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Facts
The assessee deducted TDS on a property sale consideration. Due to an inadvertent error, the assessee deducted TDS at a lower rate than stipulated by a certificate. The Assessing Officer initiated proceedings under Section 201 for short deduction, and the assessee's rectification application was rejected. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the CIT(A) dismissed the appeal without providing an opportunity for rectification and without deciding on the merits. The Tribunal remanded the case back to the CIT(A) to allow the assessee to rectify the error and to pass a de novo order after considering the submissions.
Key Issues
Whether the CIT(A) erred in dismissing the appeal without giving an opportunity to rectify the defect and without deciding the merits of the case.
Sections Cited
250, 201, 154, 195, 197
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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
(Assessment Year: 2016-17) Firdosh Noshir Kotwal Income Tax Officer, TDS-1, Thane 124, 12th Floor, Primerose, Tata Glendale CHS, Pokhran Road No. II, Vs. Thane – 400 610. PAN/GIR No. ANFPK5464L (Appellant) : (Respondent) Assessee by : Shri Jayant Bhatt Respondent by : Ms. Kavitha Kaushik (SR DR) Date of Hearing : 10.07.2025 Date of Pronouncement : 29.08.2025 O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) ADDL/JCIT (A)-2, Chennai (‘ld. CIT(A)’ for short), passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2016-17.
The assessee has raised the following grounds of appeal:
1. Under the facts and circumstances of the case and in law order passed by Ld.CIT Appeal being bad in law on various counts the same should be set aside.
2. Under the facts and circumstances of the case and in law order passed by Ld.CIT Appeal has erred in dismissing an appeal in limine without allowing opportunity to correct the error and thereby confirming the demand without considering the merits of the case being bad in law and the same should be set aside.
(A.Y. 2016-17) Firdosh Noshir Kotwal 3. Under the facts and circumstances of the case and in law the Ld.CIT(A) should have allowed the appellant to rectify the error before dismissing the appeal on technical ground and thereby has violated the principle of natural justice and the Ld.CIT(A) be directed to allow to rectify the form 35 and that the order may be passed on merit.
4. Under the facts and circumstances of the case and in law order passed by Ld.CIT has failed to consider and appreciate the applicability of CBDT Instruction No. 2/2014 dated 26/02/2014 where assessee is not to be treated as an assessee in default u/s 201 if the deductee has already filed the return of income and paid taxes thereon.”
Brief facts of the case are that the assessee is an individual and had bought a property from Mrs. Dimple Rohit Pradhan who was an NRI for a sale consideration of Rs. 1,43,00,000/- for which the assessee was liable to deduct TDS. Mrs. Dimple Rohit Pradhan is said to have obtained certificate of deduction at lower rate u/s. 195 r.w.s. 197 of the Act and had requested the assessee to deduct the rate as per the said certificate which was at 5% plus surcharge 12% and education cess 3% on TDS. The assessee inadvertently included surcharge and education cess in the TDS deducted and paid only 5% on the total consideration, where the surcharge of Rs. 85,800/- and education cess of Rs. 24,024/- was liable to be deducted. The ld. AO issued notice u/s. 201 for short deduction amounting to Rs. 1,09,824/- towards the surcharge and education cess. It is observed that Mrs. Dimple Rohit Pradhan had filed her return of income claiming credit and TDS deducted by the assessee, where no additional demand has been claimed and assessment completed with a grant of refund of Rs. 43,630/- out of TDS paid. The assessee then filed a rectification application u/s. 154 manually with the Jurisdictional AO, Ward TDS-1, Thane, dated 22.09.2020 and the ld. AO vide letter dated 25.09.2020 stated that such demand raised was on estimate basis for which the ld. AO did not have (A.Y. 2016-17) Firdosh Noshir Kotwal access for manual interference to decide the rectification application. The assessee was advised to file an online rectification application along with certificate of Accountant as per the first proviso to Sub Section (1) of Section 201 but the assessee was unsuccessful in filing the same as there was failure to accept the assessee’s application by the system. Subsequently, the assessee is said to have sent a mail to the Jurisdictional AO explaining the same and after much effort the assessee had applied for rectification on 18.08.2022 and the same was brought to the knowledge of the ld. AO. The ld. AO rejected the rectification application filed by the assessee vide order dated 22.08.2022 without specifying the reason for the same.
Aggrieved the assessee was in appeal before the first appellate authority, who vide an order dated 04.03.2025, dismissed the appeal filed by the assessee on the ground that the assessee has wrongly filed the appeal against order u/s. 201 dated 22.08.2022 instead of rectification order u/s. 154 of the Act passed by TRACES dated 22.08.2022, without giving the assessee opportunity to file the appeal under the right provision challenging the order of rectification passed u/s. 154 of the Act.
The assessee is in appeal before us, challenging the impugned order of the ld. CIT(A) on the above-mentioned grounds.
The learned Authorised Representative (ld. AR for short) for the assessee contended that the ld. CIT(A) has dismissed the appeal without issuing a defect notice to the assessee. The ld. AR further contended that the assessee has got a good case on the merits and prayed that the assessee may be given one more opportunity to present his case before the ld. CIT(A)
(A.Y. 2016-17) Firdosh Noshir Kotwal 7. The learned Departmental Representative (ld. DR for short) for the revenue had nothing to controvert the same and relied on the order of the lower authorities.
In the above facts of the case, it is observed that the assessee has filed wrong provision before the ld. CIT(A) for which the assessee contends that it was not given an opportunity to rectify the error in Form 35. The ld. CIT(A) has also not decided the issue on the merits of the claim of the assessee and had in limine dismissed the appeal of the assessee stating that the details of the order appealed against has not been mentioned correctly in Form 35. We are therefore of the considered opinion that the assessee may be given one more opportunity to present his case before the ld. CIT(A) by rectifying the error crept in in Form 35. We therefore remand all these issues back to the file of the ld. CIT(A) by adhering to the principles of natural justice and in the interest of justice dispensation. The ld. CIT(A) is directed to consider the submission of the assessee and to pass a de novo order on the merits of the case and in accordance with law after giving sufficient opportunity of hearing.