2024 (12) TMI 113 - AT - Income Tax

Applicability of TDS @ 1% or 20% in terms of provisions of Section 194IA with a conjoint reading of Section 206AA - non-availability of PAN or non-quoting of PAN - Purchase of property exceeded the limit prescribed u/s 194IA of Rs. 50.00 lac - P ayment in the nature of loan was made through Avani Traders by the proprietorship concern of Mr. RA, who happen to be the husband of the assessee, and at that point of time, the Seller was not having any PAN Number HELD THAT - Higher rate of TDS was introduced to strengthen the PAN mechanism, so that the persons who are in receipt of payments and are subject to deduction of tax at source shall mandatorily furnish their PAN Numbers to the deductor and if they failed to do so, the deductor shall be liable to deduct tax at higher rate of 20%. Such provisions were brought in the Act to overcome the excuse of the non-availability of PAN or non-quoting of PAN, creating problems in processing of returns of income and in granting credit for tax deducted at source, leading to delay in issue of refunds. Going through the facts of the present case, as the recipient (Seller) has furnished his PAN Number before completion of the transaction, thus, non-availability of PAN or non-quoting of PAN, which was the concern of legislator has been complied with, therefore, it is not the case wherein, the processing of returns or any other proceedings or action which the revenue intending to perform against the parties to the impugned transaction of sale / purchase of property are being obstructed. We, therefore, are of the opinion that the act of assessee cannot be treated in violation of the mandate of law. We find force of the contentions of the assessee that the requisite TDS u/s 194IA was duly deducted and deposited by the assessee as prescribed under the relevant provisions of the Act, therefore, the demand raised u/s 201(1) qua the payment made to the Seller are liable to be vacated. Interest for the period of default and the levy of fee u/s 234E of the Act are consequential in nature, therefore, we restore the issue to the file of Ld. AO with the directions to re-compute the amount of interest u/s 201(1A) and fee u/s 234E, in terms of our aforesaid observations. Appeal of the assessee is partly allowed, for statistical purposes.

Summary

Issues:
1. Applicability of TDS rates under Sections 194IA and 206AA.
2. Compliance with PAN requirements for TDS deductions.
3. Assessment of demand for short deduction of TDS, interest, and late filing fee.
4. Non-compliance of the assessee during the appeal process.

Analysis:

Issue 1: Applicability of TDS rates under Sections 194IA and 206AA
The controversy in the case revolved around whether TDS should be deducted at 1% or 20% under Section 194IA, considering the provisions of Section 206AA. The payment in question was initially made as a loan by a relative of the assessee, and later adjusted towards the property purchase. As the payee was allotted a PAN before the transaction date, the TDS rate of 1% was deemed appropriate as per Section 194IA, and Section 206AA did not apply in this scenario.

Issue 2: Compliance with PAN requirements for TDS deductions
The introduction of Section 206AA aimed to enhance PAN compliance in TDS deductions. The legislative intent was to ensure that deductees furnish their PAN to deductors, failing which higher TDS rates would apply. In this case, as the payee had provided the PAN before the transaction, the purpose of the law to overcome non-PAN quoting issues was fulfilled, indicating compliance with the statutory requirements.

Issue 3: Assessment of demand for short deduction of TDS, interest, and late filing fee
The Assessing Officer had raised demands for short deduction of TDS, interest under Section 201(1A), and a late filing fee under Section 234E. The tribunal found that the TDS under Section 194IA was correctly deducted by the assessee, leading to the dismissal of the demand related to short deduction. However, the interest and fee were considered consequential, prompting a re-computation by the AO based on the tribunal's observations.

Issue 4: Non-compliance of the assessee during the appeal process
The assessee was non-compliant during the appeal process, failing to represent on multiple occasions before the ACIT(A). Consequently, an ex-parte order was passed by the ACIT(A) affirming the AO's observations and demands. The tribunal, upon reviewing the case, partially allowed the appeal, directing a re-computation of interest and fee while vacating the demand for short deduction of TDS.

This detailed analysis of the judgment highlights the key legal issues, interpretations of relevant sections, compliance with statutory requirements, assessment of demands, and the tribunal's decision regarding the appeal.