ARCHANABEN RAJENDRASINGH DEVAL,AHMEDABAD V. THE INCOME TAX OFFICER, TDS WARD-1, AHMEDABAD

ITA 1465/AHD/2024

AI Insights

The case revolves around the applicability of section 194IA of the Income Tax Act, 1961, concerning the deduction of tax at source on the purchase of immovable property. The assessee, Archanaben Rajendrasingh Deval, along with a co-owner, purchased agricultural land for a total consideration of Rs. 1,23,67,360. The Income Tax Officer (ITO) contended that the assessee failed to deduct TDS as required under section 194IA, leading to a demand under sections 201(1) and 201(1A) of the Act. The assessee argued that the land was agricultural and thus exempt from section 194IA, and that the payments to each seller were below the Rs. 50 lakhs threshold individually, which should exempt them from TDS requirements. The Tribunal, referencing previous decisions, concluded that the threshold should be assessed per transferor, not cumulatively, leading to the decision in favor of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29658 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Other Referred Cases: Bhikhabhai H. Patel vs. DCIT, Vinod Soni v. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B.P. SRIVASTAVA
• Assessee Lawyers: JAIMIN SHAH
• Keywords: Condonation of delay; Set aside; Capital asset; TDS; Non-deduction of tax
• Section: 250; 201; 201(1); 191

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “ए“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD \u0015ी टी.आर. से\u0019\u001aल क ुमार, \u0011ाियक सद एवं \u0015ी मकरंद वसंत महादेवकर, लेखा सद क े सम!। ] ] BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.1465/Ahd/2024 िनधा \u000fरण वष\u000f /Assessment Year : 2015-16 Archanaben Rajendrasingh Deval 42, Tirth Bhumi Co-op. Society Near Dhara Soap Factory Nikol Gam Road, Nikol, Ahmedabad – 382 350 बनाम/ v/s. The Income Tax Officer TDS Ward-1, Ahmedabad – 380 014 \u0013थायी लेखा सं./PAN: AHZPD 2745 D (अपीलाथ$/ Appellant) (%& यथ$/ Respondent) Assessee by : Shri Jaimin Shah, AR Revenue by : Shri B.P. Srivastava, Sr.DR सुनवाई की तारीख/Date of Hearing : 01/04/2025 घोषणा की तारीख /Date of Pronouncement: 02/04/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal is filed by the assessee against the order dated 30.03.2023 passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “Ld. CIT(A)”], under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”], for the Assessment Year (AY) 2015–16. The appeal arises from the order of the Income Tax Officer, TDS Ward-1, Ahmedabad ITA No.1465/Ahd/2024 Archanaben Rajendrasingh Deval Asst. Year : 2015-16 2 [hereinafter referred to as “AO”] dated 06.01.2022 passed under sections 201(1)/201(1A) of the Act. Facts of the case: 2. The brief facts of the case, as emanating from the record, are that the assessee, an individual, had jointly purchased immovable property along with co-owners during the year under consideration. As per the information gathered by the TDS Wing, the assessee had purchased land situated at Survey No.196, Khata No. 430, at Village Shiholi Moti, Dist. Gandhinagar, for total consideration of Rs.1,23,67,360/-. The share of the assessee in the said property was Rs.53,67,360/-. 2.1. Based on this transaction, the AO initiated proceedings under section 201 of the Act for failure to deduct tax at source (TDS) under section 194IA of the Act. The AO issued notices to the assessee on multiple occasions including 11.08.2021, 07.10.2021 and 21.12.2021, seeking explanations along with copies of sale deeds and details of payment of TDS, if any. 2.2. In response to the notices issued by the AO, the assessee, vide letter dated 14.08.2021, submitted that the land purchased was agricultural land situated in Village Shiholi, Taluka Kalol, District Gandhinagar. It was stated that the land was purchased jointly and the share of the assessee in the total consideration of Rs.1,23,67,360/- was Rs.53,67,360/-. The assessee submitted that since the land is agricultural land, the provisions of section 194IA of the Act are not applicable. It was further submitted that since the payment to each seller was below Rs.50 lakhs, the provisions of section 194IA(2) of the Act would also apply, and therefore, no TDS was required to be deducted. ITA No.1465/Ahd/2024 Archanaben Rajendrasingh Deval Asst. Year : 2015-16 3 Based on these grounds, the assessee contended that the provisions of section 194IA of the Act were not applicable. 3. The AO rejected the assessee’s claim that the land in question was agricultural in nature and therefore outside the purview of section 194IA of the Act. The AO referred to the letter dated 17.07.2021 issued by the Gandhinagar Urban Development Authority (GUDA), which confirmed that the subject land was located at an aerial distance of only 2.61 kilometers from the municipal limits of Gandhinagar. Further, the Assessing Officer noted that the assessee’s individual share in the total purchase consideration was Rs.53,67,360/-, which exceeded the monetary threshold of Rs.50,00,000/- as prescribed under section 194IA(2) of the Act. Accordingly, the AO held that the assessee was liable to deduct tax at source at the rate of 1% under section 194IA(1) of the Act. The AO rejected the assessee’s contention that no payment to any individual seller exceeded Rs.50 lakhs, observing that the statutory threshold under section 194IA of the Act applies with reference to the consideration payable by the transferee and not with reference to any individual share. Since no tax was deducted at source, the AO treated the assessee as an assessee-in-default under section 201(1) of the Act for failure to deduct tax. 4. The assessee preferred an appeal before the Ld.CIT(A). The assessee contended that the primary condition for the application of section 194IA of the Act, namely that the transaction involved transfer of an immovable property other than agricultural land, was not fulfilled in the present case. The assessee submitted that the land purchased was agricultural land, as evidenced by its classification in the registered sale deed. There was no dispute raised by the AO regarding the classification of the land in the ITA No.1465/Ahd/2024 Archanaben Rajendrasingh Deval Asst. Year : 2015-16 4 revenue records. It was further submitted that the land was situated at a distance of 2.61 kilometers from the limits of the Gandhinagar Municipal Corporation, as confirmed by a certificate issued by the Village Talati. Additionally, it was brought to the notice of the Ld.CIT(A) that the population of Village Shiholi was less than 10,000, as certified by the local Panchayat. In view of these facts, the assessee argued that the land was covered by the exclusion set out in section 2(14)(iii)(b)(II) of the Act, which provides that land shall not be treated as a capital asset if it is situated beyond a certain distance from a municipality, and the population of the relevant area does not exceed the prescribed limit. Since both conditions failed, the land could not be treated as a capital asset, and hence, the provisions of section 194IA of the Act were not applicable. The assessee also contended that even assuming for a moment that the land was not agricultural, the provisions of section 194IA(2) of the Act were still not attracted. It was submitted that the total purchase consideration was Rs.1,23,67,360/-, which was jointly paid by the assessee and her co-owner. The assessee’s individual share in the property was Rs.53,67,360/-, but the consideration was paid in two parts to two separate sellers – Rs.21,83,680/- and Rs.31,83,680/- respectively – and hence, payment to each seller was below Rs.50 lakhs. 4.1. In addition to the above, the assessee further submitted that the AO had erred in treating her as an assessee-in-default under section 201(1) of the Act without satisfying the conditions laid down in the Explanation to section 191 of the Act and the first proviso to section 201(1) of the Act. The assessee claimed to have acted under a bona fide belief that the transaction did not attract TDS, as the land was agricultural and the payments to individual sellers were below Rs.50 lakhs. However, the CIT(A) dismissed the appeal. The Ld.CIT(A) primarily relied on the findings recorded by the AO and ITA No.1465/Ahd/2024 Archanaben Rajendrasingh Deval Asst. Year : 2015-16 5 proceeded to summarily affirm the same. The Ld.CIT(A) placed sole reliance on the certificate issued by the Gandhinagar Urban Development Authority (GUDA), which stated that the land in question was situated at a distance of 2.61 kilometers from the limits of the Gandhinagar Municipality. Based on this fact, the Ld.CIT(A) inferred that the land did not qualify as “agricultural land” within the meaning of section 2(14)(iii) of the Act. The Ld.CIT(A) also denied the assessee the benefit of the first proviso to section 201(1) of the Act. 5. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us raising following grounds of appeal: 1. That the Ld. CIT(A), National Faceless Appeal Center has erred both in law and on facts while passing the order u/s 250 of the Income Tax Act, 1961 and therefore the order passed is against the facts on record and prejudicial to the interest of justice, therefore the addition sustained u/s 201(1) /201(1A) of Rs.1,00,907/- require to be deleted. 2. That the assessee has not made any default U/s 201(1)/ 201(1A) of the I.T. Act, 1961, however the demand raised by the ITO, TDS ward 1, Ahmedabad and sustained by the CIT(A), National Faceless Appeal Center is against the provision of law and requires to be deleted. 3. That the appellant has purchase agriculture land situated at (1) Survey No. 196, Khata No. 430, Dist, Gandhinagar, Village Shiholi Moti, The GUDA has also confirmed that the land is 2.61 Kms away from Gandhinagar Municipality and the population of Village Shiholi is less than 10,000, which amounts to agriculture land on purchase of which TDS provisions of section 194IA is not applicable, which ground is not considered by the CIT(A) and therefore the order passed by CIT(A) is against the provision of law and therefore the addition made u/s 201(1)/ 201(1A) require to be deleted. 4. That the assesse has purchase agriculture land along with her co-owner for Rs.1,23,67,360/- and paid amount to each landowner less than Rs.50 lacs, however the Ld. CIT(A) and ITO has wrongly interpreted the section 201(1)/ 201(1A) and raised heavy demand of Rs. 1,00,907/- is require to be deleted. 5. That the assessee is govern by proviso to section 201(1) of the Income Tax Act, 1961, Further the ITO has without ascertaining whether deductees have failed to pay the tax directly or not, heavy addition made may please be deleted. ITA No.1465/Ahd/2024 Archanaben Rajendrasingh Deval Asst. Year : 2015-16 6 6. The learned assessing officer erred in treating the assessee as 'assessee in default' under section 201(1) without demonstrating the satisfaction of the requirements of Explanation to section 191 and first proviso to section 201(1) of the Act and as such the demand raised of Rs.1,00,907/- requires to be deleted. 7. That the assesse has not made any default U/s 201(1) / 201(1A), however the penalty proceedings-initiated u/s 271C of the act, requires to be dropped. 8. The assessee craves leave to add, alter, amend or delete any grounds of appeal before the appeal finally heard and decided. Condonation of Delay 6. At the outset, the registry has noted that there is a delay of 438 days (494 days as computed by the assessee) in filing the present appeal before us. The assessee has filed an application for condonation of delay supported by an affidavit, wherein it is stated that the order of the Ld.CIT(A) dated 30.03.2023 was never received by her either through email or physical communication. It is explained that the assessee became aware of the appellate order only when a pop-up message appeared on the Income Tax e-filing portal in July 2024 while attempting to file the income tax return for Assessment Year 2024–25. Thereafter, the assessee consulted her Chartered Accountant, who, due to the intervening filing season, could not immediately attend to the preparation of the appeal. The delay, according to the assessee, was neither deliberate nor intentional, but occurred due to circumstances beyond her control. 7. While we have considered the reasons set forth by the assessee, we are unable to accept non-receipt of the e-mail from the department as a sufficient cause by itself for condoning such an extended delay. In the present digital framework, it is the responsibility of every taxpayer to regularly track and monitor communications issued by the Income Tax Department through ITA No.1465/Ahd/2024 Archanaben Rajendrasingh Deval Asst. Year : 2015-16 7 their registered email and portal login. The presumption under the law is that an electronically issued order is deemed to have been served once it is made available in the assessee’s registered account or email, and ignorance of such communication does not by itself constitute a satisfactory explanation. 7.1. That said, it is equally well-settled law that a liberal and pragmatic view should be taken in condoning delay where denial of such relief would result in injustice, especially when the delay is not attributable to mala fides or intentional disregard of law. In the facts of the present case, the assessee has acted promptly upon discovery of the order and has approached us with an appeal on merits. Denial of hearing on technical grounds would defeat the very object of adjudication. 7.2. Accordingly, while the explanation tendered by the assessee is not fully satisfactory, we are inclined to condone the delay in the interest of substantial justice, subject to payment of a nominal cost of Rs.2,000/- by the assessee to the credit of the Income Tax Department within a period of four weeks from the date of this order. The appeal is admitted for hearing and is taken up for adjudication on merits. 8. During the course of hearing before us, the Authorized Representative (AR) of the assessee reiterated the facts and stated that the assessee's share in the purchase consideration was Rs.53,67,360/-, and the amount was paid to two different sellers—none of whom received more than Rs.50 lakhs. The AR clarified that while the assessee earlier relied on section 194IA(2) of the Act to argue that the consideration paid to each seller was below Rs.50 lakhs, it is now evident that a proviso to section 194IA(2) of the Act has been inserted only with effect from 1st October 2024 by the Finance Act, 2023. Therefore, ITA No.1465/Ahd/2024 Archanaben Rajendrasingh Deval Asst. Year : 2015-16 8 the benefit of the amended provision is not available for Assessment Year 2015–16. The AR placed reliance on a decision of the Co-ordinate Bench of ITAT Ahmedabad in the case of Bhikhabhai H. Patel vs. DCIT (ITA No. 1680/Ahd/2018, order dated 31.01.2020), where the Co-ordinate Bench held, following the decision of co-ordinate bench in case of Vinod Soni v. ITO (ITA No. 2736/Del/2015 order dated 10.12.2018), that for the purposes of section 194IA of the Act, the obligation to deduct tax must be examined with reference to each transferee and each transferor individually. Where the consideration paid to any one transferor is below Rs.50 lakhs, the transferee is not required to deduct TDS under section 194IA of the Act. The AR submitted that the facts of the present case are identical in nature and the principle laid down therein should be followed to grant relief to the assessee. On the other hand, the Learned Departmental Representative (DR) supported the orders passed by the lower authorities. The DR submitted that the assessee’s share in the purchase consideration exceeded Rs.50 lakhs and the property was not shown to be agricultural in nature in accordance with section 2(14)(iii) of the Act. Therefore, the provisions of section 194IA of the Act were clearly applicable and the assessee, having failed to deduct tax at source, was rightly held to be in default under section 201(1) of the Act and liable for interest under section 201(1A) of the Act. 9. We have carefully considered the rival submissions and perused the material available on record. The undisputed facts are that the assessee, along with a co-owner, purchased immovable property for a total consideration of Rs.1,23,67,360/-, and her share in the said transaction was Rs.53,67,360/-. The AO invoked the provisions of section 194IA of the Act and held the assessee to be an assessee-in-default under section 201(1) of the Act for non-deduction of TDS, along with consequential interest under section 201(1A) of the Act. ITA No.1465/Ahd/2024 Archanaben Rajendrasingh Deval Asst. Year : 2015-16 9 The Ld.CIT(A) affirmed the action of the AO without independent verification or analysis of key factual and legal aspects and summarily dismissed the appeal. 9.1. During the course of hearing before us, the AR of the assessee confined his arguments to the issue that the provisions of section 194IA of the Act were not applicable in view of the fact that the amount paid to each seller in the transaction was below Rs.50,00,000, even though the assessee’s share in the total transaction exceeded the threshold. The AR also contended that the amendment made by way of insertion of a proviso to sub-section (2) of section 194IA of the Act, by the Finance Act, 2024 with effect from 1st October 2024, is not applicable to the present year under appeal (AY 2015–16). Nevertheless, the AR placed reliance on the decision of the Co-ordinate Bench of the ITAT Ahmedabad in the case of Bhikhabhai H. Patel vs. DCIT (supra), wherein the Co-ordinate Bench, following the decision in the case of Vinod Soni v. ITO (supra), held that for the purpose of section 194IA of the Act, the threshold of Rs.50 lakhs is to be examined with reference to each transferee- transferor pair individually, and that where the consideration paid to each seller is below Rs.50 lakhs, the provisions of section 194IA of the Act are not attracted. 9.2. We find merit in the submission made by the AR. In the present case, as recorded in the assessment order and not disputed by the revenue, the assessee had paid Rs.21,83,680/- to one seller and Rs.31,83,680/- to another seller, both of which are individually below the threshold of Rs.50 lakhs prescribed under section 194IA of the Act. The assessee’s reliance on the decision of the Co-ordinate Bench in the case of Bhikhabhai H. Patel (supra) is well placed where it was held that for the purposes of section 194IA of the ITA No.1465/Ahd/2024 Archanaben Rajendrasingh Deval Asst. Year : 2015-16 10 Act, the threshold of Rs.50 lakhs is to be examined with reference to each transferee and each transferor individually. Where the amount paid to any one transferor is below Rs.50 lakhs, the transferee is not obliged to deduct tax under section 194IA of the Act. 9.3. In paragraph 5.2 of its order in the case of Vinod Soni (supra), the Co- ordinate Bench categorically observed that section 194IA(1) of the Act imposes a deduction obligation on “any person being a transferee”, and therefore, section 194IA(2) of the Act, which provides a threshold exemption, must also logically apply with reference to the individual transferee. The said para is reproduced herewith for clarity and ready reference – “5.2 After perusing the Paper Book and the relevant provisions of law, we find that Section 194- IA(2) provides that Section 194- IA(1) will not applicable where the consideration for transfer of immovable property is less than Rs.50,00,000/ -. However, section 194- IA(1) is applicable on any person being a transferee, so section 194- IA(2) is also, obviously, applicable only w.r.t. the amount related to each transferee and not with reference to the amount as per sale deed. In the instant case there are 04 separate transferees and the sale consideration w.r.t. each transferee is Rs.37,50,000/ -, hence, less than Rs. 50,00,000/ - each. Each transferee is a separate income tax entity therefore, the law has to be applied with reference to each transferee as an individual transferee / person. I t is also noted that Sect ion 194- IA was introduced by Finance Act, 2013 effective from 1.6.2013. It is also noted from the Memorandum explaining the provisions brought out along with the Finance Bill wherein it was stated that “in order to reduce the compliance burden on the small tax payers, it is further proposed that no deduct ion of tax under this provision shall be made where the total amount of consideration for the transfer of an immovable property is less than fifty lakhs rupees.” We further find that the main reason by the AO is that the amount as per sale deed is Rs.1,50,00,000/ -. The law cannot be interpreted and applied differently for the same transact ion, if carried out in different ways. The point to be made is that, the law cannot be read as that in case of four separate purchase deed for four persons separately, Sect ion 194- IA was not applicable, and in case of a single purchase deed for four persons Sect ion 194- IA will be applicable. It is noted that AO has passed a common order u/s. 201(1) for al l the four transferees. In order to justify his action since in case of separate orders for each transferee separately, apparently, provisions of sect ion 194IA could not had been made applicable since in each case purchase consideration is only Rs.37,50,000/ -. This act ion of AO shows that he was also clear in his mind that with reference to each transferee, Sect ion 194IA was not applicable. Hence, we are ITA No.1465/Ahd/2024 Archanaben Rajendrasingh Deval Asst. Year : 2015-16 11 of the considered view that the addition made by the AO and confirmed by the Ld. CIT(A) is not sustainable in the eyes of law, thus the same is deleted. As far as issue of charging interest is concerned, the same is consequential in nature, hence, need not be adjudicated. As regards the case laws ci ted by the Ld. DR are concerned, the same are on distinguished facts and therefore, not applicable in the present case. Accordingly, the grounds raised by the assessee stand allowed and as a result thereof, the appeal of the assessee is allowed.” 9.4. Applying the above reasoning to the facts of the present case, we note that the assessee paid Rs.21,83,680/- to one seller and Rs.31,83,680/- to another seller — both of which are individually below Rs.50,00,000/-. In line with the interpretation adopted in the case of Bhikhabhai H. Patel (supra), we hold that the provisions of section 194IA of the Act were not attracted in the case of the assessee. 9.5. We find that the Ld.CIT(A), while upholding the AO’s action, failed to consider the legal issue squarely raised by the assessee and did not deal with the applicable precedent or examine the transaction structure in light of judicial interpretation. The approach of the appellate authority, in summarily concurring with the AO without addressing these key issues, does not meet the standard required under section 250(6) of the Act. 9.6. In view of the above findings, the demand raised under section 201(1) and 201(1A) of the Act is liable to be deleted. As the assessee has been held not to be in default for failure to deduct tax under section 194IA of the Act, all other grounds raised in the appeal — including those relating to section 2(14)(iii) of the Act, the proviso to section 201(1) of the Act, the Explanation to section 191 of the Act, and penalty under section 271C of the Act — are rendered redundant and academic and are therefore not adjudicated. ITA No.1465/Ahd/2024 Archanaben Rajendrasingh Deval Asst. Year : 2015-16 12 9.7. Accordingly, the assessee could not have been held to be an assessee- in-default under section 201(1) of the Act, and the consequential levy of interest under section 201(1A) of the Act also fails. The orders of the lower authorities are therefore liable to be set aside on this short ground alone. 10. In the result, the appeal filed by the assessee is allowed, as indicated above. Order pronounced in the Open Court on 2nd April, 2025 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 02/04/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS आदेश की \"ितिलिप अ#ेिषत/Copy of the Order forwarded to : 1. अपीलाथ$ / The Appellant 2. \"%थ$ / The Respondent. 3. संबंिधत आयकर आयु& / Concerned CIT 4. आयकर आयु& ) अपील ( / The CIT(A)-(NFAC), Delhi 5. िवभागीय \"ितिनिध , अिधकरण अपीलीय आयकर , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u000f फाईल / Guard file. आदेशानुसार/ BY ORDER, स%ािपत \"ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 2.4.2025 2. Date on which the typed draft is placed before the Dictating Member. : 2.4.2025 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 2.4.25 7. Date on which the file goes to the Bench Clerk. : 2.4.25 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : "