Apoorva Leasing Finance and Investment Company Limited Vs ITO (ITAT Delhi)
Delhi ITAT Deletes Interest U/s 201(1) & 201(1A) Where Deductee Paid Tax & Form 26A Was Furnished
The Delhi ITAT allowed the assessee’s appeals and deleted the interest levied under sections 201(1) and 201(1A) for failure to deduct TDS on payments made to GMADA towards allotment of land. The assessee contended that it had made the payments under a bona fide belief that GMADA, being a Government authority, was not liable to TDS. It also furnished Form 26A, certifying that GMADA had duly accounted for the receipts in its return of income and paid the applicable taxes.
The Tribunal relied on the Supreme Court decision in Hindustan Coca Cola Beverage (P.) Ltd., the CBDT Circular No. 275/201/95-IT(B), and the Madras High Court decision in S.A.A. Ispahani Trust, holding that once the deductee has included the income in its return and discharged the tax liability, the deductor cannot be treated as an assessee in default. In the present case, Form 26A conclusively established that GMADA had offered the receipts to tax.
Accordingly, the Tribunal held that the levy of interest under sections 201(1) and 201(1A) was unsustainable and set it aside. The same view was applied to the connected appeals for the subsequent assessment years, and all three appeals were allowed.
Cases Discussed
- A.A. Ispahani Trust vs. ITO (Madras High Court), (2013) 216 Taxman 1 (Mad.)
- Hindustan Coca Cola Beverage (P.) Ltd vs. CIT (Supreme Court), (2007) 293 ITR 226 (SC)
- CIT vs. Rishikesh Apartments Co-op. Housing Society Ltd. (Gujarat High Court), (2002) 253 ITR 310 (Guj.)
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeals filed by the Appellant/Assessee are against order dated 14.11.2025, 17.11.2025 and 17.11.2025 of the Ld. Commissioner of Income Tax (Appeals)-4, Kolkata (hereinafter referred to as ‘the CIT(A)’) u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of assessment order dated 08.04.2025 of Ld. Assessing Officer / ITO, Ward No. 73(1), Room No. 401, 4th Floor, Aayakar Bhawan, Laxmi Nagar, Delhi (hereinafter referred to as ‘the AO’) u/s 201/201(1A) of the Act for Assessment Year 2022-23 to 2024-25 respectively.
2. All the cases having similar facts, grounds and issues. So, we are taking 939/Del/2026 as a lead case.
3. Brief facts of the case are that the case of assessee was taken up for verification on the basis of information received from complainant through CPGRAM Portal in the complaint was mentioned that the assessee had made payments to Great Mohali Area Development Authority (GMADA) on which TDS was to be deducted which was not deducted. Notice u/s 201(1)/ 201(1A) dated 03.10.2024 was issued. The assessee submitted reply dated 18.10.2024 on final show cause notice dated 20.03.2025 was issued. The assessee filed reply dated 27.03.2025 was issued. The assessee filed reply dated 27.03.2025. On completion of proceedings, ld. AO vide order dated 08.04.2025 imposed penalty of Rs. 3,36,254/- u/s 201(1)/ 201(1A) of the Act.
4. Against order dated 08.04.2025, the assessee filed appeal before Ld. CIT(A) which was partly allowed the appeal.
5. Being aggrieved, the appellant/assessee preferred present appeal on following grounds:
“1. Ground of appeal No. 1: That the Ld. CIT(A) has erred in law and on facts in confirming levy of interest of Rs. 3,36,254/- u/s 201(1)/ 201(1A) by the income tax officer and it is prayed that the demand of Rs. 3,36,254/- on account of interest u/s 201(1A) be deleted.”
6. Ld. Authorized Representative for appellant/assessee submitted that Ld. CIT(A) erred in confirming levy of interest of Rs. 3,36,254/- u/s 201(1)/ 201(1A) of the Act. Ld. CIT(A) failed to appreciate that the assessee company made payments to Greater Noida under bonafide belief that Greater Noida being Government enterprises, no TDS is to be deducted. The assessee submitted Form 26A as per proviso of Section 201(1) and the assessee had not treated as assessee in default. The assessee company had no intention of causing any loss to the Revenue. The company did not gain any mandatory benefit by not deducting and depositing TDS. As per notification No. 28/2025/F No. 300195/3/2024-ITA in the Extraordinary Gazette of India, income, Greater Noida is not accepted.
7. Reliance was placed on Hindustan Coca Cola Beverage (P.) Ltd vs. CIT, (2007) 293 ITR 226(SC), wherein it was held in para No. 10 as under:
“10. Be that as it may, the Circular No. 275/201/95-IT(B), dated 29-1-1997 issued by the Central board of Direct Taxes, in our considered opinion, should put an end to the controversy. The circular declares “no demand visualized under section 201(1) of the Income-tax Act should be enforced after the tax deductor has satisfied the officer-in-charge of TDS, that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under section 201(1A) of the Act till the dte of payment of tax by the deductee-assessee or the liability for penalty under section 271C of the Income-tax Act.”
8. Reliance was placed on S.A.A. Ispahani Trust vs. ITO, (2013) 216 Taxman 1 (Mad.)
9. Reliance was placed on CIT vs. Rishikesh Apartments Co-op. Housing Society Ltd., (2002) 253 ITR 310 (Guj.) wherein it was held in para 12 as under:
“12. From the legal provisions discussed hereinabove, it is crystal clear that in the instant case Ravi Builder, on whose behalf the tax was to be paid by the assessee, had duly paid its tax and was not required to pay any tax to the revenue in respect of the income earned by it from the assessee. If the tax was duly paid and that too at the time when it had become due, it would not be proper on the part of the revenue to levy any interest under section 201(1A) especially when Ravi Builder had paid more amount of tax by way of advance tax than what was payable by it. As the amount of tax payable by the Contractor had already been paid by it and that too in excess of the amount which was payable by way of advance tax, in our opinion, the Tribunal was absolutely right in holding that the tax paid by the Contractor in its own case, by way of advance tax and self-assessment tax, should be deducted from the gross tax that the assessee should have deducted under section 194C while computing interest chargeable under section 201(1A). If the revenue is permitted to levy interest under the provisions of section 201(1A), even in the case where the person liabile to pay the tax has paid the tax on the date due for the payment of the tax, the revenue would derive under benefit or advantage by getting interest on the amount of tax which had already been paid on the due date. Such a position, in our opinion, cannot be permitted.”
10. Ld. Departmental Representative relied on impugned order.
11. From examination of record in light of above said rival contention it is crystal clear that Ld. CIT(A) vide order dated 14.11.2025 confirmed levy of interest of Rs. 3,36,254/- u/s 201(1) / 201(1A) of the Act and raised by the Income Tax Officer for not deducted TDS on payments made to GMADA towards allotment of land to the assessee. GMADA comes under and is part of Government of Punjab for A.Y. 2024-25 GMADA has been issued certificate u/s 10 , Clause 46A, Sub-clause (ii) of the Act as per notification No. 28/2025/F No. 300195/3/2024-ITA in the Extraordinary Gazette of India, income, Greater Noida. The assessee filed Form 26A as per which it was certified by Chartered Accountant of GMADA that the payment made by assessee have been accounted for in calculating receipts/ income of GMADA and return for same has been filed along with detail and tax due and tax paid copy of Form 26A is at page No. 56 to 60 of paper book. Hon’ble High Court of Madras in SAA Ispahani Trust vs. ITO it is held that para No. 12 observed as under:
“12. A perusal of the said order of the Hon’ble Supreme Court in Hindustan Coca Cola Beverage case would show that the assessee therein was held “as assessee in default” under Section 201(1) of the Act and also levied interest under Section 201(1-A). The assessee therein contended that the recipient therein has been assessed on their income and the tax due has been recovered from them by the Department and therefore no further tax could have been collected from the assessee therein. The said contention was accepted by the Tribunal. It was held that though the assessee therein was held to be as assessee in default, there could be no recovery of the tax alleged to be in default once again from the assessee therein considering the fact that the recipient had already paid the tax on the amount received from the assessee. The said order of the Tribunal was challenged before the High Court which in turn interfered with the same. Further appeal came up before the Hon’ble Supreme Court. In the said appeal, the Apex Court found that the Tribunal came to the right conclusion that the tax once again could not be recovered from the appellant therein since the tax has already been paid by the recipient of the income. The Apex Court also relied on the circular issued by the Central Board of Direct Taxes in Circular No. 275/201/95-IT (B) dated 29.01.1997 wherein it is declared that no demand visualized under Section 201(1) of the Income Tax Act should be enforced after the tax deductor has satisfied the Revenue that taxes due have paid by the deductee-assessee. While holding so, the Apex Court however pointed out that such position will not alter the liability to charge interest under Section 201(1A) till the date of payment of taxes by the deductee assessee.”
12. In view of above material facts i.e. Form 26A page No. 56 to 60 of paper book showing payments made by assessee having been accounted for calculating receipt/ income of GMADA and filing of return along with detail of tax due and tax paid and by respectfully following the judicial precedents it is held that impugned action of Ld. CIT(A) in confirming levy of interest u/s 201(1) and 201(1A) of the Act by Ld. AO being illegal, therefore, the levy of interest is set aside. Ground of appeal No. 1 is accepted.
13. The appeal ITA No. 939/Del/2026 is filed by the assessee is allowed.
ITA No. 940/Del/2026 & ITA No. 941/Del/2026
14. ITA Nos. 940/Del/2026 & 041/Del/2026 since the facts and issues involved are identical, the findings in ITA No. 939/Del./2026 shall, mutatis mutandis, apply to these appeals also.
15. In the result, three appeals filed by the assessee are allowed.
Order pronounced in the open court on 31.07.2026
