SHREE MUTHUKUMARAN SILKS,ELLAMPILLAI vs. ITO, CIRCLE-1(1), SALEM

आदेश / O R D E R

PER MANU KUMAR GIRI, JM:

These appeals are directed against the orders of the Commissioner of Income Tax (Appeals) for Assessment Year 2024- 25 arising out of intimation/order passed under section 154 read with sections 200A and 206CB of the Income-tax Act, 1961. 2. The appellant is a deductor who filed its TDS return for the second quarter of Financial Year 2023-24 on 12.12.2023. Subsequently, the CPC-TDS processed the statement and passed an intimation under section 200A of the Act raising a demand of

ITA Nos 1631 to1633/Chny/2026 (AYs 2024-25) Shree Muthukumaran Silks Vs ITO C-1(1) :: 2 :: Rs.7,30,083/- on account of alleged short deduction of tax at source. Out of the said demand, a sum of Rs.6,64,692/- represented the principal demand for short deduction of TDS.The basis for raising the demand was that in respect of certain deductees, tax had been deducted at the rate prescribed under section 194C of the Act, whereas according to the CPC-TDS, the deductees had not linked their PAN with Aadhaar and consequently tax ought to have been deducted at a higher rate of 20%. The Assessing Officer/CPC-TDS processed the TDS statement under section 200A and treated the assessee as having short deducted tax in respect of certain deductees whose PANs were stated to be inoperative due to non-linkage with Aadhaar. Accordingly, a demand of Rs.7,30,083/- including consequential interest was raised. 3. Aggrieved by the intimations for captioned quarters, the assessee preferred separate appeals before the learned CIT(A). Before the CIT(A), the assessee contended that the purpose of TDS provisions is to secure collection of tax and prevent revenue leakage and that deduction at the prescribed rate under section 194C constituted substantial compliance with the law. It was further contended that the demand was unsustainable when the alleged default arose solely due to non-linkage of PAN and Aadhaar by the deductees. The assessee further submitted that it had deducted tax at source at the rate prescribed under section 194C on a bona fide belief that the deductees had complied with PAN-Aadhaar linkage requirements. It was further submitted that the deductor had no practical control over the compliance obligations of independent deductees and could not compel them to link their PAN with Aadhaar.

ITA Nos 1631 to1633/Chny/2026 (AYs 2024-25) Shree Muthukumaran Silks Vs ITO C-1(1) :: 3 :: The learned CIT(A), however, rejected the contentions of the assessee. According to the CIT(A), sufficient time had been granted by the Government for PAN-Aadhaar linkage and once the deductor became aware that certain deductees had not completed such linkage, tax was required to be deducted at the higher rate. The CIT(A) further observed that Circular No. 9/2025 and the judicial decisions relied upon by the assessee were distinguishable on facts. Now assessee is in appeals before this Tribunal. 4. Before us, ld.AR for the assessee reiterated the submissions whereas ld. DR supported the orders of the authorities below. 5. We have heard the submissions of the parties and perused the material available on record. The issue involved in the present appeal relates to the consequences of deduction of tax at the rate prescribed under section 194C where certain deductees were subsequently found to have inoperative PANs on account of non- linkage with Aadhaar. The assessee has consistently contended that tax was deducted under a bona fide belief that the deductees had complied with PAN-Aadhaar linkage requirements and that the deductor had no means to compel compliance by independent third parties. The assessee has further contended that the deductees may have subsequently linked their PAN with Aadhaar and that relevant factual verification is required before fastening liability upon the deductor. On perusal of the orders of the lower authorities, we find that neither the Assessing Officer nor the CIT(A) has undertaken a detailed factual verification regarding: (i) the status of PAN-Aadhaar linkage of each deductee; (ii) whether any of the deductees subsequently regularised their PAN by linking Aadhaar; (iii) the dates on which such linkage, if any, was completed;

ITA Nos 1631 to1633/Chny/2026 (AYs 2024-25) Shree Muthukumaran Silks Vs ITO C-1(1) :: 4 :: (iv) whether taxes have been duly offered and paid by the concerned deductees; (v) the applicability of Circulars, notifications and judicial precedents relied upon by the assessee; and (vi) the legal consequences arising from subsequent activation or validation of PANs. 6. We further find that the learned CIT(A) dismissed the appeal primarily on general observations without undertaking a deductee- wise examination of facts. The order does not contain any discussion regarding the specific deductees, the status of their PANs, the evidentiary material produced by the assessee or the applicability of the judicial precedents relied upon by it.In our considered opinion, proper adjudication of the controversy requires detailed factual verification and examination of the legal contentions raised by the assessee. Since the relevant factual aspects have not been examined in sufficient detail by the lower authorities, we deem it appropriate to restore the matter to the file of the Assessing Officer.Accordingly, in the interest of justice, the orders of the Assessing Officer and the CIT(A) are set aside. The matter is restored to the file of the Assessing Officer for fresh adjudication. The Assessing Officer shall examine all contentions of the assessee, verify the status of PAN-Aadhaar linkage of the concerned deductees, consider any subsequent compliance made by them, examine the applicability of the relevant circulars, statutory provisions and judicial precedents, and thereafter pass a speaking order in accordance with law.The assessee shall be afforded adequate opportunity of being heard and shall be at liberty to file all documents, evidences and legal submissions in support of its claim. The Assessing Officer shall consider the same objectively and decide

ITA Nos 1631 to1633/Chny/2026 (AYs 2024-25) Shree Muthukumaran Silks Vs ITO C-1(1) :: 5 :: the issue afresh uninfluenced by the observations contained in the orders of the lower authorities. 7. Our above order will apply mutatis mutandis to ITA Nos.1632- 1633/Chny/2026 also as the facts are similar to the facts of ITA N0.1631/Chny/2026. 8. Accordingly, the captioned appeals of the assessee are allowed for statistical purposes and the mattersare restored to the file of the Assessing Officer for fresh adjudication in accordance with law after providing reasonable opportunity of hearing to the assessee. 9. In the result, the captioned appeals of the assessee are allowed for statistical purposes. Order pronounced in the open court on the 01st day of June 2026, in Chennai.

Sd/- Sd/- (इंतूरी रामा राव) (मनु कुमार िग�र) (INTURI RAMA RAO) (MANU KUMAR GIRI) लेखा सद*य/ACCOUNTANT MEMBER �या�यक सद*य/JUDICIAL MEMBER

चे�नई/Chennai, +दनांक/Dated: 01st June, 2026. SNDP, Sr. PS

आदेश क! ��त,ल-प अ.े-षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF