Case Law Details
Bela Rohit Shah Vs ACIT (ITAT Mumbai)
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) allowed the appeal filed by the assessee and directed deletion of the demand raised under Section 200A of the Income-tax Act, 1961, towards alleged short deduction of tax, interest, and levy. The Tribunal held that the demand was unsustainable in law in the facts of the case.
The assessee had jointly purchased a residential flat situated at Tardeo, Mumbai, along with her husband through a registered sale deed dated 9 December 2024. The total consideration for the property was ₹1.90 crore. The assessee held a 15% ownership share in the property, resulting in a consideration amount of ₹28.50 lakh attributable to her share, while the remaining 85% share belonged to her husband. The consideration, stamp duty, registration charges, and other incidental expenses were apportioned between the co-owners according to their respective ownership interests.
In compliance with Section 194-IA, the assessee deducted tax at source amounting to ₹28,500 on 9 December 2024 and deposited the same through Form 26QB. Subsequently, an intimation under Section 200A dated 2 April 2025 was issued raising a demand of ₹5,82,290 on account of alleged short deduction of tax, interest, and late filing levy. The basis for the demand was that the seller’s Permanent Account Number (PAN) was allegedly inoperative, thereby attracting deduction of tax at a higher rate under Section 206AA of the Act.
The assessee contended that the seller, though a United States citizen of Indian origin, had returned to India on 29 May 2024 and remained in India for more than 182 days during the relevant financial year. It was submitted that the seller had obtained Aadhaar and linked it with PAN, resulting in regularisation of the PAN status. The Department’s portal had also accepted the PAN while processing Form 26QB without raising any objection. The assessee further submitted that interest for delayed deposit of TDS and late filing levy had already been discharged, demonstrating substantial compliance with statutory requirements.
The assessee relied upon CBDT Circular No. 9/2025 dated 21 July 2025, which partially modified an earlier circular and clarified that no liability would arise upon deductors for deduction of tax at a higher rate under Sections 206AA or 206CC where the PAN was made operative through Aadhaar linkage on or before 30 September 2025 in respect of transactions undertaken between 1 April 2024 and 31 July 2025. It was argued that the assessee’s case squarely fell within the scope of this clarification.
The assessee also submitted that the seller had filed the return of income for Assessment Year 2025-26 declaring the capital gains arising from the sale of the property and had discharged the tax liability thereon. Therefore, by virtue of the proviso to Section 201(1), the assessee could not be treated as an assessee in default. It was further pointed out that in the identical case of the assessee’s husband, arising out of the same transaction, the Commissioner of Income-tax (Appeals) had already deleted a similar demand.
After examining the material on record, the Tribunal observed that the assessee had purchased only a 15% share in the property and had deducted tax under Section 194-IA on the consideration attributable to that share. The Tribunal noted that the sole basis for the demand was the alleged inoperative status of the seller’s PAN. However, the seller had subsequently linked Aadhaar with PAN and regularised the PAN within the timeline specified in CBDT Circular No. 9/2025.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The aforesaid appeal has been filed by the assessee against the order dated 04.12.2025 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, arising out of intimation issued under section 200A of the Income Tax Act, 1961 for the Assessment Year 2025-26, whereby demand on account of alleged short deduction of TDS, interest and levy has been sustained.
2. Briefly stated, the facts borne out from the record are that the assessee, Mrs. Bela Rohit Shah, had jointly purchased a residential flat being Flat No.14, 1st Floor, Dev Chhaya, Tardeo, Haji Ali, Mumbai jointly with her husband Shri Rohit Jaykumar Shah from Shri Jaydev Harish Raja. As per the registered Sale Deed dated 09.12.2024, the total consideration for acquisition of the said property was Rs.1,90,00,000/-. The assessee held 15% share in the said property and accordingly her share of consideration amounted to Rs.28,50,000/-, whereas the balance 85% share belonged to her husband. The sale deed was duly registered before the Sub-Registrar, Mumbai vide Registration No. Mumbai-V-19981/2024 dated 09.12.2024 and the payment of consideration stood apportioned between the co-owners in accordance with their respective ownership ratio. The assessee had also separately borne proportionate stamp duty, registration charges and incidental expenses relatable to her share in the property.
3. In compliance with the provisions of section 194IA, the assessee had deducted tax at source amounting to Rs.28,500/- on 09.12.2024 and the same was deposited vide challan in Form 26QB bearing CIN No.05700 dated 31.03.2025. Subsequently, an intimation under section 200A dated 02.04.2025 came to be issued raising a demand of Rs.5,82,290/- towards alleged short deduction of tax, interest and late filing levy. The primary basis for raising the aforesaid demand was that the PAN of the seller was allegedly inoperative and therefore tax ought to have been deducted at higher rate in terms of section 206AA of the Act.
4. Before the authorities below as well as before us, the assessee submitted that the seller, Shri Jaydev Harish Raja, though a U.S. citizen of Indian origin, had returned to India on 29.05.2024 and had remained in India for more than 182 days during the relevant financial year and therefore qualified as a resident under the provisions of the Income Tax Act. It was further submitted that the seller had duly obtained Aadhaar and thereafter linked the same with his PAN. The PAN of the seller was valid and operative at the time of transaction and even the Departmental portal had accepted the PAN while processing Form 26QB without raising any objection whatsoever. The assessee had also separately paid interest on delayed deposit of TDS and late filing levy and therefore there was complete and substantial compliance with the statutory requirements.
5. The learned counsel submitted that the very foundation on which the impugned demand has been raised under section 200A proceeds on an erroneous assumption that provisions of section 206AA stood automatically attracted merely because PAN was allegedly shown as inoperative at some stage. It was pointed out that the seller had already linked Aadhaar with PAN and had regularized the PAN status within the timeline contemplated under CBDT Circular No.9/2025 dated 21.07.2025. Our attention was specifically invited to the said Circular wherein the CBDT, while partially modifying earlier Circular No.3 of 2023, clarified that no liability shall arise upon deductors/collectors for deduction of tax at higher rate under section 206AA/206CC in cases where PAN is made operative by linkage with Aadhaar on or before 30.09.2025 in respect of transactions undertaken between 01.04.2024 and 31.07.2025. According to the learned counsel, the assessee’s case falls squarely within the ambit of the aforesaid beneficial clarification issued by the CBDT.
6. It was further submitted that the seller had duly filed his return of income for Assessment Year 2025-26 declaring the capital gains arising from sale of the subject property and had also discharged due taxes thereon. Therefore, in view of proviso to section 201(1), the assessee could not have been treated as an assessee-in-default. It was also brought to our notice that in the identical case of the assessee’s husband and co-owner, namely Shri Rohit Jaykumar Shah, arising from the very same transaction, the learned CIT(A) himself had already deleted similar demand raised under section 200A. A copy of the appellate order passed in the case of the co-owner was also placed before us.
7. We have carefully considered the rival submissions and perused the entire material placed on record, including the documentary evidences furnished in the paper book. The undisputed factual position emerging from the record is that the assessee had purchased only 15% share in the subject property and had duly deducted tax under section 1941A at the prescribed rate on the consideration attributable to her share. The tax so deducted was also deposited through Form 26QB. The sole basis on which the impugned demand under section 200A has been raised is that PAN of the seller was allegedly inoperative and therefore higher rate of deduction under section 206AA was applicable. However, from the material placed before us, it is evident that the seller had subsequently linked his Aadhaar with PAN and the PAN stood regularized within the time contemplated under CBDT Circular No.9/2025 dated 21.07.2025. The said Circular specifically provides relief to deductors in cases where PAN has been made operative within the prescribed period and clarifies that higher rate of deduction under section 206AA shall not apply in such circumstances for the relevant transactions. Thus, once the very foundation for invoking section 206AA no longer survives in view of the Board’s own clarification, the consequential demand raised under section 200A cannot be sustained.
8. Apart from the above, it is also an admitted factual position that the seller has duly filed his return of income for the impugned assessment year declaring the capital gains arising from sale of the property and has paid taxes thereon. Therefore, even otherwise, in view of proviso to section 201(1), the assessee could not have been treated as an assessee-in-default. We also find that in the identical case of the assessee’s husband and co-owner arising from the very same transaction, the learned CIT(A) himself has already deleted similar demand raised under section 200A. Thus, on identical facts emanating from the same transaction, there remains no justification to sustain the impugned demand in the hands of the present assessee. The learned CIT(A), in our opinion, erred in sustaining the demand despite complete evidences having been placed on record by the assessee. Accordingly, considering the entirety of facts and material available before us, we hold that the demand raised under section 200A towards alleged short deduction of tax, interest and levy is unsustainable in law and the same is directed to be deleted.
9. In the result, appeal of the assessee stands allowed.
Order pronounced on 15th May, 2026.
Author Bio
