HC held that under Section 194A of Income Tax Act, 1961, the tax ...

Tax Deduction Dispute: Section 194A Interpretation Protects Deductor from Immediate Penalty Without Proper Tax Verification Process

April 7, 2025

Case Laws     Income Tax     HC

HC held that under Section 194A of Income Tax Act, 1961, the tax deductor was not liable for immediate penalty when TDS was not deducted from interest/finance charges paid to NBFCs. The AO must first provide an opportunity to the appellant to establish that the tax deductee has paid applicable taxes. The lower appellate authorities' orders were set aside, and the matter was remanded to the AO for fresh consideration, requiring a fair hearing to the appellant and verification of whether the NBFCs incorporated the receipts in their accounts and paid corresponding taxes.

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