Property seller providing PAN before transaction completion allows 1% TDS under Section 194IA instead of 20% under Section 206AA

ITAT Raipur held that where a property seller provided PAN before transaction completion, TDS should be deducted at 1% under Section 194IA rather than 20% under Section 206AA. The tribunal found that since the seller furnished PAN before the property purchase transaction was completed, the higher TDS rate was not applicable despite initial PAN non-availability. The demand under Section 201(1) was vacated as proper TDS was deducted and deposited. The matter was remanded to AO for recomputation of interest under Section 201(1A) and fee under Section 234E. Appeal was partly allowed.

---

---

Issues:
1. Applicability of TDS rates under Sections 194IA and 206AA.
2. Compliance with PAN requirements for TDS deductions.
3. Assessment of demand for short deduction of TDS, interest, and late filing fee.
4. Non-compliance of the assessee during the appeal process.

Analysis:

Issue 1: Applicability of TDS rates under Sections 194IA and 206AA
The controversy in the case revolved around whether TDS should be deducted at 1% or 20% under Section 194IA, considering the provisions of Section 206AA. The payment in question was initially made as a loan by a relative of the assessee, and later adjusted towards the property purchase. As the payee was allotted a PAN before the transaction date, the TDS rate of 1% was deemed appropriate as per Section 194IA, and Section 206AA did not apply in this scenario.

Issue 2: Compliance with PAN requirements for TDS deductions
The introduction of Section 206AA aimed to enhance PAN compliance in TDS deductions. The legislative intent was to ensure that deductees furnish their PAN to deductors, failing which higher TDS rates would apply. In this case, as the payee had provided the PAN before the transaction, the purpose of the law to overcome non-PAN quoting issues was fulfilled, indicating compliance with the statutory requirements.

Issue 3: Assessment of demand for short deduction of TDS, interest, and late filing fee
The Assessing Officer had raised demands for short deduction of TDS, interest under Section 201(1A), and a late filing fee under Section 234E. The tribunal found that the TDS under Section 194IA was correctly deducted by the assessee, leading to the dismissal of the demand related to short deduction. However, the interest and fee were considered consequential, prompting a re-computation by the AO based on the tribunal's observations.

Issue 4: Non-compliance of the assessee during the appeal process
The assessee was non-compliant during the appeal process, failing to represent on multiple occasions before the ACIT(A). Consequently, an ex-parte order was passed by the ACIT(A) affirming the AO's observations and demands. The tribunal, upon reviewing the case, partially allowed the appeal, directing a re-computation of interest and fee while vacating the demand for short deduction of TDS.

This detailed analysis of the judgment highlights the key legal issues, interpretations of relevant sections, compliance with statutory requirements, assessment of demands, and the tribunal's decision regarding the appeal.

---