Jagadish Panchal Vs ADIT (TDS) (ITAT Jodhpur)
Summary: The Income Tax Appellate Tribunal (ITAT), Jodhpur Bench, allowed the appeal of Jagadish Panchal against the confirmation of a penalty of ₹1,12,500 imposed under Section 271C of the Income Tax Act, 1961, for failure to deduct tax at source under Section 194-IA while purchasing immovable property jointly with his wife. The assessee and his wife had purchased property on 25 June 2015 for ₹2,25,00,000 from Shri Daljeet Singh Bhandari. The assessee failed to deduct TDS of ₹1,12,500, following which the Assessing Officer imposed an equivalent penalty under Section 271C. The Commissioner of Income Tax (Appeals) confirmed the penalty, leading to the present appeal before the Tribunal.
The Tribunal first considered the delay of 329 days in filing the appeal. The assessee explained through a notarised affidavit that he was a non-resident staying outside India for business purposes. Since his wife’s appeal relating to the same property transaction had already been allowed by the CIT(A), he initially believed that a separate appeal was unnecessary. He subsequently learned from his Chartered Accountant that an independent appeal was required. Finding reasonable cause in these circumstances, the Tribunal condoned the delay of 329 days.
On merits, the assessee relied upon the appellate order passed in his wife’s case, where the CIT(A) had deleted an identical penalty. The CIT(A) had found that the seller disclosed the entire sale consideration in his income-tax return, computed the capital gains and claimed deduction under the applicable provisions of the Income Tax Act. The seller’s income-tax return and Chartered Accountant-certified Form 26A were furnished in support of compliance with the proviso to Section 201(1). Interest of ₹14,626 had also been paid under Sections 201(1) and 201(1A). Considering the seller’s disclosure of the transaction, absence of tax evasion and the explanation that the purchasers were unaware of the TDS requirement, the CIT(A) had accepted reasonable cause and cancelled the penalty in the wife’s case.
The Tribunal observed that there was no material difference between the assessee’s case and that of his wife, both being co-owners of the same property acquired through the same transaction. The seller had disclosed the entire consideration, the prescribed Form 26A had been furnished, and interest had been paid. Since the CIT(A) had already deleted the penalty in the co-owner’s case on identical facts, the Tribunal found no justification for sustaining the penalty against the assessee. Accordingly, it deleted the penalty of ₹1,12,500 under Section 271C and allowed the appeal.
FULL TEXT OF THE ORDER OF ITAT JODHPUR
This appeal is filed by the assessee as against the order dated 31.03.2023 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi (hereinafter referred to as “Ld. CIT(A)”), arising out of the confirmation of penalty levied under Section 271C of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) relating to the Assessment Year 2016-17.
2. The Registry has noted that there is a delay of 329 days in filing the above appeal. The assessee by way of a notarized affidavit stated that, he is a non-resident and he was out of India for business purposes. The assessee along with her wife as co-purchaser purchased an immovable property, which was the subject matter of appeal before the Ld. CIT(A) wherein Ld. CIT(A) vide order dated 31.03.2023 allowed in favour of assessee (wife), therefore not filed appeal in his case. However, on consultation with the Chartered Accountant, he came to know that assessee is also required to file appeal against the appellate order thereby the delay in filing the appeal and requested to condone the delay.
2.1. Considering the above submission of the assessee, where reasonable cause has been made out, thereby the delay of 329 days in filing the above appeal is hereby condoned.
3. Brief facts of the case is, the assessee is an individual along with his wife purchased an immovable property on 25.06.2015 for a total consideration of Rs.2,25,00,000/- from one Sh. Daljeet Singh Bhandari. The assessee failed to deduct tax at source of Rs.1,12,500/- u/s 194IA of the Act. Therefore penalty proceedings u/s 271C of the Act was initiated. The assessee submission was considered however, the Assessing Officer imposed a penalty of Rs.1,12,500/- u/s 271C of the Act.
4. Aggrieved against the same, assessee filed appeal before the Ld. CIT(A), who has also confirmed the levy of penalty u/s 271C of the Act.
5. Aggrieved against the same, assessee is in appeal before us, raising following grounds of appeal:-
1 The AO has passed an order and imposed the penalty after mentioning that “Ignorance of law is not an excuse for contravention of law”. The learned AO has not considered facts and circumstances of the case which is totally in favour of assesse. Although there is a general presumption that ignorance of law is not an excuse but there is no presumption in law that every individual knows all the law. There is no prejudice is caused to Revenue, as the seller has declared the capital gains on sale of plot of land in the return of income filed with Revenue and paid due taxes to Government. The learned Additional Commissioner of Income Tax Range-TDS, Udaipur and Commissioner (Appeals) has erred in imposing and confirming the penalty of Rs.112500/- u/s 271 (c) r.w.s. 274 of the I.T. Act. The action of the learned officer is illegal, wrong and against the facts and circumstances of the case and therefore needs to be quashed. The appellant reserve his right to add, amend or alter the grounds.
6. Ld. Counsel appearing for the assessee brought to our notice to the appellate order passed in the case of assessee’s wife on similar transaction wherein Ld. CIT(A) deleted the penalty by observing as follows:-
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16. In view of the submission of the appellant and the provisions of law contained under sub-section (1) of section 201 of the IT Act, the appellant is liable to be treated as assessee in default for non-compliance with the provisions of section 1941A which requires the appellant to deduct TDS at the time of making payment for purchase of residential house property. However, the proviso to sub-section (1) of section 201 lays down that an assessee will not be treated as assessee in default in case the assessee provides the copy of the ITR of the seller of the property showing that the amount of income pertaining to the sale of property has been disclosed by it in the ITR and due taxes thereon have been paid before the filing of the ITR. Further, as per the above proviso, along with the copy of the ITR, the deductor has also to provide the copy of Form 26A, a certificate from a Chartered Accountant, of the deductee stating that the ITR was duly filed by the deductee after considering the income arising from the sale of property and due taxes thereon have been paid.
17. In the case in hand, the appellant has placed on record before this office all the relevant documents as prescribed under the proviso to sub-section (1) of section 201 i.e., the ITR of seller and Form 26A obtained from CA by the seller. From the documents submitted it is clear that Form 26A was available at the time of penalty proceedings and considering the position under law that a person shall not be treated as an assessee in default if the compliance as per the proviso of section 201(1) has been duly made. As has been discussed above, the intent of the legislature is to ensure widening of tax base and check tax evasion. Here in the case, the appellant has provided the copy of the ITR of the deductee where it is seen that it has duly shown the entire amount of sale consideration and claimed deduction of the amount of capital gain as per the allowable provisions of section 54 of the IT Act, 1961. Hence, in this case, there is no tax evasion as the deductee i.e., the seller of the property has duly shown the entire sale consideration of the said property in his return of income and has claimed deduction u/s 54 of the IT Act which is permitted by the IT Act. Moreover, the appellant has paid the interest due to him amounting to Rs. 14,626/- as per the order u/s 201(1)/201(1A) of the IT Act, 1961.
18. The appellant in his submission has vehemently argued that she was not aware about the provisions of deduction of TDS on sale of property mentioned at Section 1941A of the IT Act, 1961. Further, the appellant has stated that, assessee and her family also are a NRI and left India 50 to 55 years ago and came to India only for acquisition of a property in year 2015 and after the acquiring the property they again returned back to abroad. Seller of the property is a salaried person who was also not aware about TDS provision. She has also mentioned that during the course of registration of the said property, the Registering Authority also did not brought the fact into the knowledge of the appellant that TDS has to be deducted on the sale of property. The appellant has further contended that, when she became aware about TDS provision u/s 1941A till that time she had paid full amount of consideration to seller, even appellant contacted with seller and discussed about TDS provision but seller denied for return back of TDS amount as he had already filed income tax return and paid tax liability accordingly. On the basis of the above assertions, the appellant has stated that there was reasonable cause in her case for not deducting TDS.
19. Based on the detailed discussion above, it can be safely concluded that the appellant was not aware of the provision u/s 1941A of the IT Act with respect to deduction of TDS on sale of property. It is also evident from the reply of the appellant that when she became aware of the said provision, she made efforts to comply with the respective provisions of the IT Act and specifically section 201 of the IT Act. Therefore, in my view the appellant has proved that reasonable cause was there on the part of the appellant for failure to deduct TDS u/s 1941A of the IT Act, Hence, the penalty imposed by the Addl. CIT, Range-TDS, Udaipur, amounting to Rs. 1,12,500/-u/s 271C of the IT Act, 1961 is hereby deleted. Accordingly, grounds of appeal raised by the appellant are allowed.
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6.1. Thus, the Ld. Counsel appearing for the assessee requested to delete the penalty levied on the present assessee (husband) case.
7. Per contra Ld. Addl. Sr. DR appearing for the Revenue supported the order passed by the Lower Authorities.
8. We have given our thoughtful consideration and perused the materials available on record. Ld. CIT(A) in the co-owner’s case has deleted the levy of penalty u/s 271C of the Act on the ground that the seller of the property has duly shown the entire sale consideration and computed the capital gain and due taxes have been paid before filing of his return of income. Further, Chartered Accountant Certificate in Form 26A of the seller of the property was also filed by the assessee, thus, duly complied with the provisions of Section 201(1A) of the Act. Thus, there is no tax evasion in the above said sale transaction. Further, the assessee also paid interest of Rs.14,626/- u/s 201/201(1A) of the Act.
8.1. There is no change in the facts of the case except the assessee in the other co-owner of this very same immovable property. Therefore, we have no hesitation in deleting the penalty levied u/s 271C of the Act.
9. In the result, the appeal filed by the assessee is hereby allowed.
Order is pronounced in the open Court on 29-09-2026
