A TDS demand was deleted based on consistency with a co-purchaser's favorable order.

A TDS demand was deleted based on consistency with a co-purchaser’s favorable order.

Issue

Can the tax department raise and sustain a TDS demand against one co-purchaser of a property when an identical demand against the other co-purchaser in the very same transaction has already been deleted by an appellate authority?

Facts

The assessee and his father jointly purchased a flat from a non-resident seller.
The seller obtained a lower deduction certificate (LDC) under Section 197 of the Income-tax Act, 1961, permitting the buyers to deduct TDS at a rate of 3%. A specific certificate was issued in the assessee’s name for his 50% share.
The assessee complied, deducting TDS at 3.12% (3% plus applicable cess) on his portion of the payment, deposited the tax, and filed the necessary TDS return.
Despite this, the DCIT, CPC-TDS, raised a demand of about ₹3.54 lakhs, alleging a short deduction of tax during the automated processing of the return under Section 200A.
A crucial fact was that the assessee’s father, the co-purchaser, had faced an identical demand which was subsequently deleted by the National Faceless Appeal Centre (NFAC). The revenue department had accepted this decision and did not file any further appeal.

Decision

The Tribunal ruled decisively in favour of the assessee.

It held that since the appellate authority had already deleted a similar demand in the case of the co-purchaser, arising from the exact same transaction and documents, a differential treatment could not be given to the assessee.
The fact that the revenue department did not appeal the decision in the father’s case indicated its acceptance of the legal position that the 3% TDS rate was correct.
The Tribunal concluded that the assessee had rightly deducted the tax at source in accordance with the valid lower deduction certificate. The demand raised by CPC-TDS was, therefore, deleted.

Key Takeaways

Principle of Consistency: Tax authorities are expected to maintain consistency in their approach, especially when dealing with different parties involved in the same transaction under identical facts and legal circumstances.
Parity of Treatment: It is unjust to treat co-obligants in a single transaction differently. If one party is granted relief on a particular issue, the other party in the same position should receive the same relief.
Finality of Unappealed Orders: When an appellate order is passed and the department chooses not to appeal it further, the decision attains finality for that specific issue and should be respected by the department in subsequent or parallel proceedings.
Validity of Section 197 Certificates: A lower deduction certificate issued by the tax department is a binding document. The automated processing under Section 200A must be aligned with the directions contained in such certificates.

IN THE ITAT DELHI BENCH ‘G’

Sumit Yadav

Income-tax Officer

C. N. PRASAD, Judicial Member
and M. Balaganesh, Accountant Member

IT Appeal No. 1658 (Delhi) of 2025
[Assessment year 2022-23]

AUGUST 29, 2025

Shantanu Jain and Ms. Jahanvi Khanna, Advs. for the Appellant. Manish Gupta, Sr. DR for the Respondent.

ORDER

M. Balaganesh, Accountant Member.- The appeal in ITA No.1658/Del/2025 for AY 2022-23, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as „ld. NFAC’, in short] in Appeal No. ITBA/NFAC/S/250/2024-25/1073747783(1) dated 26.02.2025 against the order of assessment passed u/s 254 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 08.05.20225 by the Assessing Officer, Dy. CIT, CPC-TDS (hereinafter referred to as „ld. AO’).

2. The assessee has raised the following grounds of appeal:-

“1. The Appellant craves leave for adducing necessary evidence, amendments and explanations including written one to the aforesaid grounds and also raise additional grounds in the course of hearing of the appellate proceedings.

2. That the Ld. CIT(A) has erred in law and on facts in upholding 2 the action of the Ld. CPC, TDS in raising the demand for an amount of Rs.3,54,180/-in an order passed u/s 154 of the Act.

3. That having regards to facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in upholding the action of Ld. CPC, TDS in making an addition of Rs.3,18,500/- on account of short deduction of TDS, is bad in law and against the facts and circumstances of the case.

4. That having regards to facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in upholding the action of Ld. CPC, TDS in making an addition of Rs.35,675/- (Rs.390/- + Rs.35,035/- + Rs.250/-) on account of interest etc. on short deduction of TDS, is bad in law and against the facts and circumstances of the case.

5. That the order u/s 154 of the Act so passed and upheld suffers from perverse findings, contrary to the facts on record and without providing an opportunity of hearing to the Appellant, which has amounted to violation of principle of natural justice.

6. That the levy of interest under the Act is disputed and as such unsustainable in law besides being excessive.”

3. We have heard the rival submissions and perused the material available on record. The assessee and his father Shri Bhupender Singh Yadav purchased a flat at Gurgaon from Shri Prashant Singh and Smt. Pooja Singh. At the time of agreement entered on 13.04.2021, Rs. 5 lakhs was paid. It is not in dispute that seller is a non-resident Indian. The seller Shri Prashant Singh obtained a lower deduction of TDS certificate from the competent authority on 06.07.2021 wherein, only the name of Shri Bhupender Singh Yadav (assessee’s father) was mentioned with long term capital gain claimed of Rs. 87,50,000/-. The ITO, International Taxation, Gurgaon, being the competent authority, allowed deduction of tax at source @3% while making payment for purchase of property. In this certificate, the total long term capital gain figure for Rs. 87,50,000/- as fully attributable to Shri Bhupender Singh Yadav. It was submitted that this certificate was obtained inadvertently in the name of Shri Bhupender Singh Yadav alone instead of separately obtaining 2 certificates for Shri Bhupender Singh Yadav (50% portion) and Shri Sumit Yadav (assessee herein) for remaining 50% portion. On 26.11.2021, the seller obtained a lower deduction certificate @3% in respect of payment pertaining to the assessee. This second certificate was obtained by the seller on realizing the mistake that in the original certificate obtained u/s 197 of the Act on 06.07.2021, only the name of Shri Bhupender Singh Yadav was mentioned instead of mentioning the name of Shri Bhupender Singh Yadav for 50% portion. The seller also obtained another lower deduction certificate separately u/s 197 of the Act in the name of assessee herein also on 26.11.2021 from ITO (International Taxation), Gurgaon clearly mentioning the long term capital gain figure of Rs. 43,75,000/- being the 50% portion alone. In other words, vide revised certificate obtained u/s 197 of the Act from ITO (International Taxation), Gurgaon, the share belonging to the assessee was Rs 43.75 lacs and share belonging to Shri Bhupender Singh Yadav was Rs. Rs 43.75 lacs. Both the parties were directed to deduct TDS @3% while making payment to the seller. The assessee duly deducted TDS @3% and deposited the same to the account of the Central Govt and had also duly furnished the quarterly TDS returns in Form 27Q. It was pleaded by the assessee there was no short deduction of TDS made by the assessee and strict compliance had indeed been made for the lower deduction certificate obtained u/s 197 of the Act. This contention of the assessee was not accepted by the DCIT, CPC, TDS and accordingly a demand of Rs. 3,54,180/- was raised on the assessee vide order passed u/s 154 read with Section 200A of the Act on the assessee for short deduction of TDS. Ultimately the sale deed was executed on 23.07.2021 after making the complete payment to the seller on 21.07.2021 and 23.07.2021.

4. It is pertinent to note that in the case of Shri Bhupender Singh Yadav, similar treatment made by the revenue was deleted by the ld NFAC vide order dated 13.01.2023 accepting the entire contentions thereon and also holding that for the entire payment made to the seller Shri Prashant Singh, TDS rate shall be only 3% plus applicable cess thereon. Against this order, no appeal has been preferred by the revenue. The assessee herein is one of the co-purchaser along with this father. Hence, differential treatment cannot be given to the assessee herein on the very same set of facts and documents. Hence, we have no hesitation to hold that payment made by the assessee to the seller Shri Prashant Singh shall be liable for deduction of tax at source @3.12% which is in consonance with lower deduction certificate obtained u/s 197 of the Act. Hence, we hold that assessee had rightly deducted the tax at source and there is no short deduction of tax at source made by the assessee. Hence, the demand raised on the assessee is hereby directed to be deleted and grounds raised by the assessee are allowed.

5. In the result, the appeal of the assessee is allowed.