Delhi ITAT Rules No Interest U/s 201(1) & 201(1A) When Deductee Has Paid Tax and Form 26A Is on Record

Background and Context

In a recent decision in the case of Apoorva Leasing Finance and Investment Company Limited Vs ITO (ITAT Delhi), the Delhi Bench of the Income Tax Appellate Tribunal examined whether interest under Section 201(1) and Section 201(1A) of the Income Tax Act 1961 can be sustained where:

  • The assessee failed to deduct tax at source (TDS) on payments,
  • The recipient of income (deductee) has already offered the income to tax and paid due taxes, and
  • Form 26A has been duly furnished certifying such tax compliance by the deductee.

The Tribunal’s ruling reiterates and applies the principles laid down by the Hon’ble Supreme Court and various High Courts, and gives practical clarity on the treatment of TDS defaults where the deductee has already discharged the tax liability.

Facts of the Case

Proceedings Initiated Under Section 201

  1. Information was received through a complaint on the CPGRAM Portal alleging that Apoorva Leasing Finance and Investment Company Limited had made payments to Great Mohali Area Development Authority (GMADA) without deducting TDS.
  2. Based on this input, the Assessing Officer (AO), ITO, Ward No. 73(1), Delhi, initiated proceedings under Section 201 and Section 201(1A) of the Income Tax Act 1961 for Assessment Year 2022-23 to Assessment Year 2024-25.
  3. A notice dated 03.10.2024 was issued under Section 201(1)/201(1A) calling upon the assessee to explain why it should not be treated as an assessee in default for non-deduction of TDS on payments to GMADA.
  4. The assessee submitted written responses, including a reply dated 18.10.2024 and a subsequent detailed response dated 27.03.2025 in answer to the final show-cause notice issued on 20.03.2025.

Order of the Assessing Officer

After considering the submissions, the AO passed an order dated 08.04.2025 under Section 201/201(1A) holding the assessee to be in default for failure to deduct TDS on payments made to GMADA towards allotment of land. The AO:

  • Determined TDS non-deduction/default,
  • Computed consequential liability, and
  • Levied interest of Rs. 3,36,254/- under Section 201(1) and Section 201(1A).

First Appeal Before CIT(A)

The assessee challenged the AO’s order before the Commissioner of Income Tax (Appeals)-4, Kolkata under Section 250. The CIT(A) passed appellate orders dated 14.11.2025, 17.11.2025 and 17.11.2025 for three different assessment years.

  • The CIT(A) granted partial relief but confirmed the levy of interest of Rs. 3,36,254/- under Section 201(1)/201(1A) for the lead year.
  • Being dissatisfied with the confirmation of interest, the assessee carried the dispute to the ITAT.

Appeals Before the ITAT

Multiple appeals were filed before the Delhi ITAT for Assessment Year 2022-23 to Assessment Year 2024-25. Since all appeals involved identical issues and similar facts, ITA No. 939/Del/2026 was treated as the lead case, and the Tribunal applied the same reasoning to the other appeals (ITA No. 940/Del/2026 and ITA No. 941/Del/2026).

The primary ground argued was confined to the validity of interest levied under Section 201(1)/201(1A), specifically the amount of Rs.