SHRI SALIM JAMAL PAYAK,MUMBAI vs. ITO TDS WARD 2(2)(1), MUMBAI

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ITA 4774/MUM/2025Status: DisposedITAT Mumbai28 October 2025AY 2015-164 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal acknowledged the assessee's submission that the seller had assured to file the return and declare the transaction. However, the Tribunal noted that no documentary evidence was furnished to demonstrate that the conditions laid down in the first proviso to Section 201(1) were satisfied. Consequently, in the interest of justice, the Tribunal restored the matter to the Assessing Officer (AO) for considering the assessee's claim as per the relevant provisions. The AO was directed to allow the claim after due verification of the prescribed conditions. The assessee was also directed to submit the requisite documentary evidence before the AO. The appeal was allowed for statistical purposes. The specific findings on the rate of interest or whether proceedings under Section 201(1A) were wrongly initiated were not definitively decided but were to be re-examined by the AO.

What were the facts?

The assessee, Shri Salim Jamal Payak, filed an appeal against the order of the ADDL/JCIT dated June 11, 2024, for Assessment Year 2015-16. The assessee had jointly purchased an immovable property for Rs. 1,10,00,000/- in FY 2014-15. The Assessing Officer (AO), ITO, TDS Ward 2(2)1, Mumbai, noted that the requisite TDS under Section 194IA had not been deducted by the purchasers. Consequently, by an order dated March 22, 2022, under Section 201(1)/201(1A) r.w.s 144, the assessee was treated as being in default and directed to pay Rs. 55,000/- under Section 201 and Rs. 40,575/- as interest under Section 201(1A). The assessee's appeal before the CIT(A) was dismissed ex-parte due to non-compliance with notices.

What were the issues?

1. Whether the learned Assessing Officer erred in initiating proceedings under Section 201(1A) of the Act for non-deduction of TDS under Section 194IA, as upheld by the CIT(A)? 2. Whether the learned Assessing Officer erred in charging interest under Section 201(1A) of the Act at the rate of 1% per month for non-deduction of TDS, as upheld by the CIT(A)? Assessee's Contentions: The assessee argued that although TDS was not deducted, the vendor had assured to reflect the transaction in his income tax return and pay the taxes, as he was regularly assessed to tax. The assessee relied on the provisions of Section 201, specifically the proviso, which states that an assessee is not to be treated in default if the seller has paid the tax due on the transaction, provided the seller has furnished their return of income, taken the sum into account for computing income, and paid the tax due. The assessee's representative referred to the relevant provisions of Section 201. Revenue's Contentions: The judgment records no specific contentions for the revenue.

Which sections of the Income-tax Act were involved?

Section 194IA,Section 201,Section 201(1A),Section 139,Section 144,Section 250

AI-generated summary — verify with the full judgment below

Before: SHRI PAWAN SINGH & SMT.RENU JAUHRI

For Appellant: Shri Nilesh Joshi
For Respondent: Shri Swapnil Choudhary- Sr. AR
Hearing: 01.10.2025Pronounced: 28.10.2025

This appeal is filed by the assessee against the order of the ADDL/JCIT (A) Bhubaneswar [hereinafter referred to as “CIT(A)”] dated 11.06.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2015-16.

2.

The grounds of appeal are as follows:

“1. The learned assessing officer has erred in initiating proceedings under section 201(1A) of the act for non-deduction of TDS under section 1941A of the Income Tax act 1961 upheld by CIT.

2. The learned Assessing officer has erred in charging the interest under section 201(1A) of the act at the rate of 1% per month for non-deduction of TDS upheld by CIT.

3. The appellant craves leave to add, amend and / or alter Any of the foregoing grounds as and when required.”

3.

The brief facts of the case are that the assessee had purchased an immovable property jointly with Rahimaben Jamalbhai Payak Patel from Nizarali Abdulbhai Dosani in F.Y. 2014-15 for a total consideration of Rs. 1,10,00,000/-. It was noticed by the ITO, TDS Ward 2(2)1, Mumbai [herewith referred to as the AO] that requisite TDS u/s. 194 IA @1% had not been deducted by the purchasers.

Accordingly, vide order u/s. 201(1)/201(1A) r.w.s 144 of the Act dated 22.03.2022, the assessee was treated as an assessee-in-default and directed to pay Rs. 55,000/- [u/s. 201] plus interest of Rs. 40,575/-

[u/s. 201(1A)].

3.2 Aggrieved the assessee preferred an appeal before ld. CIT(A). Since no compliance was made to the three notices issued by ld. CIT(A), the appeal was dismissed ex-parte. The assessee has now filed an appeal before the Tribunal.

4.

Before us, Ld. AR has submitted that although the assessee had not deducted the tax at source, but the vendor had given assurance to him to reflect the same in his income tax return and pay the taxes as he was regularly assessed to tax under PAN ADMPD2853L. In this regard, ld. AR has referred to the provisions of section 201 wherein the assessee is not to be treated in default, if the seller has paid the tax due on the impugned transaction. Relevant provisions of the section are as under:

Consequences of failure to deduct or pay. Section 201 (1)Where any person, including the principal officer of a company,— (a)who is required to deduct any sum in accordance with the provisions of this Act; or (b)referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee— (i)has furnished his return of income under section 139; (ii)has taken into account such sum for computing income in such return of income; and (iii)has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed: Provided further that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax.

5.

We have heard the rival submissions and perused the material available on record as well as the relevant provisions of the Act. Ld. AR has submitted that assurance was given by the seller to the assessee that he would file his return declaring the impugned transaction. However, no documentary evidence in support of the claim has been furnished to demonstrate that the conditions laid down in the first proviso to section 201(1) have been satisfied. Accordingly, in the interest of justice, we hereby, restore the matter to the ld. AO for considering the assessee’s claim as per the relevant provisions and allow the same after due verification regarding prescribed conditions. The assessee is also directed to submit requisite documentary evidences in support of his claim before the ld. AO.

6.

In the result, the assessee’s appeal is allowed for statistical purposes.

Order Pronounced in Open Court on 28.10.2025

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