Section 194Q circular guidance clarifies threshold computation and must be addressed when assessing tax deduction obligations

Circular No. 13/2021 dated 30 June 2021 provides guidance on the scope and operation of section 194Q of the Income-tax Act, 1961, including threshold computation and related clarifications. Its relevance arises where an assessment under sections 143(3) and 144B concerns tax deduction obligations under section 194Q. Assessment authorities should address applicable circular guidance when determining the controversy and record their reasoning in accordance with law. The material indicates that failure to consider relevant guidance may require the assessment to be reconsidered, while the precise legal effect depends on the adjudicatory decision and facts.

---

---

Issues: Whether the assessment order was liable to be set aside and the matter remanded on the ground that Circular No. 13/2021 dated 30.06.2021 issued under section 194Q of the Income-tax Act, 1961 was not considered.

Analysis: The petition challenged the assessment order passed under section 143(3) read with section 144B and the consequential penalty notice, contending that the assessing authority had not adverted to Circular No. 13/2021 issued under section 194Q. The circular laid down guidelines on the scope and working of section 194Q, including threshold computation and related clarifications, and was relevant to the controversy raised in the assessment. Since the circular was not considered while passing the impugned order, the order could not be sustained and the matter required reconsideration in the light of the circular and in accordance with law.

Conclusion: The assessment order was set aside and the matter was remitted for fresh consideration, resulting in relief to the assessee.

---