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Judgment
Per Renu Jauhri, Accountant Member:
This appeal by the assessee is directed against the order dated 08.01.2026 of the Ld. Commissioner of Income Tax, (Appeal), ADDL/JCIT (A)-1 Pune, [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the Order dated 03.03.2021 passed under section 201 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by ITO, ward-77(3), New Delhi (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2014-15.
The Assessee has raised the following grounds of appeal:
“ 1. Action of Commissioner of Income Tax Appeal in confirming the addition under section 201(1) of Rs. 4,26,799, as made by the Income Tax Officer, without considering the explanation and information available on record is unjust, illegal, arbitrary and against the facts and circumstances of the case.
2.Action of Commissioner of Income Tax (A) in confirming the addition under section 201(1A) of Rs. 3,58,511 being interest 1 percent being interest in respect of default in making the payment of TDS by 84 months, as made by the Income Tax Officer, without considering the explanation and information available on record is unjust, illegal, arbitrary and against the facts and circumstances of the case.
3.The Appellant craves to add, amend, alter, submit and withdraw any ground before the appeal is heard.”
Brief facts are that the assessee company is engaged in the business of real estate development. It had paid lease rent to NOIDA / Greater NOIDA/ Yamuna Expressway Industrial Development Authority (YEIDA) amounting to Rs. 42,67,989/- on 31.03.2014 but no TDS was deducted.
Accordingly, notice u/s 201(1)/201(1A) was issued by the AO on 28.10.2010 calling for information regarding TDS compliance for the F.Y. 2013-14. Not satisfied with the assessee’s explanation that the deductee being a local authority is exempt u/s 10(20) & 10(20A), the AO treated the assessee in default for non-deduction of TDS u/s 194I of the Act. Interest u/s 201(1A) was charged at Rs. 3,58,511/- and penalty proceedings u/s 271C were alsoinitiated vide order dated 3.3.2021.
Aggrieved, the assessee preferred an appeal before the CIT(A).
Vide order dated 8.1.2026, the CIT(A) dismissed the appeal of the assessee holding as under:
“Ground Nos. 1, 2, 3, 5 and 7 These grounds relate to the applicability of section 194-I on lease rent paid to Noida Authority and the consequent demand raised under section 201(1). On examination of the judicial precedents placed on record, it is noted that the Hon’ble Supreme Court in New Okhla Industrial Development Authority v. CIT has conclusively held that annual lease rent paid to development authorities constitutes “rent” within the meaning of section 194-I and is liable for deduction of tax at source. The reliance placed by the appellant on earlier appellate orders does not override the binding nature of the judgment of the Hon’ble Supreme Court, which settles the issue against the assessee. Accordingly, the demand raised under section 201(1) is found to be in accordance with law. These grounds are dismissed.”
Further aggrieved, the assessee has filed the present appeal before the Tribunal contending that the demand of Rs. 426,799/- u/s 201(1) and interest of Rs. 3,58,511/-u/s 201(1A) has been upheld by CIT(A) without considering the assessee’s explanation.
We have heard the rival submissions and perused the material available on record. As regards the liability to deduct tax at source in respect of lease rent paid by the assessee to NOIDA / Greater NOIDA/ YEIDA, we note that the issue is decided against the assessee by the Hon’ble Supreme Court in assessee’s own case, NOIDA v CIT [2018] 95 taxmann.com 80 as has been correctly observed by the CIT(A). Thus, we hold that the assessee was liable to deduct TDS on the lease rent paid to NOIDA / G NOIDA / YEIDA amounting to Rs. 42,67,989/- during the F.Y. 2013-14. However, while treating the assessee in default u/s 201, the AO ought to have given it an opportunity to demonstrate whether its case is covered under the first proviso to section 201(1) which prescribes the circumstances under which the assessee should not be treated as assessee-in-default. The relevant section and its proviso is reproduced below:-
“Consequences of failure to deduct or pay.
201.(1) Where any person, including the principal officer of a company,— (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax:
Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee— (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed: (emphasis supplied)
In view of the above legal position and in the interest of justice, we deem it appropriate to restore the matter to the AO for fresh consideration after providing the assessee an opportunity to demonstrate whether the conditions of the first proviso are satisfied by it.
The assessee is also directed to furnish requisite information before the AO in terms of conditions prescribed in the aforesaid proviso to section 201(1) of the Act.
In the result, appeal of the assessee is allowed for statistical purposes.