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Facts
The assessee, Ravikumar Burugupalli, purchased immovable property from a non-resident individual in 2015 but failed to deduct TDS. The Assessing Officer (AO) deemed the assessee an 'assessee in default' under Sections 201(1) & 201(1A) and raised a demand. The assessee appealed, claiming unawareness of the seller's non-resident status and stating the seller had paid the tax, furnishing Form 26A.
Held
The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to grant relief. It held that the amendment to the proviso of Section 201(1), extending benefits to non-residents, is clarificatory and retrospective in nature, not imposing new liability. As the seller had discharged their tax liability, there was no revenue leakage, and thus the assessee could not be considered an 'assessee in default'.
Key Issues
Whether the beneficial and clarificatory amendment to the proviso of Section 201(1) of the Income Tax Act, regarding non-deduction of TDS when the payee has paid tax, applies retrospectively to transactions involving non-residents for Assessment Year 2016-17.
Sections Cited
201(1), 201(1A), 251(1)(c), 195, 194IA
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Income Tax Appellate Tribunal, VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM
Before: SHRI RAVISH SOOD, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
This appeal filed by the revenue against the order of Learned Commissioner of Income Tax (Appeals)-10, Hyderabad (hereinafter in short “Ld.CIT(A)”] vide Appeal No. NFAC/2015-16/1005863 dated 13.01.2025 arising out of the order passed under section 201(1) & 201(1A) of Income Tax Act, 1961 (in short ‘Act’) dated 30.03.2021. Cross objection is filed by the assessee in support of the order of the Ld. CIT(A).
Brief facts of the case are that, assessee being an individual purchased immovable property for a consideration of Rs.3,02,39,680/- from a Non-resident Individual Shri K. Venkata Sita Rama Chandra Rao on 24.11.2015. It was noticed by the Ld. Assessing Officer [hereinafter in short “Ld. AO"] that the assessee has failed to deduct TDS on the above payments towards purchase of the property. Ld. AO thereafter issued a show-cause notice dated 22.12.2020 requiring the assessee to show cause why the order under section 201(1) & 201(1A) of the Act should not be passed considering the assessee as “assessee in default”. The assessee submitted response to the Ld.AO stating that he was not aware that Shri K. Venkata Sita Rama Chandra Rao was a Non-resident as he himself was present to execute the sale deed and the local address was mentioned in the sale deed. Not convinced with the reply
Page No. 2
On being aggrieved by the order of the Ld. AO, assessee filed an appeal before Ld. CIT(A). Ld. CIT(A) considering the proviso to Section 201(1) of the Act found that prima-facie the claim is admissible as he has complied with the provisions of section 201(1) of the Act. However, Ld. CIT(A) in exercising of powers vested under section 251(1)(c) of the Act directed the Ld. AO to provide relief subject to verification of Form 26A to be furnished before Ld. AO by the assessee.
4. On being aggrieved by the order of the Ld. CIT(A), revenue is in appeal before us by raising following grounds of appeal: -
1. The CIT(Appeals) erred both in law and on facts of the case in granting relief to the assessee.
2. On the facts and circumstances of the case and in law, whether the CIT(Appeals) is justified in holding that the assessee cannot be deemed to be an assessee in default provided he satisfies the first proviso to sub- section (1) of Section 201, without appreciating the fact that the said first provision to Section 201(1) is applicable to the payments made to 'resident' only, whereas in the case of the assessee the payments are made to 'non-resident' seller.
3. On the facts and in the circumstances of the case, and in law, whether the Id. CIT(Appeals) is justified in holding that the assessee cannot be deemed to be an assessee in default provided he satisfies the first proviso to sub-section (1) of Section 201 based on amended provisions w.e.f 01.09.2019 without appreciating the fact that these amended provisions are not applicable to the case of the assessee, as assessment year involved is A.Y.2016-17.
Any other ground of appeal that may be raised with the prior approval the Hon'ble ITAT during the appellate proceedings.”
Page No. 3
Ground Nos. 2 & 3 relates to the relief granted by the Ld. CIT(A) stating 6. the provisions of section 201(1) of the Act read with proviso, which was applicable to the payments made to “Residents” only whereas it was made applicable to “Non-resident” w.e.f. 01.09.2019. Ld. Departmental Representative [hereinafter in short “Ld. DR”] submitted that the Ld. CIT(A) erred in considering the provisions of section applicable from the date 01.09.2019 for the impugned assessment year. He submitted that for the A.Y.2016-17 “Non-resident” was not covered by the proviso under section 201(1) of the Act. He therefore pleaded that order of the Ld. CIT(A) be set-aside.
Per contra, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that assessee has furnished Form 26A along with copies of return filed by the seller duly disclosing the sale of immovable property along with the computation of capital gains and discharged the tax liability. A Certificate in Form 26A duly certified by the Chartered Accountant as required by proviso under section 201(1) of the Act was submitted before the Ld.CIT(A). He further submitted that since the seller has discharged the tax liability there is no revenue leakage to the department. He also further submitted that even though the proviso to section 201(1) of the Act was amended w.e.f. 01.09.2019 this being a beneficial and clarificatory proviso it can be applied retrospectively. He
Page No. 4 C.O. No. 38/VIZ/2025 Ravikumar Burugupalli also submitted that various judicial pronouncements have held that the beneficiary provisions can be applied retrospectively unless otherwise specified, if it is not increasing the tax liability of the assessee. He therefore pleaded that order of the Revenue Authorities be quashed.
We have heard both the sides and perused the material available on record. It is an admitted and undisputed fact that the assessee has purchased the immovable property for a consideration of Rs.3,02,39,680/- from Shri K.Venkata Sita Rama Chandra Rao on 24.11.2015. However, assessee has failed to deduct tax at source on the payments made to Shri K. Venkata Sita Rama Chandra Rao either under section 195 of the Act or under section 194IA of the Act. From the submissions of the Ld.AR, we find that the assessee has furnished Form 26A from the Chartered Accountant complying with the proviso to section 201(1) of the Act stating that the seller of the property has disclosed the sale consideration and capital gains while filing his return of income and has also discharged the tax liability arising out of the sale of property. The only contention of the revenue is that this benefit of furnishing Form 26A in accordance with provisions of section 201(1) of the Act shall be applicable to “resident” for the A.Y.2016-17, since the Government came with amendment provisions to section 201(1) of the Act was made w.e.f. 01.09.2019 including the “Non-resident”. However, we gone through the Memorandum of Finance (No.2) of 2019 wherein the proviso to section 201(1) was amended w.e.f.
Page No. 5 C.O. No. 38/VIZ/2025 Ravikumar Burugupalli 01.09.2019 which clearly states that this amendment was made with respect to clear the anomaly of the benefit of providing relief to “residents” and not to other payees, which is impartial. We consider that this amendment of extending the benefit to “Non-resident” to remove the anomaly of providing the benefit only to certain categories of payees shall be considered as clarificatory in nature without imposing any new liability. The Hon’ble Supreme Court in the case of CIT v. Vatika Township Private Limited in Civil Appeal No.8750 of 2014 dated 15.09.2014 establishes the fact that the clarificatory provisions can be applied retrospectively, if they do not impose any new burdens on the assessee. Further, Memorandum of Finance (No.2) of 2019 states that relief is available to deductor on payments made to “non-resident” shall be available which was considered as anomaly in the existing provisions. In these circumstances, it was also established by filing of Form 26A duly certified by Chartered Accountant that the seller has also discharged the tax liability. It is trite law that the same income cannot be taxed twice. We therefore of the considered view that there is no infirmity in the findings of the Ld. CIT(A) in remitting the matter back to the file of Ld. AO to verify the documents filed along with Form 26A and to grant the relief to the assessee and hence we are inclined not to interfere with the order of the Ld. CIT(A). Accordingly, grounds raised by the revenue are dismissed.
In the result, appeal of the revenue is dismissed.
Page No. 6
With respect to grounds raised by the assessee’s in the Cross Objection filed in C.O.No.38/VIZ/2025, the Ld.AR submitted that the Cross objection is supportive to the order of the Ld.CIT(A). Since the grounds raised by the Revenue are dismissed as in aforesaid paragraphs, the grounds raised by the assessee in its Cross Objection supporting the order of Ld CIT(A) are considered infructuous and hence dismissed.
In the result, cross objection filed by the assessee is dismissed.
To sum-up, appeal filed by the revenue as well as the cross objection filed by the assessee are dismissed.
Order pronounced in the open court on 22nd August, 2025.