ITAT Delhi Deletes Rs. 75 Lakh Addition Triggered by Section 194-IA TDS Mismatch
Background of the Dispute
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) in the case of Maheepal Vs ITO dealt with a reassessment for Assessment Year 2016-17 where the core issue was whether a mere entry in a Section 194-IA TDS statement could justify a substantive addition of ₹75,00,000 as short-term capital gains in the hands of an assessee who consistently denied any sale of immovable property.
The proceedings originated from an order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] under Section 250, which affirmed an assessment framed under Section 147 read with Section 144 and Section 144B of the Income Tax Act 1961. The assessee, Mr. Maheepal, carried the matter in second appeal before the ITAT.
Origin of Reassessment Proceedings
Information from Departmental Portal
The Assessing Officer (AO) received information through the departmental system indicating a transaction reported under Section 194-IA in respect of an immovable property situated at Kanchan Nagar. The data reflected a sales consideration of ₹75,00,000 for Assessment Year 2016-17, categorized as:
- Nature of information: TDS Statement – Sales consideration on transfer of immovable property (
Section 194-IA) - Location: Kanchan Nagar
- Assessment Year: 2016-17
- Amount: ₹75,00,000
This information suggested that TDS had been deducted by a purchaser on a property sale allegedly involving the assessee as the seller.
No Return Filed Under Section 139
For Assessment Year 2016-17, the assessee had not filed any return of income under Section 139. He maintained throughout that his income was below the basic exemption threshold and, therefore, no obligation to file a return arose.
Relying on the portal-based information, the AO formed a belief that income had escaped assessment and initiated reassessment proceedings under Section 147 and issued notice under Section 148.
Proceedings Under Sections 148A, 147 and 148
Initial Non-Compliance and Subsequent Participation
The AO first initiated the pre-notice inquiry framework prescribed under Section 148A(b) and subsequently passed an order under Section 148A(d). At this initial stage, the assessee did not participate in the inquiry.
Thereafter:
- A notice under
Section 148dated 22.03.2023 was issued, calling upon the assessee to furnish a return of income. - The assessee did not file any return in response to the
Section 148notice. - During reassessment, further notices under
Section 142(1)were issued, along with a show cause notice (SCN). - At this stage, the assessee joined the reassessment proceedings and submitted explanations along with documents.
Stand of the Assessee Before the AO
Denial of Any Property Sale
The assessee unequivocally denied having sold any property for ₹75,00,000 or having entered into any transaction of transfer of immovable property for that amount during the relevant year. His consistent stand was:
- No property at Kanchan Nagar or elsewhere was sold in Assessment Year 2016-17.
- He did not receive any sale consideration of ₹75,00,000.
Bank Passbook and Absence of Sale Proceeds
To support his position, the assessee produced his bank passbook and stated that:
- He maintained only one bank account, with Punjab National Bank, Account No. 3659000100042538.
- The account statement showed no credit entry reflecting ₹75,00,000 or any comparable amount that could be linked to a sale of immovable property.
Thus, he argued that the alleged transaction was not supported by any banking trail.
Explanation Regarding TDS Portal Entry
The assessee further clarified that: