Shailesh Veljibhai Paladiya Vs ITO (ITAT Surat)
The ITAT Surat allowed the assessee’s appeal against the demand raised under sections 201(1) and 201(1A) for alleged short deduction of TDS under section 194-IA read with section 206AA on the purchase of land. The Tribunal observed that section 194-IA applies only to transfers of immovable property other than agricultural land and found that the registered sale deed consistently described the property as agricultural land. It also noted that the Revenue had not produced any material to show otherwise. The Tribunal held that section 206AA does not create an independent liability to deduct tax and can operate only where tax is otherwise deductible under section 194-IA. It further recorded that the sale deed was subsequently cancelled by the Civil Court due to title disputes and that the cheques issued towards the consideration were never presented for encashment. Holding that there was no legal obligation to deduct tax under section 194-IA, the Tribunal concluded that the assessee could not be treated as an assessee in default under section 201(1), and consequently deleted both the demand and the interest levied under section 201(1A).
Ratio. Section 206AA does not create an independent liability to deduct tax at source. It merely prescribes a higher rate where tax is otherwise deductible. Therefore, if section 194-IA itself is inapplicable because the property transferred is agricultural land, the purchaser cannot be treated as an assessee in default under section 201 for alleged short deduction at the enhanced rate under section 206AA.
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