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Facts
The assessee appealed against an order disallowing TDS on purchases amounting to Rs. 50,97,72,367/-, leading to an addition of Rs. 15,29,31,710/-. The assessee contended that Section 194Q of the Income Tax Act was not applicable as their turnover in the preceding financial year was below Rs. 10 crores.
Held
The Tribunal held that the assessee had successfully demonstrated that there was no operation or turnover in the preceding financial year. Therefore, Section 194Q of the Act was not applicable, and the disallowance was not justified.
Key Issues
Applicability of Section 194Q for TDS on purchases when the preceding year's turnover was below the threshold. Validity of disallowance under Section 40(a)(ia) due to non-deduction of TDS.
Sections Cited
194Q, 40(a)(ia), 144
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Income Tax Appellate Tribunal, “C” BENCH, DELHI
Before: SHRI ANUBHAV SHARMA & SHRI NAVEEN CHANDRA
O R D E R PER ANUBHAV SHARMA, JM:
This appeal is preferred by the assessee against the order dated 30.07.2025 of the Commissioner of Income Tax (Appeal)-30, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in Appeal No: CIT(A), Delhi-30/10097/2022- 23 arising out of the order dated 31.03.2025 passed u/s 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the ACIT,CC-32, Delhi (hereinafter referred to as the Ld. AO) for AY: 2023-24.
On hearing both the sides we find that the issue involved in the appeal is the challenge the applicability of section 194Q of the Act and the consequent disallowance under section 40(a)(ia) of the Act for non-deduction of TDS on purchases amounting to Rs. 50,97,72,367/-, leading to an addition of Rs. 15,29,31,710/- (30% of the purchase value) to the taxable income. The appellant contends that the provisions of section 194Q do not apply because the turnover in the immediately preceding financial year (F.Y.
2021-22, corresponding to A.Y. 2022-23) was below the threshold limit of Rs. 10 crores, and that A.Y. 2023-24 is the first year of operation, thereby exempting the appellant from the obligation to deduct TDS on purchases made during F.Y. 2022-23 (A.Y.2023-24).
We have gone through Section 194Q with the assistance of ld.DR and find that same mandates that a buyer whose total sales, gross receipts, or turnover from business exceeded Rs. 10 crores in the financial year immediately preceding the financial year in which the purchase of goods is carried out, shall deduct TDS at 0.1% on the value of goods purchased from a seller exceeding Rs. 50 lakhs in a year (computed seller-wise).
Noncompliance triggers disallowance of 30% of such expenditure under section 40(a)(ia). The appellant's claim hinges on proving that there were no operations or turnover below Rs. 10 crores in F.Y. 2021-22.
We find that at the stage of First Appellate Authority this question could not be examined appropriately because assessment was concluded under Section 144 of the Act and at First Appellate Authority stage appellant did not provide complete submissions documents.
However, now before us Ld. counsel has demonstrated that GST registration certificate was issued on 12.05.2022 w.e.f 30.03.2022 and the GST return filed copy of which is available at page 4 -7 and tax audit report for AY: 2023-24 made available at page no. 8 -24 of the paper book show that during the Financial Year 2021-22. There was no turnover or gross profit etc. This factual aspect could not be disputed by Ld. DR and his only contention was that assessee has failed to bring necessary evidences in the submission before the ld. First Appellate Authority. However, as assessee has successfully demonstrated before us that there was no operation or turnover in the preceding financial year. Thus, there is no question of applicability of Section 194Q of the Act and the burden stand sufficiently discharged. We sustain the ground as raised and allow the appeal of the assessee.
Order pronounced in the open court on 05.12.2025