Varun Atul Jain Vs ITO (ITAT Mumbai)
Section 194-IA Delay Has a Price – Interest under Section 201(1A) and Fee under Section 234E Cannot Be Waived for Bona Fide Reasons
Background
The assessee purchased an immovable property situated at Palaj, Gandhinagar, Gujarat, for a total consideration of ₹1,76,25,000 during Financial Year 2024-25.
The entire sale consideration was paid to the seller on 8 August 2024, while the sale deed was executed and registered in the assessee’s name on 8 October 2024.
Under section 194-IA, a buyer purchasing immovable property for ₹50 lakh or more is required to deduct tax at source at the prescribed rate. The assessee, however, deposited TDS of ₹1,76,250 and furnished the challan-cum-statement in Form No. 26QB only on 29 March 2025.
While processing Form No. 26QB under section 200A, CPC-TDS charged interest of ₹21,144 under section 201(1A) for delayed payment of TDS and levied a fee of ₹36,000 under section 234E for delayed filing of Form No. 26QB. The total demand, after rounding off, was ₹57,140.
Assessee’s Explanation for the Delay
The assessee explained that the delay was neither deliberate nor wilful. He was unaware of the statutory timelines applicable to TDS on the purchase of immovable property. Further, the accountant handling his income-tax matters was temporarily unavailable due to medical exigencies in his family.
According to the assessee, the lapse was discovered during the year-end verification. Immediately thereafter, the TDS was deposited and Form No. 26QB was filed on 29 March 2025.
It was also contended that the tax was deposited and corresponding credit was made available to the seller within the same financial year. Therefore, neither the seller nor the Revenue had suffered any actual loss.
The assessee pleaded that there had been substantial compliance in good faith and that the levy of interest and late-filing fee caused undue hardship.
CIT(A) Rejects the Plea of Bona Fide Conduct
The CIT(A) held that interest under section 201(1A) was statutory, mandatory and automatic once the default was established. There was no discretion to waive the interest on equitable grounds or because the delay was unintentional.
Regarding the fee under section 234E, the CIT(A) observed that the TDS statement related to a period after 1 June 2015. Therefore, the Assessing Officer was empowered under section 200A to compute and levy the fee while processing Form No. 26QB.
The CIT(A) accordingly confirmed both levies.
Interest under Section 201(1A) Is Mandatory
The Mumbai Tribunal noted that the material facts were undisputed. The property consideration was paid on 8 August 2024, whereas the corresponding TDS was deposited only on 29 March 2025.
Section 201(1A) mandates payment of interest where a person liable to deduct tax either fails to deduct it or, after deduction, fails to deposit it with the Central Government within the prescribed time.
Once the amount of TDS and the period of delay are established, the interest liability follows by operation of law. The assessee had neither disputed the delay nor demonstrated any error in the amount or period adopted for calculating interest.
The Tribunal held that the assessee’s lack of knowledge and the accountant’s temporary unavailability might explain how the delay occurred, but such circumstances could not extinguish the statutory liability.
Payment Within the Same Financial Year Is No Defence
The assessee argued that the tax had ultimately been deposited within the same financial year and that the seller had received the corresponding TDS credit.
The Tribunal rejected this contention. Compliance within the same financial year cannot substitute compliance within the specific period prescribed under the Act and the Rules.
Interest under section 201(1A) compensates the Revenue for the period during which the amount legally payable to the Government remained unpaid. Therefore, the absence of mala fide intention, the ultimate availability of TDS credit to the seller or the absence of permanent revenue loss did not affect the liability.
The interest of ₹21,144 was accordingly confirmed.
Fee under Section 234E Is Independent of Revenue Loss
Section 234E provides for a fee for every day during which the failure to furnish the prescribed TDS statement continues, subject to the statutory ceiling.
The Tribunal observed that the assessee admittedly furnished Form No. 26QB beyond the prescribed period. The obligation to file the statement within time operates independently of whether the Revenue ultimately suffered any monetary loss.
The statement related to Financial Year 2024-25, which was well after 1 June 2015. Therefore, section 200A expressly empowered the Assessing Officer to compute the section 234E fee while processing the TDS statement.
The assessee did not establish any error in the period of default, daily rate or computation of the fee. Consequently, the fee of ₹36,000 was also upheld.
No Power to Waive Fee on Grounds of Hardship
The Tribunal held that neither the Assessing Officer nor the appellate authority had discretion to delete the section 234E fee merely because the delay arose from a reasonable or bona fide cause.
Lack of awareness, medical exigencies faced by the accountant, substantial compliance, absence of mala fides and hardship were not sufficient grounds for deleting a statutory fee once the delay itself was admitted.
The assessee’s appeal was therefore dismissed.
Authors’ Comments
This decision is an important reminder that compliance under section 194-IA is linked not merely to the registration of the property but to the statutory point at which the consideration is credited or paid. Where the consideration is paid before execution or registration of the sale deed, postponing TDS compliance until registration may expose the purchaser to interest and late-filing fee.
The decision also explains the distinction between the two levies. Interest under section 201(1A) compensates the Government for the period during which the tax remained unpaid, whereas the fee under section 234E is imposed for delayed furnishing of the TDS statement. Consequently, eventual payment within the same financial year does not erase either default.
Bona fide reasons may be relevant where the statute expressly permits relief on proof of reasonable cause. However, the Tribunal found no discretion under sections 201(1A) or 234E to waive the amounts merely on equitable considerations.
From a practical perspective, purchasers must ensure that TDS compliance is triggered at the stage prescribed under section 194-IA and not deferred until the registration of the sale deed. The unavailability of an accountant or ignorance of the procedure offers little protection against automatic statutory consequences.
In short, good faith may explain the delay, but it cannot stop the statutory clock under sections 201(1A) and 234E.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, MUMBAI
This appeal by the assessee is directed against the order dated 15.01.2026 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], under section 250 of the Income-tax Act, 1961 [“the Act”], for the assessment year 2025-26. The impugned order arises from the intimation dated 02.04.2025 issued by the Assistant Commissioner of Income-tax, Centralized Processing Cell-TDS [“AO”], under section 200A of the Act in respect of Form No. 26QB for the financial year 2024-25.
2. The assessee has raised the following grounds of appeal:
1. On the facts and in the circumstances of the appellant’s case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in confirming the levy of interest amounting to Rs 21,144/- imposed by the Ld. Assessing Officer u/s 201 of the Income Tax Act, 1961, without appreciating the fact that the appellant had substantially complied with the statutory provisions in good faith, and that the levy of such interest is unjustified and results in undue hardship to the appellant.
2. On the facts and in the circumstances of the appellant’s case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in confirming the levy of late filing fees amounting to Rs 36,000/- imposed by the Ld. Assessing Officer u/s 234E of the Income Tax Act, 1961, without appreciating the fact that the appellant had substantially complied with the statutory provisions in good faith, and that the levy of such fees is unjustified and results in undue hardship to the appellant.
3. On the facts and in the circumstances of the appellant’s case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in confirming the levy of interest u/s 201 and late filing fees u/s 234E of the Income-tax Act, 1961, without appreciating that such levies are compensatory in nature and should be levied benevolently based on the facts of each case and should not arise where delay in compliance is attributable to genuine and bona fide reasons in the interest of justice.
4. The appellant craves leave to add, alter, amend, modify, delete, vary and/or withdraw any or all of the grounds of appeal as may be necessary.
3. The facts, in brief, are that the assessee is an individual. During the financial year 2024-25, the assessee purchased an immovable property situated at Survey No. 190, City Survey No. NA 190, Mouje Village, Palaj, Gandhinagar, Gujarat-382355, for a total consideration of Rs.1,76,25,000/-. As recorded in the order of the learned CIT(A), the entire consideration was paid to the seller on 08.08.2024, while the sale deed was executed and the property was registered in the name of the assessee on 08.10.2024.
4. The assessee subsequently deposited TDS amounting to Rs.1,76,250/- and furnished the challan-cum-statement in Form No. 26QB on 29.03.2025. The Form No. 26QB was processed by the CPC-TDS under section 200A of the Act. By the intimation dated 02.04.2025 the AO charged interest of Rs.21,144/- under section 201(1A) of the Act for delayed payment of TDS and levied fee of Rs.36,000/- under section 234E of the Act for delayed furnishing of Form No. 26QB. After rounding off, the net demand was determined at Rs.57,140/-.
5. Aggrieved, the assessee preferred an appeal before the learned CIT(A). The assessee submitted that the delay was neither intentional nor wilful. It was explained that the assessee was unaware of the prescribed timelines and that the accountant handling the assessee’s income-tax matters was unavailable owing to medical exigencies in his family. It was submitted that upon noticing the lapse during the year-end verification, the assessee immediately deposited the TDS and furnished Form No. 26QB on 29.03.2025. It was further contended that the TDS was deposited and the credit thereof was made available to the deductee within the same financial year and, therefore, no loss was caused either to the deductee or to the Revenue.
6. The learned CIT(A) did not accept the explanation of the assessee. In respect of the interest charged under section 201(1A), the learned CIT(A) held that such interest was statutory, mandatory and automatic upon the default being established and that there was no discretion to waive the same on equitable considerations. As regards the fee levied under section 234E, the learned CIT(A) observed that the TDS statement related to a period subsequent to 01.06.2015 and, therefore, the AO was empowered under section 200A to levy the fee while processing the statement. Holding that reasonable cause or hardship did not provide a basis for waiver of the statutory fee, the learned CIT(A) confirmed both the levies and dismissed the appeal.
7. Before us, the learned Authorised Representative reiterated the submissions made before the learned CIT(A). He submitted that the delay in depositing the TDS and furnishing Form No. 26QB was neither deliberate nor wilful, but occurred on account of the assessee’s lack of awareness regarding the prescribed timelines and the temporary unavailability of his accountant owing to medical exigencies in the latter’s family. Upon noticing the lapse, the assessee deposited TDS of Rs.1,76,250/- and furnished Form No. 26QB on 29.03.2025. The learned AR further submitted that the tax was deposited, and credit thereof was made available to the deductee, within the same financial year, resulting in no loss to the Revenue. It was contended that the assessee had substantially complied with the statutory requirements in good faith and that the levy of interest of Rs.21,144/- under section 201(1A) and fee of Rs.36,000/- under section 234E caused undue hardship. The learned AR, therefore, prayed that both the levies be deleted.
8. Per contra, the learned Departmental Representative relied upon the orders of the authorities below and submitted that the levy of interest under section 201(1A) and fee under section 234E of the Act was in accordance with law. He, therefore, supported the order of the learned CIT(A).
9. We have considered the rival submissions and perused the material available on record. The controversy before us is confined to the levy of interest of Rs.21,144/- under section 201(1A) and fee of Rs.36,000/- under section 234E of the Act. The material facts are not in dispute. The assessee paid the consideration for the immovable property on 08.08.2024, whereas the corresponding TDS of Rs.1,76,250/- was deposited and Form No. 26QB was furnished only on 29.03.2025.
10. Section 201(1A) mandates the payment of interest where a person liable to deduct tax fails to deduct the whole or any part of the tax or, after deducting the tax, fails to pay the same to the credit of the Central Government within the prescribed period. The liability to pay interest is a statutory consequence of the delay. Once the foundational facts regarding the amount of tax and the period of delay are undisputed, the levy follows by operation of law.
In the present case, the assessee has not disputed the delay in depositing the TDS. The explanation concerning lack of awareness of the statutory timeline and the unavailability of the accountant may explain the circumstances in which the delay occurred, but it does not extinguish the statutory liability to interest under section 201(1A). The plea that the tax was deposited within the same financial year or that the deductee ultimately received credit for the tax also does not alter the admitted fact that the amount was not deposited within the prescribed period. Compliance within the same financial year cannot substitute compliance within the time specifically prescribed under the Act and the Rules.
11. Interest under section 201(1A) compensates the Revenue for the period during which the amount lawfully payable to the Central Government remained unpaid. The absence of mala fide intention or any allegation of personal utilisation of the amount is, therefore, not determinative of the liability. The assessee has also not demonstrated any error in the amount of interest or in the period for which it was computed. We, therefore, find no infirmity in the order of the learned CIT(A) confirming the interest of Rs.21,144/- under section 201(1A) of the Act. Ground No. 1 is accordingly dismissed.
12. Section 234E provides for the levy of a fee for every day during which the failure to furnish the prescribed TDS statement continues, subject to the statutory ceiling contained therein. The obligation is linked to the delay in furnishing the statement and operates independently of whether any eventual loss of revenue is demonstrated. The assessee admittedly furnished Form No. 26QB on 29.03.2025 beyond the prescribed period.
13. Section 200A, as applicable to the period under consideration, expressly permits computation of the fee payable under section 234E while processing a TDS statement. The statement in the present case pertains to the financial year 2024-25, which is subsequent to 01.06.2015. The competence of the AO to compute the fee under section 234E while processing the statement under section 200A cannot, therefore, be faulted.
14. The contention that the delay was attributable to lack of awareness and the medical exigencies faced by the accountant cannot be accepted as a ground for deleting the fee. The statutory provision does not confer discretion upon the AO or the appellate authority to waive the fee merely on the basis of reasonable cause or hardship. Further, filing Form No. 26QB within the same financial year does not cure the delay in complying with the prescribed time limit.
15. The assessee has not pointed out any error in the period of default, the applicable daily rate or the computation of the fee. We, therefore, find no infirmity in the order of the learned CIT(A) confirming the fee of Rs.36,000/- levied under section 234E of the Act. Ground No. 2 is accordingly dismissed.
16. Ground No. 3 reiterates the challenge to the aforesaid statutory levies on the grounds of bona fide conduct, absence of loss to the Revenue and hardship. In view of our findings in paragraphs 11 to 17 above, the contentions raised in this ground do not merit acceptance. Ground No. 3 is accordingly dismissed.
17. Ground No. 4 is general in nature and does not require separate adjudication.
18. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on. 16.09.2026.
