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Facts
The assessee purchased a property and deducted TDS at 1% under Section 1941A. The AO held that since the seller was a non-resident, TDS should have been deducted at 20% under Section 195, treating the assessee as being in default and raising a demand and interest.
Held
The Tribunal set aside the order of the Ld.CIT(A) and restored the issues relating to demand and interest to the file of the AO for re-examination. The assessee was given an opportunity to present relevant documents and contentions.
Key Issues
Whether the assessee is liable for short deduction of TDS for purchasing property from a non-resident, and if the benefit of the first proviso to Section 201(1) is applicable.
Sections Cited
1941A, 195, 201, 201(1), 201(1A), 234E, 147, 148, 143(3)
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Income Tax Appellate Tribunal, MUMBAI “A” BENCH : MUMBAI
Before: SHRI B.R. BASKARAN & SHRI ANIKESH BANERJEE
O R D E R PER B.R. BASKARAN, A.M :
The assessee has filed this appeal challenging the order dt.29-08-2024 passed by the Ld. Commissioner of Income Tax (Appeals)-55, Mumbai [„Ld.CIT(A)‟] and it relates to AY. 2016-17. The assessee is aggrieved by the decision of the Ld.CIT(A) in confirming the demand raised by the AO u/s.201 of the Income Tax Act, 1961 („the Act‟) and also the interest levied by the AO u/s. 201(1A) of the Act.
During the year under consideration, the assessee had purchased a property from a person, named, Shri Shabbir Sarafali Golawala for a consideration of Rs.2,21,00,000/-. The assessee deducted TDS @ 1% u/s. 194IA of the Act. The AO noticed that the seller, Shri Shabbir Sarafali Golawala, is a non-resident and hence he held that the assessee should have deducted TDS u/s. 195 of the Act @ 20%. Since there was short deduction of tax at source, the AO treated the assessee herein as an assessee in default. Accordingly, the AO raised a demand of Rs. 20,99,500/- u/s. 201(1) of the Act and also charged interest u/s. 201(1A) of the Act to the tune of Rs. 17,11,861/-. The AO also levied fee u/s. 234E of the Act for late filing of TDS return. The assessee filed appeal challenging the demand and interest raised u/s. 201/201(1A) of the Act before the Ld.CIT(A), but the said appeal came to be dismissed by the First Appellate Authority (FAA). Hence, the assessee filed this appeal before the Tribunal.
The Ld.AR submitted that the seller of the property, Shri Shabbir Sarafali Golawala has filed his return of income for the year under consideration, wherein he has declared capital loss arising from the sale of the property that was purchased by the assessee. Accordingly, he submitted that the assessee herein shall be covered by concession given in the first proviso to section 201(1) of the Act. Accordingly, the Ld.AR submitted that the AO was not right in raising the demand u/s. 201(1) of the Act. The Ld.AR further submitted that the seller of the property was not ultimately liable to pay tax for the current year. Hence, there was no loss of revenue to the Government on account of short deduction of tax at source and in that case, the interest u/s. 201(1A) of the Act also not leviable. In support of this proposition, the Ld.AR placed reliance on the decision rendered by the Co-ordinate Bench of the Tribunal in the case of Mr. Thomas Muthoot vs. DCIT in and others and also the decision rendered by the Jabalpur Bench of the Tribunal in the case of National Highway Authority of India vs. ACIT, 49 taxmann.com 32 (Jabalpur-Trib).
The Ld.DR, on the contrary, submitted that the assessee can take the benefit of proviso to section 201(1) of the Act only if he furnishes a certificate obtained from an Accountant to the effect that the conditions prescribed in the first proviso to sec.201(1)have been fulfilled. However, the assessee has not furnished the said certificate before the AO. He further submitted that the details of income tax return filed by the seller were filed before Ld CIT(A) only. Accordingly, the Ld.DR submitted that the assessee has not complied with the first proviso to sec.201(1) of the Act.
In the rejoinder, the Ld.AR submitted that the assessee has since obtained the required certificate from a Chartered Accountant in Form 26A and assessee will be in a position to present it and also other income tax details of the seller before the AO, if an opportunity is given.
6. We heard the parties and perused the record. There should not be any dispute that the concession/benefit given in the first proviso to section 201(1) of the Act will be available to the assessee only if the conditions mentioned therein are satisfied. In the instant case, the assessee did not file all the relevant document before the AO in order to demonstrate that he has complied with all the conditions prescribed in the first proviso to sec.201(1) of the Act. According to theLd A.R, the details relating to income tax return filed by the seller were produced before the Ld CIT(A) and the Accountant‟s certificate is also readily available. Accordingly, in the interest of natural justice, we are of the view that the assessee may be provided with one more opportunity to present his case properly before the AO. Accordingly, we set aside the order passed by the Ld.CIT(A) and restore all the issues relating to demand u/s. 201(1)/201(1A) of the Act of the Actto the file of the AO for examination. The assessee is free to submit the relevant documents and raise all the contentions before the AO. After affording adequate opportunity of being heard to the assessee, the AO may take appropriate action in accordance with law.
In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.