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Facts
The assessee was treated in default by the AO for non-deduction of TDS under Section 194-IA and charged interest under Section 201(1A) on a payment of Rs. 1,25,54,607/- for a plot purchase. The assessee contended that the entire consideration for the plot was paid, and the sale deed executed, before Section 194-IA's effective date (prior to 2013). The disputed payment was argued to be for 'enhanced compensation' reimbursed to HSIDC, not for the original land purchase, and that no proper opportunity of hearing was granted by the CIT (Appeals).
Held
The tribunal noted that lower authorities confined their findings only to the disputed payment of Rs. 1.25 Cr, without adequately considering the assessee's claim that the original transaction was finalized before Section 194-IA's insertion and that the payment was for enhanced compensation, not consideration for land. Consequently, the tribunal set aside the CIT(A)'s order and remanded the issue back to the CIT(A) for fresh adjudication, directing to consider the transaction's timeline and nature of payment.
Key Issues
Whether TDS under Section 194-IA was applicable on payments made by the assessee, given that the original plot purchase and sale deed occurred before the section's effective date and the current payment was for enhanced compensation, and if the assessee was afforded a proper opportunity of hearing by the CIT(A).
Sections Cited
194-IA, 201(1A), 201(1), 203A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
आदेश/ORDER PER RAJPAL YADAV, VP
The assessee is in appeal against the order of ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 30.08.2024 passed for assessment year 2015-16.
ITA 1152/CHD/2024 A.Y. 2015-16 2
The assessee has taken five grounds of appeal, however, its grievance revolves around a single issue, namely, ld. CIT (Appeals) has erred in confirming the order of the AO dated 15.03.2022 vide which AO has treated the assessee in default on account of non-deduction of tax u/s 194-IA and charging of interest u/s 201(1A) of the Income Tax Act.
3. The brief facts of the case, as emerging out from the assessment order are that assessee has purchased a plot from HSIDC, Panchkula and made payment of Rs.1,25,54,607/-. According to the AO, as per Section 194-IA, assessee was supposed to deduct TDS on payments exceeding Rs.50 lacs for purchase of land or building except agriculture land. This TDS was to be deducted @ 1%, thus, according to the AO, assessee failed to deduct the TDS. Therefore, he worked out a default of Rs.1,25,546/- u/s 201(1) and charged interest u/s 201(1A) of Rs.1,09,129/-.
The appeal to the ld.CIT (Appeals) did not bring any relief to the assessee.
ITA 1152/CHD/2024 A.Y. 2015-16 3
Before us, ld. counsel for the assessee has filed written submissions. He raised two-fold of submissions. In his first fold of contention, he submitted that CIT (Appeals) issued a notice on 08.08.2024 directing the assessee to submit reply by 13.08.2024. The time limit given by the CIT (Appeals) is very less comparing to the situation that assessee has a turnover of more than Rs.1000 Cr. It has to collect various details supporting its submissions. Hence no appropriate opportunity of hearing was granted to the assessee. As regard to non- deduction of TDS, he submitted various details supported with case-laws. We take note of the relevant part of the submissions made by the assessee : “As regards non-deduction of tax at source on the payment of Rs. 1,25,54,607/- which was made on the following dates alongwith the details of demand raised;-
Date of Amount of Amount of Intt. u/s Fee to be Total demand payment payment tax 201(IA) charged u/s 234E 06.01.2015 Rs.50,00,000/- Rs.50,000/- Rs.43,500/- Rs.50,000/- 19.01.2015 Rs.70,71,648/- Rs. 70,716/- Rs.61,523/- Rs. 70,716/- 11.03.2015 Rs. 4,82,959/- Rs. 4,830/- Rs.4,106/- Rs. 4,830/- Total 1,25,54,607/- Rs.1,25,546/- Rs.1,09,129/- Rs.1,25,546/- Rs.3,60,220/-
It is further submitted that the appellant was allotted Plot No. 19, Sector 22, Industrial Estate as per allotment letter R.L.A. NO. HSIIDC/3062 dated 05.06.2008. The price of the plot was fixed at Rs. 4,17,97,500/- and the appellant paid the entire consideration, the details of which are as under:-
ITA 1152/CHD/2024 A.Y. 2015-16 4
Dated Amount (Rs.) 29.11.2007 3000000/- 30.11.2007 1500000/- 30.06.2008 10129125/- 27.03.2009 5433675/- 04.12.2009 3921708/- 04.06.2010 3921708/- 13.10.2010 12056982/- 15.11.2010 1834302/- Total 41797500/-
And after the payment of the entire consideration, the sale deed/conveyance deed was executed on 30.03.2011. The relevant part is reproduced below:- "WHEREAS the plot/shed hereinafter described and intended to be hereby conveyed is owned by the transferor with full proprietary rights. WHEREAS Industrial Plot/Shed No. 19, Sector 22, in Industrial Estate Panchkula measuring 5573 sq. mtrs. Was allotted to the transferee, in pursuance to its application for allotment of the plot for the purpose of setting up of project of TECH PART as per the terms and conditions, contained in the Regular Letter of Allotment (RLA No. HSIIDC: 3062 dt. 05.06.2008 and agreement dated 27.08.2008, which shall continue to remain part and parcel of this deed. WHEREAS, the transferee has made the full payment amounting to Rs. 4,17,97,500/- (Rupees Four Crores Seventeen Lacs Ninety Seven Thousand Five Hundred Only) as on date, towards the price of the said plot/shed to the transferor. NOW THEREFORE, this deed witnessed that for the purpose of carrying into effect the Regular Letter of Allotment (RLA) and this Agreement and further in consideration of the said sum of Rs. 4,17,97,500/- (Rupees Four Crores Seventeen Lacs Ninety Seven Thousand Five Hundred Only) paid by the transferee, the transferor hereby grants and conveys to the transferee all that part and parcel of Plot No. 19, Sector 22, Panchkula. The copy of conveyance deed dated 30.03.2011 is enclosed herewith at Page No. 1 to 8 of the Paper Book. The appellant became the owner of the plot with usual riders. Under the Income Tax Act, before the amendment of provisions, as per Finance Act, 2012, Section 1941A was inserted w.e.f. 01.06.2013 as under:- "194-IA. (1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at ITA 1152/CHD/2024 A.Y. 2015-16 5 the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income tax thereon. (2). No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than fifty lakh rupees. (3). The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this Section." Since the appellant had paid the entire consideration of Rs. 4,17,97,500/- as per conveyance deed. Both were done before the insertion of Section 194IA. As regards amount paid in respect of enhanced compensation to be paid to the Haryana Govt, as per the award of the Court arising of the compulsory acquisition proceedings. The appellant was under a Bonafide belief that since the entire consideration charged by the Haryana State Industrial and Infrastructure Development Corporation Ltd. (HSIIDC) was paid and the sale deed was also executed on 30.03.2011. This amount of compensation payable to the Haryana Govt, is only reimbursement of compensation amount payable to Haryana Govt, and there is no element of any amount payable to the HSIIDC as was paid much earlier and this amount is not a part of consideration. Since, the amount is payable to the Haryana Govt., no tax is required to be deducted at source as HSIIDC only a conduit pipe for the Govt, as per court award and the appellant is not liable to deduct tax (TDS). Provision inserted after the purchase of the property for which the conveyance deed was also executed on 30.03.2011, under the transfer of property Act. The possession is to be delivered and the price as per sale deed is made which is also acknowledged by the seller. All these acts were performed upto 31.03.2011 only. The appellant under good faith and bonafide belief, that since the assessee had purchased the immoveable property prior to 2013 and is not required to deduct tax on the enhancement price which was also to be deposited against court award. The appellant was prevented by a reasonable cause that this enhanced compensation is not a part of sale price of immoveable property and this being a new proviso, the assessee was under a bonafide belief that it is not liable to TDS on such payment. Kind attention is invited to the Hon'ble Delhi High Court decision wherein it has been held in the case of Azadi Bachao Andolan vs. Union of India, 252 ITR - 471 (Del) that a reasonable cause, as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. The assessee is one of such person. The assessee is a man of ordinary prudence and intelligence cannot be expected to know of today changes in the proviso of Act and was without negligence or inaction or want of bonafide. The assessee did not deduct tax at source as was not even aware of the amendment.”
ITA 1152/CHD/2024 A.Y. 2015-16 6 6. The ld. Sr.DR, on the other hand, submitted that sufficient opportunities were given to the assessee.
We have duly considered the rival contentions and gone through the record carefully. Neither the AO nor the CIT (Appeals) has taken complete details on record. They have confined their finding qua the payment of Rs.1.25 Cr, whereas the case of the assessee is that this plot was allotted to it on 05.06.2008, Sale Deed was executed prior to 2011. It has made all the payments to the HSIDC and transaction was complete. The HSIDC has raised an additional demand qua payment made by it on enhanced compensation given to the farmers. Thus, it is not a consideration paid for the purchase of land or building. This aspect has not been noticed by any of the authority in their impugned order. Therefore, we set aside the order of the CIT (Appeals) and restore this issue to the file of CIT (Appeals) for deciding the appeal afresh on merit after providing due opportunity of hearing to the assessee. The ld. CIT (Appeals) is further directed to take cognizance of the fact that sale was finalized before 2011 and no provision to deduct tax on purchase consideration was required by the vendee. With the above
ITA 1152/CHD/2024 A.Y. 2015-16 7 observations, the impugned order is set aside and the issues are restored to the file of CIT (Appeals) for fresh adjudication.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced on 28th July,2025.