Abhay Singla Vs Union of India (Rajasthan High Court)
The Rajasthan High Court, Jaipur in the matter of, Abhay Singla v. Union of India, has recently issued notice in a public interest litigation challenging the constitutionality of Section 194N of the Income Tax Act, 1961.
The provision was inserted by the Finance Act, 2019 and became effective from September 1, 2019. The provision mandates the deduction of tax at source at the rate of 2% on cash withdrawals from, inter alia, a banking company exceeding Rs. 1 crore in a financial year.
it was mentioned in the plea that as per the provision, tax can be deducted or collected at source only on the income of the assessee. The plea also stated that cash withdrawal from one or more accounts maintained with a bank, cooperative society engaged in the business of banking or a post office, does not involve the character of income of the recipient and hence cannot be said to be a payment.
They are merely returning the money, which belongs to the recipient, on demand of the recipient, added the plea.
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