Remedies available to assessees if employer fails to deposit the deducted TDS

The Revenue department has warned the tax deductors who are defaulters in depositing TDS to prosecute them for such failure.
It is often found that the employers after deducting TDS from the salaries of their employees are not depositing them in government account. Such retention of TDS beyond the due date is an offence as per the law of India. Such employers are liable for prosecution as per Section 276B of the Income Tax Act, 1961.
The Central Board of Direct taxes aims to punish the defaulters with imprisonment and shall also make them liable to pay fine. Such Rigorous Imprisonment may extend up to seven years.
The CBDT has modified the existing rules dealing with cases for prosecution. As per the new guidelines, the offence under section 276B of the Act can however be compounded by the Chief Commissioner of Income Tax either before or after the prosecution proceedings.

Kinds of defaults by the employers:

Failure regarding TDS can be of the following kinds –
a. Failure to deposit the TDS;
b. Failure to apply for TAN or to quote TAN as per section 203A of the Act within time;
c. Failure to furnish TDS returns or certificates;
d. Failure to mention the PAN of the employees.

Consequences of Defaults by employers:

As per Section 201 and 201 (A) of the Act, the department has power to demand the defaulted TDS amount and also charge interest at the rate of 1 % per month of the same. They can also prosecute with rigorous imprisonment of a term ranging from 3 months to 7 years and also with fine.

TDS credit can be availed by the assessees:

TDS credit can be availed by assessees on the basis of evidence produced by them even if no TDS certificate is available to the department.
The Mumbai Bench of the Income Tax Appellate Tribunal in the case of Citicorp Finance (India) Limited v. ACIT (ITA No. 8532/Mum/2011) has held that tax credit cannot be denied to assesses even if TDS Certificate is not available or no TDS entry is found in the Form 26AS.
The Tribunal has further held that the tax department should provide TDS credit once TDS certificate is produced or where the deductor did not issue TDS certificates, based on evidence produced by the assessee for deduction of tax based on indemnity bond.

Belated returns:

If an assessee fails to deduct TDS or deducts tax at a lower rate or pays the TDS after due time with interest, he can file revised TDS return with authentic figures. Such belated payments should appear in the Form 26AS.
If the assessee, from whom TDS is deducted after the due time, files his returns and pays due taxes, he is liable to file revised return for the purpose of claiming the additional TDS, if the original return is within time.
An assesee should preserve his salary slips till he gets tax certificate. If he does not receive form 16, he can file his return based on his salary slips. An employee can get his refund even if the form 16 is not available with him.

Assessee not liable for default in deposit of TDS by deductor:

The Gauhati High Court in the case of ACIT vs. Om Prakash Gattani has recently held that the defaulted amount of tax cannot be recovered from the assessee if his employer does not deposit the same. The assessee cannot be held responsible for the tax liability.