Offline Form 26A Accepted for TDS Non‑deduction Relief: Detailed Study of Rashmi Singh Vs ITO (ITAT Jaipur)

In Rashmi Singh Vs ITO (ITAT Jaipur), the Jaipur Bench of the Income Tax Appellate Tribunal examined whether an assessee can be treated as an “assessee in default” under Section 201(1) for not deducting TDS under Section 194-IA, even when the seller has already paid the due tax and a Form 26A certified by a Chartered Accountant has been furnished, but in manual/offline mode instead of electronic mode as prescribed.

The Tribunal held that once the seller has disclosed the income and paid tax and Form 26A is duly obtained and produced, the benefit of the first proviso to Section 201(1) cannot be denied merely because Form 26A was not uploaded electronically. Manual filing of Form 26A was treated as a procedural irregularity and not a ground to fasten substantive TDS liability on the purchaser.

Factual Background

Property transaction and TDS obligation

  • The assessee, Rashmi Singh, purchased an immovable property on 02.01.2019 for a consideration of ₹66,20,435.
  • Since the consideration exceeded ₹50 lakh, the provisions of Section 194-IA were triggered, requiring deduction of TDS at 1% of the consideration.
  • Accordingly, the TDS amount that should have been deducted under Section 194-IA was ₹66,204.
  • The assessee did not deduct this TDS at the time of making payment to the seller.

Initiation of proceedings under Section 201

  • The Assessing Officer (AO) initiated proceedings under Section 201(1) and Section 201(1A) on account of non‑deduction of TDS.
  • The assessee took the plea that the conditions of the first proviso to Section 201(1) were fulfilled because:
    • the seller had filed the return of income,
    • the property consideration had been duly considered while computing income,
    • the corresponding tax had been paid by the seller, and
    • a Chartered Accountant-certified Form 26A had been obtained to evidence compliance.

Form 26A and AO’s stand

  • The assessee furnished Form 26A before the AO in support of the claim that the seller had already discharged the tax liability.
  • However, this Form 26A was filed manually/offline and not through the electronic mode prescribed by Rule 31ACB read with CBDT Notification No. 11/2016 dated 22.06.2016.
  • The AO rejected the assessee’s contention, treated the assessee as an “assessee in default” under Section 201(1), and:
    • raised a TDS demand of ₹66,204, and
    • levied interest of ₹48,990 under Section 201(1A).
  • Thus, a total demand of ₹1,15,194 was raised.
  • The matter was also referred for initiation of penalty proceedings under Section 271C.

Proceedings before CIT(A)

  • On appeal, the CIT(A) affirmed the AO’s action.
  • The CIT(A) accepted that the seller had indeed paid the tax on the transaction, but still denied the protection of the first proviso to Section 201(1) solely on the ground that Form 26A was not furnished electronically as required by Rule 31ACB.

Appeal before ITAT Jaipur

  • Aggrieved, the assessee filed an appeal before the Jaipur Bench of the ITAT challenging:

    • the jurisdiction and legality of the order under Section 201(1)/Section 201(1A),
    • the characterization of the purchaser as an “assessee in default”,
    • the levy of interest under Section 201(1A),
    • and the reference for initiation of penalty under Section 271C.

  • The Tribunal also noticed an apparent typographical error in the lower order mentioning the purchase date as 20.12.2009 and TDS as ₹66,20,435. However, the Tribunal recorded the correct and undisputed facts as:

    • purchase date: 02.01.2019, and
    • TDS amount in dispute: ₹66,204.

The Tribunal had to decide:

  1. Whether an assessee can be denied the shelter of the first proviso to Section 201(1) only because Form 26A—though duly certified by a Chartered Accountant—was filed manually instead of electronically as required under Rule 31ACB.

  2. Whether the purchaser could still be treated as an “assessee in default” under Section 201(1) and interest under Section 201(1A) sustained, when it was undisputed that the seller had already disclosed the income and paid the tax.

Assessee’s Contentions Before ITAT