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Facts
The assessee jointly purchased two parcels of land in F.Y. 2014-15. The AO initiated proceedings under Sections 201(1)/201(1A) for failure to deduct TDS under Section 194IA, asserting the lands were 'urban lands' and the assessee's total share in the transactions exceeded Rs. 50 lakhs. The assessee contended that the amount paid to each individual seller for both parcels was less than Rs. 50 lakhs, and therefore Section 194IA was not applicable. The CIT(A) dismissed the assessee's appeal ex parte without considering the merits.
Held
The ITAT held that the threshold limit of Rs. 50 lakhs under Section 194IA(2) must be examined with reference to each individual transferor-transferee pair, not the assessee's total share or the aggregate transaction value. Since the amounts paid by the assessee to each individual seller were below Rs. 50 lakhs, the provisions of Section 194IA were not attracted for A.Y. 2015-16. The tribunal also noted that the amendment to Section 194IA(2) in Finance Act, 2023, which allows for an aggregate threshold, is prospective and not applicable to the relevant assessment year. Consequently, the assessee could not be treated as an assessee-in-default under Section 201(1), and the demand for tax and interest under Section 201(1A) was deleted.
Key Issues
Whether the threshold limit of Rs. 50 lakhs for TDS deduction under Section 194IA applies to the total transaction value or the amount paid to each individual seller. Whether the CIT(A)'s ex parte order dismissing the appeal without considering legal contentions was valid.
Sections Cited
2(14)(iii), 191, 194IA, 194IA(2), 201(1), 201(1A), 250, 250(6), 271C
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR
O R D E R
PER MAKARAND V. MAHADEOKAR, AM:
This appeal has been preferred by the assessee against the order dated 28.02.2025 passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], confirming the demand raised under section 201(1) and 201(1A) by the ITO, TDS Ward 1, Ahmedabad [hereinafter referred to as “Assessing Officer or AO”], in relation to A.Y. 2015–16. Ashvinkumar Naranbhai Patel vs. ITO Asst. Year : 2015-16 Facts of the Case:
The assessee, an individual, jointly purchased two parcels of land during F.Y. 2014–15 relevant to A.Y. 2015–16. The details are as under:
Sl. Property Description Total Assessee’s No. Consideration Share (Rs.) (Rs.) 1 Survey No. 196, Khata No. 430, 1,23,67,360/- 70,00,000/- Village Shiholi Moti, Gandhinagar 2 Survey No. 85, Khata No. 115, 3,40,00,000/- 1,13,33,336/- Moje Vastral, Ahmedabad
The AO issued notices dated 11.12.2018 and 26.08.2019, proposing to invoke section 201(1)/201(1A) for failure to deduct tax at source under section 194IA. The assessee, in reply dated 01.01.2019, submitted that both lands were agricultural lands and not subject to TDS under section 194IA. It was also contended that the consideration paid to each individual seller was less than Rs. 50 lakhs. The AO obtained confirmations from AUDA and GUDA. GUDA, vide letter dated 17.07.2021, stated that the Shiholi land is 2.61 km from the Gandhinagar Municipal limits. AUDA confirmed that the Vastral land is within Ahmedabad Municipality. Based on these reports, the AO held that both properties are “urban lands” within the meaning of section 2(14)(iii) and not agricultural. Further, since the assessee’s share in both transactions exceeded Rs. 50 lakhs, section 194IA was held applicable. The AO computed the default and interest as under: Ashvinkumar Naranbhai Patel vs. ITO Asst. Year : 2015-16 3 Property TDS Default (Rs.) Interest u/s 201(1A) (Rs.) Total (Rs.) Shiholi 70,000/- 60,900/- 1,30,900/- Vastral 1,13,333/- 92,933/- 2,06,266/- Total 1,83,333/- 1,53,833/- 3,37,166/- 3.1. A separate proposal for penalty under section 271C was also initiated. The assessee filed appeal before CIT(A). However, despite three notices dated 22.09.2022, 27.02.2023 and 26.02.2025, the assessee failed to make any submission. The CIT(A) dismissed the appeal citing non-prosecution and upheld the AO’s order in toto.
Aggrieved by the order of the CIT(A), the assessee is in appeal before us raising following grounds of appeal:
1. That the Ld. CIT(A) has erred both in law and on facts while passing the order u/s250 of the Income tax Act, 1961, and therefore it requires to be set aside.
2. That the Ld. CIT(A) has without appreciating the facts and submissions made by the appellant before the assessing officer, appeal rejected on the grounds of limitation is against the principal of natural justice and therefore the appeal of the appellant may please be decided on merits.
3. That the assessee has not made any default U/s 201(1)/ 201(1A) of the I.T. Act, 1961, however the demand raised by the ITO, TDS ward 1, Ahmedabad is against the provision of law and requires to be deleted.
4. That the appellant has purchase agriculture land situated at (1) Survey No. 196, Khata No. 430, Dist, Gandhinagar, Village Shiholi Moti, The GUDA has also confirmed that the land is 2.61 Kms away from Gandhinagar Municipality and the ITO has failed to consider second condition of population of Village Shiholi and made demand u/s section 201(1)/ 201(1A) on wrong interpretation of Law for Rs. 1,30,900/- require to be deleted.
5. That the assesse has purchase agriculture land situated at Vastral and paid amount to each transferor of land less than Rs. 50 lacs, however the Ld. ITO has wrongly interpreted the section 194IA and sections 201(1)/ Ashvinkumar Naranbhai Patel vs. ITO Asst. Year : 2015-16 4 201(1A) and raised heavy demand of Rs. 2,06,266/- for Tax and Interest are requires to be deleted.
6. That the assessee is govern by proviso to section 201(1) of the Income Tax Act, 1961, Further the ITO has without ascertaining the details about payment of taxes by the deductees, heavy addition made may please be deleted.
7. The learned assessing officer erred in treating the assessee as 'assessee in default' under section 201(1) without demonstrating the satisfaction of the requirements of Explanation to section 191 and first proviso to section 201(1) of the Act and as such the demand raised of Rs. 2,06,266/- requires to be deleted.
8. That the assesse has not made any default U/s 201(1) / 201(1A), however the penalty proceedings-initiated u/s 271C of the act, requires to be dropped.
9. The assessee craves leave to add, alter, amend or delete any grounds of appeal before the appeal finally heard and decided.
During the course of hearing before us the learned Authorized Representative (AR) of the assessee submitted that the Assessing Officer as well as the CIT(A) have erred in treating the assessee as “assessee in default” under section 201(1) for non-deduction of TDS under section 194IA of the Act, without appreciating the correct legal position and factual matrix. The AR submitted that during the relevant year, the assessee had jointly purchased two parcels of land, namely: (i) Land at Survey No. 196, Khata No. 430, Village Moti Shiholi, Dist. Gandhinagar, for a total consideration of Rs. 1,23,67,360/-, out of which the assessee’s share was Rs. 70,00,000/-, and (ii) Land at Survey No. 85, Moje Vastral, Ahmedabad, for a total consideration of Rs. 3,40,00,000/-, out of which the assessee's share was Rs. 1,13,33,336/-. Ashvinkumar Naranbhai Patel vs. ITO Asst. Year : 2015-16
The AR emphasized that the entire amount of Rs. 70,00,000/- paid by the assessee in the Shiholi transaction was distributed between two landowners, namely: • Smt. Manjulaben Trikamlal – Rs. 25,00,000/-, and • Smt. Joshi Padmaben Somnath – Rs. 45,00,000/-, both of which are individually below the statutory threshold of Rs. 50,00,000/- under section 194IA(2). Similarly, for the Vastral transaction, the assessee paid Rs. 1,13,33,336/- to eight different co-owners of land, and in each case, the individual payment was only Rs. 14,16,667/-, as detailed in the submission. Therefore, in no case was payment to any individual seller more than Rs. 50 lakhs. The AR submitted that as per the settled legal position, section 194IA is attracted only where consideration paid to a particular seller exceeds Rs. 50 lakhs, and the threshold under section 194IA(2) must be tested with reference to each individual transferor-transferee pair, not with reference to the total transaction value or the composite sale deed. The AR relied upon the decision of the Coordinate Bench in the case of Archanaben Rajendrasingh Deval v. ITO, TDS Ward-1, Ahmedabad, order dated 02.04.2025, wherein one of the co-owners of the very same Shiholi land had been held to be not liable under section 194IA for failure to deduct TDS, on the ground that no individual seller had received more than Rs. 50 lakhs. It was further submitted, by way of written submission, that the AO failed to consider whether the payees (sellers) had declared such receipts in their income-tax returns and paid taxes thereon. The first proviso to section 201(1) and the Explanation to section 191 required the AO to make such verification before treating the assessee as “assessee in default”. The AR prayed for deletion of the demand raised under section 201(1)/201(1A). Ashvinkumar Naranbhai Patel vs. ITO Asst. Year : 2015-16
The learned Departmental Representative (DR) supported the action of the Assessing Officer, and the order passed by the CIT(A). The DR further submitted that the object of section 194IA, as stated in the Finance Bill, 2013, was to widen the tax net in immovable property transactions and prevent avoidance by splitting transactions among multiple sellers or co-owners. The DR referred to paragraph 6 of the Assessing Officer’s order, where the AO reproduced the provision of the applicable sections and emphasized that the AO had rightly rejected the argument of the assessee by holding that the threshold must be applied from the perspective of each transferee’s share in the property, and not with reference to individual sellers.
We have considered the rival submissions and perused the relevant materials available on record. The facts are not in dispute. The contention of the assessee is that the amount paid to each seller was less than Rs.50,00,000/- , and therefore, the provisions of section 194IA of the Act were not attracted. The assessee also placed reliance on the decision of the Co-ordinate Bench in the case of Archanaben Rajendrasingh Deval v. ITO, TDS Ward-1, Ahmedabad, order dated 02.04.2025 where the Co- ordinate bench after relying on various decisions of the Co-ordinate Bench [Bhikhabhai H. Patel vs. DCIT (ITA No. 1680/Ahd/2018, order dated 31.01.2020) and Vinod Soni v. ITO (ITA No. 2736/Del/2015 order dated 10.12.2018)] held that for the purposes of section 194IA of the Act, the threshold of Rs.50 lakhs is to be examined with reference to each transferee and each transferor individually. Where the amount paid to any one transferor is below Rs.50 lakhs, the transferee is not obliged to deduct tax under section 194IA of the Act. The relevant paras of the order are reproduced herewith for the sake of clarity – Ashvinkumar Naranbhai Patel vs. ITO Asst. Year : 2015-16 7 9. We have carefully considered the rival submissions and perused the material available on record. The undisputed facts are that the assessee, along with a co-owner, purchased immovable property for a total consideration of Rs.1,23,67,360/-, and her share in the said transaction was Rs.53,67,360/-. The AO invoked the provisions of section 194IA of the Act and held the assessee to be an assessee-in-default under section 201(1) of the Act for non- deduction of TDS, along with consequential interest under section 201(1A) of the Act. The Ld.CIT(A) affirmed the action of the AO without independent verification or analysis of key factual and legal aspects and summarily dismissed the appeal.
9.1. During the course of hearing before us, the AR of the assessee confined his arguments to the issue that the provisions of section 194IA of the Act were not applicable in view of the fact that the amount paid to each seller in the transaction was below Rs.50,00,000, even though the assessee’s share in the total transaction exceeded the threshold. The AR also contended that the amendment made by way of insertion of a proviso to sub-section (2) of section 194IA of the Act, by the Finance Act, 2024 with effect from 1st October 2024, is not applicable to the present year under appeal (AY 2015–16). Nevertheless, the AR placed reliance on the decision of the Co-ordinate Bench of the ITAT Ahmedabad in the case of Bhikhabhai H. Patel vs. DCIT (supra), wherein the Co-ordinate Bench, following the decision in the case of Vinod Soni v. ITO (supra), held that for the purpose of section 194IA of the Act, the threshold of Rs.50 lakhs is to be examined with reference to each transferee-transferor pair individually, and that where the consideration paid to each seller is below Rs.50 lakhs, the provisions of section 194IA of the Act are not attracted.
9.2. We find merit in the submission made by the AR. In the present case, as recorded in the assessment order and not disputed by the revenue, the assessee had paid Rs.21,83,680/- to one seller and Rs.31,83,680/- to another seller, both of which are individually below the threshold of Rs.50 lakhs prescribed under section 194IA of the Act. The assessee’s reliance on the decision of the Co- ordinate Bench in the case of Bhikhabhai H. Patel (supra) is well placed where it was held that for the purposes of section 194IA of the Act, the threshold of Rs.50 lakhs is to be examined with reference to each transferee and each transferor individually. Where the amount paid to any one transferor is Ashvinkumar Naranbhai Patel vs. ITO Asst. Year : 2015-16 8 below Rs.50 lakhs, the transferee is not obliged to deduct tax under section 194IA of the Act.
9.3. In paragraph 5.2 of its order in the case of Vinod Soni (supra), the Coordinate Bench categorically observed that section 194IA(1) of the Act imposes a deduction obligation on “any person being a transferee”, and therefore, section 194IA(2) of the Act, which provides a threshold exemption, must also logically apply with reference to the individual transferee. The said para is reproduced herewith for clarity and ready reference – “5.2 After perusing the Paper Book and the relevant provisions of law, we find that Section 194- IA(2) provides that Section 194- IA(1) will not applicable where the consideration for transfer of immovable property is less than Rs.50,00,000/ -. However, section 194- IA(1) is applicable on any person being a transferee, so section 194- IA(2) is also, obviously, applicable only w.r.t. the amount related to each transferee and not with reference to the amount as per sale deed. In the instant case there are 04 separate transferees and the sale consideration w.r.t. each transferee is Rs.37,50,000/ -, hence, less than Rs. 50,00,000/ - each. Each transferee is a separate income tax entity therefore, the law has to be applied with reference to each transferee as an individual transferee / person. I t is also noted that Sect ion 194- IA was introduced by Finance Act, 2013 effective from 1.6.2013. It is also noted from the Memorandum explaining the provisions brought out along with the Finance Bill wherein it was stated that “in order to reduce the compliance burden on the small tax payers, it is further proposed that no deduct ion of tax under this provision shall be made where the total amount of consideration for the transfer of an immovable property is less than fifty lakhs rupees.” We further find that the main reason by the AO is that the amount as per sale deed is Rs.1,50,00,000/ -. The law cannot be interpreted and applied differently for the same transact ion, if carried out in different ways. The point to be made is that, the law cannot be read as that in case of four separate purchase deed for four persons separately, Sect ion 194- IA was not applicable, and in case of a single purchase deed for four persons Sect ion 194- IA will be applicable. It is noted that AO has passed a common order u/s. 201(1) for all the four transferees. In order to justify his action since in case of separate orders for each transferee separately, apparently, provisions of sect ion 194IA could not had been made applicable since in each case purchase consideration is only Ashvinkumar Naranbhai Patel vs. ITO Asst. Year : 2015-16 9 Rs.37,50,000/ -. This act ion of AO shows that he was also clear in his mind that with reference to each transferee, Sect ion 194IA was not applicable. Hence, we are of the considered view that the addition made by the AO and confirmed by the Ld. CIT(A) is not sustainable in the eyes of law, thus the same is deleted. As far as issue of charging interest is concerned, the same is consequential in nature, hence, need not be adjudicated. As regards the case laws ci ted by the Ld. DR are concerned, the same are on distinguished facts and therefore, not applicable in the present case. Accordingly, the grounds raised by the assessee stand allowed and as a result thereof, the appeal of the assessee is allowed.”
9.4 Applying the above reasoning to the facts of the present case, we note that the assessee paid Rs.21,83,680/- to one seller and Rs.31,83,680/- to another seller — both of which are individually below Rs.50,00,000/-. In line with the interpretation adopted in the case of Bhikhabhai H. Patel (supra), we hold that the provisions of section 194IA of the Act were not attracted in the case of the assessee.
In the present case, as per the admitted facts on record, the assessee paid Rs.21,83,680/- to one transferor and Rs.31,83,680/- to another, both of which are individually below Rs.50 lakhs. Therefore, in light of the above judicial interpretation, the provisions of section 194IA are not attracted. We further note that the amendment to section 194IA(2) of the Act by insertion of a proviso vide Finance Act, 2023, which treats the threshold on aggregate basis, is applicable only from 01.10.2024 and hence has no application to Assessment Year 2015–16 under consideration.
9.1. The CIT(A), however, passed the order in an ex parte manner, without affording an effective opportunity of hearing to the assessee and without examining the specific legal contentions raised before the Assessing Officer. Ashvinkumar Naranbhai Patel vs. ITO Asst. Year : 2015-16 The CIT(A) merely affirmed the action of the Assessing Officer by relying on the GUDA certificate regarding the proximity of the land to municipal limits, and upheld the applicability of section 194IA without any independent analysis. In doing so, the CIT(A) failed to discharge the statutory obligation cast under section 250(6) of the Act, which mandates a reasoned and speaking order dealing with each ground of appeal. The absence of any discussion on the applicability of section 194IA(2), and the judicial precedents governing its interpretation, renders the appellate order legally unsustainable.
9.2. We are therefore of the considered view that the assessee could not have been treated as an assessee-in-default under section 201(1) of the Act in respect of the transaction under consideration. Consequently, the levy of interest under section 201(1A) also fails.
9.3. As the impugned demand is liable to be deleted on the legal ground discussed above, we do not find it necessary to adjudicate the remaining grounds taken by the assessee including those relating to agricultural nature of land, the proviso to section 201(1), and applicability of Explanation to section 191 of the Act, as those issues have become academic in view of our conclusion on the core issue.
9.4. In view of the above discussion and respectfully following the binding ratio of the Co-ordinate Bench as discussed above, we hold that the assessee was not liable to deduct tax under section 194IA of the Act in the facts of the present case. Accordingly, the assessee could not be held to be in default under section 201(1) of the Act and the consequential levy of interest under Ashvinkumar Naranbhai Patel vs. ITO Asst. Year : 2015-16 section 201(1A) also stands deleted. The impugned demand is therefore directed to be deleted.