TaxTMI 
TaxTMI 
2026 (5) TMI 1343
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....that it is stated that it will be deemed that the deductee has not furnished his PAN if the PAN is found to be invalid. 2. That as per sec 139AA (2) the deductee was under an obligation to link his PAN with Aadhar Proviso to this section stated that the consequence of non-linking of PAN with Aadhar would result in: a. Before 01.09.2019, PAN will become invalid. b. With effect from 01.09.2019 the PAN will become inoperative. c. The change so made reflects that the legislature in its wisdom had made a distinction between the words invalid and inoperative. d. The word invalid had not been defined in the section. e. The deductor had obtained PAN of deductee and filled up TDS challan-cum-return in form number 26QB. The utility does not give any pop-up nor any message was flashed when the PAN was filled in the form. f. Furthermore, the utility did not give any pop-up nor any message was flashed when the rate of TDS was filled as 1%. g. In this background, the deductor assessee had no reason to disbelieve the validity of PAN and had gone ahead to deposit the TDS @ 1% and to upload form number 26QB. 3. That th....
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....has been made for levy of penalty, the same by itself would not lead to the conclusion that penalty must be levied in all situations." c. The above stated citations were accepted and followed by the Apex court in State of West Bengal v. Kesoram Industries Ltd., (2004) 10 SCC 201. 9. That the observations of Supreme Court that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty. In the instant case the assessee can at best be said to have failed to carry out a statutory obligation of checking the linking of PAN of the deductee with his Aadhar." 3. Brief facts of the case are that the assessee has purchased property along with two other co-owners, during the year under consideration. The consideration paid/payable by the assessee was Rs. 30,60,000/-. The assessee deducted and deposited income-tax at source (TDS) u/s 194IA of Rs. 30,600/- @ 1% of the amount of consideration payable to the seller, vide Challan cum statement in Form No. 26QB dated 28.08.2023.. But, however, the PAN of the seller was not linked with Aadhar rendering the PAN inoperative as per Rule 114AAA(3), which in such....
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....d on the assessee towards short deduction of TDS. 5. Still Aggrieved, the assessee filed an appeal with the Tribunal. At the outset, the Ld. Counsel for the assessee submitted that this is a technical/venial breach wherein the deductee has not linked PAN with the Aadhaar. The assessee submitted that there was direction to link PAN with the Aadhaar. The assessee drew our attention to the provisions of Section 206AA r.w. Rule 114AAA(3). The ld. Counsel for the assessee submitted that the assessee purchased immovable property and deducted TDS@1% u/s 1941A. It was submitted that when the PAN of the deductee is not linked with the Aadhaar, there is requirement to deduct TDS @20%. It was submitted that this time limit for linking PAN with Aadhaar was extended by CBDT till May 2024. The assessee deducted TDS in the month of August 2023, but the PAN of the deductee i.e. seller of the property was not linked with Aadhaar. It was submitted that deductee i.e. the seller of the property could not get the said PAN linked with Aadhaar within extended time limit also. It was submitted that the deductee i.e. seller of the property got the PAN linked with Aadhar only in the month of August, 2024....
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.... to the persons responsible for deducting such tax, failing which tax shall be deducted at the higher of the (i) rates specified in the relevant provision of the 1961 Act (ii) at the rates in force ; or (iii) at the rate of twenty percent. Rule 114AAA(3), inter-alia, stipulates where a person, who has been allotted the PAN as on the 1st day of July, 2017, and is required to intimate his Aadhaar number u/s 139AA(2), has failed to intimate the same on or before the 31st day of March, 2022, the PAN of such person shall become inoperative. It also provide that such person shall be liable to consequences which, inter-alia, include that where tax is deductible under Chapter XVIIB in case of such persons, such tax shall be collected at higher rate, in accordance with provisions of Section 206AA. Further, Section 139AA(2) provides that every person who has been allotted PAN as on the 1st day of July, 2017, and who is eligible to obtain Aadhaar number, shall intimate his Aadhaar number to such authority in such form and manner as may be prescribed on or before a date to be notified by the Central Government in the official gazette; Provided that in case of failure to intimate the Aadhaar nu....
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....d to be linked with Aadhaar on August, 2024, while the extended date for linkage of PAN with Aadhaar was 31.05.2024. Thus, the assessee was required to deduct income tax at source @20% on the payments made for purchase of property or stamp duty value, which ever is higher, but the assessee deducted income tax at source @1% u/s 194IA. But, at the same time when department is bringing such a stringent measure, and that the department is upgrading its systems and operations by a higher technology on regular basis for last many years continuously, it was expected of department to have brought in the technical feature in its system that all the inoperative PAN should have been red-flagged by the system itself, so that once the deductor or any other person wish to transact with such person holding inoperative PAN due to non linkage of PAN with Aadhaar number, the system should auto alert by red-flagging that the PAN of the deductee is inoperative and in such cases TDS is required to be deducted as provided u/s 206AA read with Rule 114AAA(3). Thus, the consequences thereof should have been auto flagged by the department's system reflecting that the income tax is required to be deducted @2....