ITAT Cancels TDS Demand U/S 201(1) & 201(1A) as Already Paid Tax Comes Under Double Taxation

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) recently ruled in favour of the appellant assessee, Mrudulagauri Jaysukhlal Bhalodia, by dismissing the demand for Tax Deducted at Source (TDS) on an amount for which tax had already been paid under Sections 201(1) and 201(1A) of the Income Tax Act, 1961, thereby helping the assessee from paying double taxation.

Mrudulagauri Jaysukhlal Bhalodia, an individual earning income from a partnership firm and other sources, appealed against the commissioner’s order confirming the Assessing Officer’s decision to treat the assessee as the defaulter and raising a demand under section 201(1) and 201(1A) of the Income Tax Act, 1961.

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During the proceedings, Shri Vimal Desai, the counsel representing the assessee, argued that both parties involved in the partnership firm had already paid the necessary taxes. Therefore, the assessee should not be considered as the defaulter under the proviso to Section 201(1) of the Income Tax Act, 1961, and no demand or interest should be imposed on the assessee for non-deduction of Tax Deducted at Source (TDS).

Shri R.R. Makwana, the counsel representing the respondent, supported the lower authorities’ directive.

After the observation, the bench noted that the transferor of the land had already paid taxes on the amount received from the assessee, although the receipt had not been disclosed in the income tax return. This non-disclosure led to the demand for the non-deduction of TDS.

In a ruling by a single-member bench of Shri Waseem Ahmed (Accountant), it was concluded that no demand could be raised under section 201(1) of the Income Tax Act, 1961 while allowing the appeal filed by the assessee.