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Issues involved:
The judgment involves the issue of tax withholding demand raised on the assessee u/s 201 and 201(1A) of the IT Act, 1961 for not deducting tax at source from payment made towards purchase of land owned by non-residents based in the UK. Summary: Issue 1: Tax withholding demand under s. 201 and 201(1A) of the IT Act The Appellate Tribunal considered whether the assessee should be treated as an assessee in default for not deducting tax at source under s. 195 of the Act from the payment made for the purchase of land owned by non-residents based in the UK. The AO held the assessee in default for non-deduction of tax at source, leading to a tax liability of &8377; 4,41,680 and interest under ss. 201 and 201(1A) of the Act. The CIT(A) upheld this demand, stating that the payment should be considered as made to non-residents. However, the Tribunal found that the payment was made to an individual resident in India, Shri Paramjit Singh, who had the right to sell the land due to power of attorneys executed by the co-owners. As the payment was not made to non-residents directly, s. 195 of the Act did not apply. Citing legal precedents, the Tribunal quashed the tax withholding demand, ruling that the assessee cannot be treated as an assessee in default under ss. 201 and 201(1A) of the Act. Issue 2: Penalty under s. 271C(1) of the Act The assessee also appealed against the penalty of &8377; 4,41,618 levied under s. 271C(1) of the Act for alleged failure to deduct tax at source under s. 195. Since the tax withholding demand was quashed, the Tribunal held that the penalty must also be deleted as the cause of action for the penalty no longer existed. Consequently, the appeal against the penalty was allowed. In conclusion, both appeals were allowed, with the tax withholding demand and penalty under s. 271C(1) of the Act being quashed based on the Tribunal's findings regarding the payment made for the purchase of land owned by non-residents.
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