections 192, 201 and 205 of the Income-tax Act the employer is the assessee in default, tax is not to be recovered from the deductee on a credit mismatch, and the department must verify the claim, with CBDT instructions of 1 June 2015 and 11 March 2016 barring coercive recovery of such demands.
By CA Nikhil Gupta · Reviewed against the retained judgment 2026-10-16
Nirupama Nanda, a lecturer, received demands for assessment years 2010-11 to 2013-14 because the TDS her colleges deducted did not show in Form 26AS. The High Court held she should not suffer for her employers' default, and ordered the department to verify her claims and correct the demands.
What happened
The petitioner joined Vyasanagar College in 1990 and Salepur College on 2 August 2000, and in 2012 moved to Sri Jayadev College of Education and Technology. The principals deducted tax at source from her salary for assessment years 2010-11 to 2013-14 but did not report or deposit it correctly, so Form 26AS did not reflect the amounts. On 8 April 2016 she asked the Income Tax Officer, Ward 3(4), Bhubaneswar to rectify the intimations under section 143(1) for 2009-10 to 2013-14, but the Department's Demand Management Facilitation Centre at CPC Bengaluru pressed for the outstanding demands: Rs. 30,790 for 2010-11, Rs. 87,500 for 2011-12, Rs. 34,960 for 2012-13 and Rs. 17,600 for 2013-14. The Department said the TDS claimed did not match Form 26AS, credit for TDS is given only where deposited and reflected, and in 2013-14 it had already allowed the credit that did show. She filed the writ seeking quashing of the demand notices and a direction that the TDS return be filed and her documents considered.
Questions before the court
- Can the Department recover a demand from an employee whose TDS credit is missing because the employer did not deposit or report the tax deducted?
Why the court ruled this way
The employer is obliged under section 192 to deduct tax and issue a certificate, and under section 201 an employer who does not deposit is an assessee in default, so the burden is on the employer and the Department can proceed against it (paragraphs 7.3 to 7.6). Following Kartik Vijaysinh Sonavane v. CIT (Gujarat), Sumit Devendra Rajani v. ACIT, Om Prakash Gattani (Gauhati) and Chintan Bindra v. CIT (Delhi), a deductee who has had tax deducted should not be doubly taxed, and the Department can recover from the deductor (paragraphs 7.7 and 7.8). Section 205 bars a direct demand against the assessee to the extent tax is deductible at source, and the CBDT's instruction of 1 June 2015 and office memorandum of 11 March 2016, applied in Malay Kar v. Union of India, direct that demands on credit mismatch not be enforced coercively (paragraph 7.12). There was no sign that the rectification applications of 2016 were taken up or that the Department exercised its powers against the employers, so the petitioner cannot be held liable for consequences beyond her control (paragraphs 7.9 to 7.11). The factual reconciliation remains for the Department, with a proper hearing (paragraphs 7.1, 7.2 and 8).
Controlling point
The petitioner could not be saddled with demands from her employers' failure to reflect TDS, and the factual claim had to be verified by the department with the employers.
Order and next steps
The petition was disposed of with the stated directions, including that the officer may summon the employers and call for records, and that the competent authority rectify or amend the outstanding demands after verification, to be concluded within three months from the petitioner's first appearance.
Practical implications
Employees with a mismatch between Form 16 and Form 26AS can cite this decision to get credit for tax deducted and to resist recovery while the Department chases the employer.
Limits of this ruling
- The Court did not itself accept the amounts claimed and left verification to the Department; credit remains subject to proof of deduction through certificates and records, and the Court expressly noted that the petitioner had to furnish proof.
Law and judgment source
- Income-tax Act, 1961, sections 143(1), 192, 199, 201, 203 and 205
- Constitution of India, articles 226 and 227
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Source checked: 2026-10-16 · Judgment paragraphs: paragraphs 1-9 · Later case history: not verified. Verify appeals, stays and subsequent orders before reliance.
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