Rashmi Singh Vs ITO (ITAT Jaipur)
Tax Already Paid, Offline Form 26A Cannot Create Default: Jaipur ITAT Deletes ₹1.15 Lakh Property TDS Demand
Summary:
The assessee, Rashmi Singh, purchased an immovable property on 2 January 2019 for a total consideration of ₹66,20,435. Since the consideration exceeded ₹50 lakh, the transaction attracted TDS at 1% u/s 194-IA. However, the assessee did not deduct TDS of ₹66,204 while making payment to the seller.
The AO initiated proceedings u/s 201(1) & 201(1A). The assessee relied upon the first proviso to section 201(1), contending that the seller had already included the property consideration in his return of income & discharged the corresponding tax liability. A Chartered Accountant-certified Form 26A was also furnished as evidence of compliance by the seller.
The AO rejected the assessee’s contention, treated her as an assessee in default u/s 201(1) & raised TDS demand of ₹66,204. Interest of ₹48,990 u/s 201(1A) was also levied, resulting in a total demand of ₹1,15,194. The matter was additionally referred for initiation of penalty proceedings u/s 271C.
The CIT(A) confirmed the demand. Aggrieved, the assessee approached the Jaipur Tribunal.
The order contains an apparent typographical reference to the purchase date as 20 December 2009 & TDS amount as ₹66,20,435. However, the Tribunal’s undisputed factual finding records the relevant purchase date as 2 January 2019, while the grounds correctly identify the TDS amount as ₹66,204.
Issue before the Tribunal
The principal issue was whether the assessee could be denied protection under the first proviso to section 201(1) merely because the Chartered Accountant-certified Form 26A was furnished manually or offline instead of electronically in the prescribed manner.
The connected issue was whether the AO was justified in treating the purchaser as an assessee in default & sustaining the consequential interest demand when the seller had already discharged the tax liability on the relevant income.
Assessee’s submissions
The assessee accepted that TDS had not been deducted u/s 194-IA at the time of purchasing the property. However, she contended that the statutory conditions contemplated by the first proviso to section 201(1) stood substantially satisfied because the seller had:
- filed his return of income;
- taken the property consideration into account while computing income;
- paid the tax due on the income declared; &
- enabled the purchaser to obtain a certificate from a Chartered Accountant in Form 26A.
The assessee submitted that the Form was furnished before the AO during the proceedings. The only defect was that it had been submitted manually rather than uploaded electronically. Such a defect was merely procedural & could not nullify the substantive fact that the Revenue had already received tax from the seller.
Revenue’s contentions
The Revenue relied upon Rule 31ACB r.w. CBDT Notification No. 11/2016 dated 22 June 2016. Under the prescribed procedure, Form 26A was required to be furnished electronically. The TaxGuru publication on the prescribed procedure is available as Procedure for furnishing and verification of Form 26A.
Since the assessee had submitted Form 26A only in manual or offline mode, the Revenue contended that the statutory procedure had not been followed. Accordingly, the CIT(A) held that the assessee was not entitled to protection under the proviso to section 201(1), despite acknowledging that the seller had discharged the tax liability.
Tribunal’s findings & legal reasoning
The Tribunal recorded as undisputed that the seller had already discharged his tax liability & that a Chartered Accountant-certified Form 26A had been furnished. Therefore, the substantive object of the proviso to section 201(1) had been fulfilled.
The Tribunal observed that the sole reason for denying relief was the failure to submit Form 26A electronically. In its view, manual filing instead of electronic filing constituted only a procedural lapse. It did not alter the underlying fact that the tax payable on the property transaction had already reached the Government.
The Tribunal also took a practical view of digital compliance. It observed that although India was rapidly growing as a digital nation, a large section of the population remained unfamiliar with electronic procedures. An ordinary purchaser of immovable property might not consult a direct tax expert before completing the transaction or understand the technical requirements relating to TDS u/s 194-IA.
When the AO issued a show-cause notice, the assessee obtained Form 26A & furnished it manually, being unaware that electronic filing was prescribed. The Tribunal held that a taxpayer could not be penalised solely because a substantively valid Form 26A was filed through the wrong mode.
Accordingly, the Tribunal granted the assessee protection under the first proviso to section 201(1). It directed deletion of the entire demand of ₹1,15,194, comprising TDS of ₹66,204 & interest of ₹48,990, & allowed the appeal.
Practical implications
The decision reinforces the principle that substantive tax compliance should prevail over a curable procedural defect. Where the recipient has disclosed the income & paid tax, the payer should not ordinarily be treated as an assessee in default merely because Form 26A was furnished manually.
Nevertheless, taxpayers should electronically file Form 26A through the prescribed process to avoid litigation. The Chartered Accountant’s certificate, seller’s return acknowledgement, computation of income & proof of tax payment should be retained.
The ruling is particularly useful in property transactions where individual purchasers inadvertently fail to deduct TDS u/s 194-IA but later establish that the seller has paid tax. Its central message is clear: once the Revenue has received the tax, an offline Form 26A cannot convert a procedural mistake into a substantive TDS default.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
Appellant, Rashmi Singh by filing the present appeal, sought to set aside the impugned order (dated 12.02.2026) passed by Commissioner of Income Tax (Appeals)-3, Mumbai [hereinafter referred to as the ‘CIT(A)’] on the grounds interalia that :-
1. The impugned order passed u/s 201(1)/201(1A) dated 30-03-2025 is bad in law; for want of jurisdiction, against the principle of natural justice and various other statutory reasons and hence same kindly be quashed.
2. The action of Id. AO in taking action u/s 201(1)/201(1A) is bad in law and without jurisdiction. Consequently, framing the impugned assessment order u/s 201(1)/201(1A) of the Act is bad in law and against the facts and circumstances of the case and thus void ab initio.
3. Ld. AO erred in law as well as on the facts of the case in treating the purchaser assessee as “assessee in default” u/s 201(1) on account of alleged non deduction of TDS u/s 194-IA of the act amounting to Rs.66,204/-. The determination so made being contrary to the provisions of law and facts, without considering the submission of assessee in right perspective and rejecting the contention made purely on hyper technical and procedural grounds, hence, kindly be deleted in full.
4. Ld.AO erred in law as well as on the facts of the case in imposing the interest of Rs.48,990/-u/s 201(1A) of the Act on alleged non deduction of TDS amounting to Rs.66,204/- u/s 194-IA of the Act. The interest so calculated and imposed being contrary to the provisions of law and facts, deserves to be deleted in full.
5. Ld. AO erred in law as well as on the facts of the case in determining total tax demand of Rs.1,15,194/- consisting of alleged TDS of Rs.66,204/- and interest thereon u/s 201(1A) amounting to Rs.48,990/-. The determination so made is being contrary to the provisions of law and facts, deserves to be deleted in full.
6. Ld. AO erred in law as well as on the facts of the case in making a reference for initiating penalty u/s 271C of the Income. The said action of Ld.AO being contrary to the provisions of law and facts, deserves to be quashed and set aside.
7. The appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing.
2. Briefly stated, facts necessary for consideration and adjudication of the issues at hand are: assessee has purchased an immovable property on 20.12.2009 for a sale consideration of Rs. 66,20,435/-, however, failed to deduct tax at source [hereinafter referred to as the ‘TDS’] @ 1% amounting to Rs. 66,20,435/- u/s 194IA of the Act. Declining the contentions raised by the assessee, who has taken shelter under proviso to section 201(1). AO proceeded to treat ‘assessee in default’ u/s 201(1) of the Act and made addition to pay interest @ 1% month. Accordingly, AO directed the assessee to pay total demand of Rs. 1,15,194/-.
3. The assessee carried the matter before ld. CIT(A) by way of filing present appeal who has confirmed the demand made by Assessing Officer by dismissing the appeal. Feeling aggrieved with the impugned order passed by ld. CIT(A), the assessee has come up before ld. Tribunal by way of filing present appeal.
4. We have heard ld. AR of the assessee, ld. DR of the revenue and perused the documents available on record.
5. Undisputedly, assessee has purchased the immovable property on 02.01.2019 for a total sale consideration of Rs. 66,20,435/- without deducting TDS @ 1% amounting to Rs. 66,20,435/-. It is also not in dispute that seller has already discharged his tax liability and Form 26A duly certified by Chartered Accountant was furnished.
6. In the back drop of aforesaid undisputed fact, ld. CIT(A) declined the relief to the assessee claimed under proviso to section 201(1) of the Act on the sale ground that: “the assessee has failed to file Form 26A in the manner prescribed under law i..e as per rule 31ACB read with CBDT Notification No. 11/2016 dated 22nd June, 2016. Form 26A is required to be furnished electronically”. However, assessee has filed Form 26A in manual/offline mode.
7. In the totality of circumstances, we are of the considered view that this mere procedural lapse on the part of the assessee in not filing Form 26A in electronic mode, otherwise tax liability on her behalf has been duly discharged. No doubt, our India is fastly growing as a digital nation but still most of our population is not conversant with procedure to be followed electronically. It is also a matter of common knowledge that nobody while purchasing immovable property ought to consult direct tax expert to know the intricacies of law.
8. When the assessee was show caused by the AO as to not deducting TDS on the amount of sale consideration paid by her, she has filed Form 26A manually/offline mode being ignorant of the rules that the same is required to be filed electronically. It is settled principle of law that filing Form 26A manually and not electronically is a procedural lapse on the basis of which assessee cannot be penalized. So, we consider the filing of Form 26A, showing that her seller has already discharged his tax liability, which is a mere procedural lapse and as such assessee is entitled to the protection provided under proviso to section 201(1) of the Act.
9. Resultantly, demand raised by AO and confirmed by ld. CIT(A) is order to be deleted and appeal is allowed.
Order pronounced in the open court on 25-08-2026
