The Assessing Officer has disallowed 30 per cent of my purchases under s.40(a)(ia) for not deducting s.194Q TDS, but the seller had already collected TCS under s.206C(1H) and it shows in my Form 26AS. Does that answer the disallowance?
Yes, in principle. The Tribunal held that where the seller has already collected tax at source under s.206C(1H) on the same transaction, the Board's instructions on s.194Q are clear that no deduction under s.194Q is required, and restored the matter to the Assessing Officer to verify the Form 26AS entries. The concession comes from para 4.9.5(v) of CBDT Circular No. 13/2021 and is available only for the years in which s.206C(1H) was in force — in practice AY 2022-23 to AY 2025-26.
Decided by the ITAT (Prashant Maharishi, Vice-President and Keshav Dubey, Judicial Member) on 2026-06-15, reported as ITA No. 1886/Bang/2025 (Income Tax Appellate Tribunal, 'B' Bench, Bangalore); assessment year 2022-23. It bears on section 194Q, section 206C(1H), section 40(a)(ia), section 194C, section 194C(6), section 143(3) of the Income Tax Act 1961, in TDS Defaults and Assessment & Scrutiny matters.
This is the ordinary shape of the s.194Q disputes now being assessed: the buyer did not deduct because the seller had already collected, and the Assessing Officer disallows thirty per cent of the whole purchase under s.40(a)(ia) without looking at Form 26AS. The rule the Tribunal applied is a concession, not a right — para 4.9.5(v) of the circular states that as between s.194Q and s.206C(1H) the buyer's obligation comes first and the transaction leaves s.206C(1H) once the buyer has deducted, but that if for any reason the seller has already collected before the buyer could deduct, the transaction is not to be subjected to deduction again. The Board gave that concession because the two rates are the same, 0.1 per cent. Be scrupulous about the years. s.194Q runs from 1 July 2021 and s.206C(1H) ceased to apply from 1 April 2025, so the overlap and this concession exist only for AY 2022-23 to AY 2025-26. For a purchase made on or after 1 April 2025 there is no s.206C(1H) collection to point to, and a buyer within s.194Q who does not deduct has no answer of this kind. Note also what the Tribunal did not do: it did not delete the disallowance. It restored the whole issue for verification, so the taxpayer still has to produce the Form 26AS entries party by party.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee is an individual carrying on a transport business under the name Khan Transport and a fuel agency under the name Anjanadri Petroleum. He filed his return for assessment year 2022-23 on 29 September 2022 declaring a loss of Rs 75,12,272. The case was selected for scrutiny and notice under s.143(2) was issued on 1 June 2023. The Assessing Officer found purchases from Bhavi Petroleum and Varad Petroleum totalling Rs 1,38,54,602 on which no tax had been deducted under s.194Q, and disallowed thirty per cent, Rs 41,56,380, under s.40(a)(ia). He also disallowed thirty per cent of hire purchase charges for want of deduction under s.194C, and made a further disallowance of Rs 38,80,074 where the transporters' declarations carried discrepancies. Total income was computed at Rs 1,36,23,242 by an order dated 17 March 2024. The Commissioner (Appeals), through the National Faceless Appeal Centre, dismissed the appeal on 30 June 2025 after four unanswered opportunities. Before the Tribunal the assessee produced a paper book of 438 pages showing that both petroleum sellers had collected tax at source under s.206C(1H), which was disclosed in Form 26AS, and relied on para 4.9.5 of CBDT Circular No. 13/2021; and produced declarations under s.194C(6) from 197 transporters which the Assessing Officer had rejected for want of a place or date or for other clerical error.
The appeal was allowed for statistical purposes. On the s.194Q limb the Tribunal recorded that the sellers had collected tax at source under s.206C(1H) as shown in Form 26AS, and that the Board's instructions on the applicability of s.194Q clearly provide that where tax is collected on the sales under s.206C there is no requirement of deduction under s.194Q (para 10). The whole issue, including the s.194C(6) declarations, was restored to the Assessing Officer for verification and fresh decision (para 12).
The Tribunal did not construe s.194Q(5) or the second proviso to s.206C(1H) for itself. It took the Board's guidelines under s.194Q as the governing instruction and applied para 4.9.5, on which the assessee's counsel had relied, to hold that a transaction on which the seller has collected under s.206C carries no obligation to deduct under s.194Q (para 10). On the transport payments it held that the existence of s.194C(6) declarations was undeniable and that if verified they would obliterate the disallowance, and that some payments were said to be below the s.194C threshold (para 11). Because both limbs turned on verification of documents produced for the first time before it, the Tribunal restored the whole issue with a direction to the assessee to substantiate its claims (para 12).
The instructions of CBDT with respect to applicability of section 194Q clearly provides that if the tax is collected on the sales from the buyer u/s. 206C of the Act, there is no requirement of TDS u/s. 194Q of the Act.
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Handle my notice → Ask a CA on WhatsAppYes, in principle. The Tribunal held that where the seller has already collected tax at source under s.206C(1H) on the same transaction, the Board's instructions on s.194Q are clear that no deduction under s.194Q is required, and restored the matter to the Assessing Officer to verify the Form 26AS entries. The concession comes from para 4.9.5(v) of CBDT Circular No. 13/2021 and is available only for the years in which s.206C(1H) was in force — in practice AY 2022-23 to AY 2025-26. This was decided by the ITAT (Prashant Maharishi, Vice-President and Keshav Dubey, Judicial Member) and bears on section 194Q, section 206C(1H), section 40(a)(ia), section 194C, section 194C(6), section 143(3) of the Income Tax Act 1961. It is reported as ITA No. 1886/Bang/2025 (Income Tax Appellate Tribunal, 'B' Bench, Bangalore); assessment year 2022-23. This is the ordinary shape of the s.194Q disputes now being assessed: the buyer did not deduct because the seller had already collected, and the Assessing Officer disallows thirty per cent of the whole purchase under s.40(a)(ia) without looking at Form 26AS. The rule the Tribunal applied is a concession, not a right — para 4.9.5(v) of the circular states that as between s.194Q and s.206C(1H) the buyer's obligation comes first and the transaction leaves s.206C(1H) once the buyer has deducted, but that if for any reason the seller has already collected before the buyer could deduct, the transaction is not to be subjected to deduction again. The Board gave that concession because the two rates are the same, 0.1 per cent. Be scrupulous about the years. s.194Q runs from 1 July 2021 and s.206C(1H) ceased to apply from 1 April 2025, so the overlap and this concession exist only for AY 2022-23 to AY 2025-26. For a purchase made on or after 1 April 2025 there is no s.206C(1H) collection to point to, and a buyer within s.194Q who does not deduct has no answer of this kind. Note also what the Tribunal did not do: it did not delete the disallowance. It restored the whole issue for verification, so the taxpayer still has to produce the Form 26AS entries party by party. If it applies to you, the first step is this: Download Form 26AS for the year and extract, seller by seller, every entry showing collection under s.206C(1H) against the same purchases the officer has disallowed; a bare assertion will not do after this order.
The assessee is an individual carrying on a transport business under the name Khan Transport and a fuel agency under the name Anjanadri Petroleum. He filed his return for assessment year 2022-23 on 29 September 2022 declaring a loss of Rs 75,12,272. The case was selected for scrutiny and notice under s.143(2) was issued on 1 June 2023. The Assessing Officer found purchases from Bhavi Petroleum and Varad Petroleum totalling Rs 1,38,54,602 on which no tax had been deducted under s.194Q, and disallowed thirty per cent, Rs 41,56,380, under s.40(a)(ia). He also disallowed thirty per cent of hire purchase charges for want of deduction under s.194C, and made a further disallowance of Rs 38,80,074 where the transporters' declarations carried discrepancies. Total income was computed at Rs 1,36,23,242 by an order dated 17 March 2024. The Commissioner (Appeals), through the National Faceless Appeal Centre, dismissed the appeal on 30 June 2025 after four unanswered opportunities. Before the Tribunal the assessee produced a paper book of 438 pages showing that both petroleum sellers had collected tax at source under s.206C(1H), which was disclosed in Form 26AS, and relied on para 4.9.5 of CBDT Circular No. 13/2021; and produced declarations under s.194C(6) from 197 transporters which the Assessing Officer had rejected for want of a place or date or for other clerical error. The matter was decided on 2026-06-15 by the ITAT (Prashant Maharishi, Vice-President and Keshav Dubey, Judicial Member). On those facts the ITAT held as follows. The appeal was allowed for statistical purposes. On the s.194Q limb the Tribunal recorded that the sellers had collected tax at source under s.206C(1H) as shown in Form 26AS, and that the Board's instructions on the applicability of s.194Q clearly provide that where tax is collected on the sales under s.206C there is no requirement of deduction under s.194Q (para 10). The whole issue, including the s.194C(6) declarations, was restored to the Assessing Officer for verification and fresh decision (para 12).
The Tribunal did not construe s.194Q(5) or the second proviso to s.206C(1H) for itself. It took the Board's guidelines under s.194Q as the governing instruction and applied para 4.9.5, on which the assessee's counsel had relied, to hold that a transaction on which the seller has collected under s.206C carries no obligation to deduct under s.194Q (para 10). On the transport payments it held that the existence of s.194C(6) declarations was undeniable and that if verified they would obliterate the disallowance, and that some payments were said to be below the s.194C threshold (para 11). Because both limbs turned on verification of documents produced for the first time before it, the Tribunal restored the whole issue with a direction to the assessee to substantiate its claims (para 12). In the words reproduced by the source cited on this page: "The instructions of CBDT with respect to applicability of section 194Q clearly provides that if the tax is collected on the sales from the buyer u/s. 206C of the Act, there is no requirement of TDS u/s. 194Q of the Act."
It was decided by the ITAT on 2026-06-15 and is reported as ITA No. 1886/Bang/2025 (Income Tax Appellate Tribunal, 'B' Bench, Bangalore); assessment year 2022-23. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 194Q, section 206C(1H), section 40(a)(ia), section 194C, section 194C(6), section 143(3), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed for statistical purposes. On the s.194Q limb the Tribunal recorded that the sellers had collected tax at source under s.206C(1H) as shown in Form 26AS, and that the Board's instructions on the applicability of s.194Q clearly provide that where tax is collected on the sales under s.206C there is no requirement of deduction under s.194Q (para 10). The whole issue, including the s.194C(6) declarations, was restored to the Assessing Officer for verification and fresh decision (para 12). It arises in TDS Defaults and Assessment & Scrutiny matters, on section 194Q, section 206C(1H), section 40(a)(ia), section 194C, section 194C(6), section 143(3) of the Income Tax Act 1961, and was decided by Prashant Maharishi, Vice-President and Keshav Dubey, Judicial Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put para 4.9.5(v) of Circular No. 13/2021 on record with the reconciliation, and state the rate identity (0.1 per cent under both provisions) which is the reason the Board gave the concession. Check the year first. For AY 2026-27 onwards there is no s.206C(1H) and this argument is not available; the buyer must show either that he is outside the ten-crore turnover test in s.194Q or that the purchase did not cross fifty lakh rupees. Where transport payments are disallowed in the same order, obtain fresh s.194C(6) declarations from the transporters correcting clerical omissions such as a missing place or date, and press that no mandatory format is prescribed — that is how the second limb of this appeal was dealt with. Do not treat a remand as a win: get the verification done at the Assessing Officer's stage with a party-wise reconciliation, or the same disallowance will come back.
Searched for later treatment; none was found. That is not the same as a source affirming it. A `citedby:` citator search on this order's Indian Kanoon id returns no later decision citing it. A second, differently worded probe - the assessee's name restricted to documents from 15 June 2026 onward, across all courts including the High Courts and the Supreme Court - turned up no judicial treatment either. In particular no appeal under section 260A, and so no High Court reversal, could be traced, and no later Bench was found taking the opposite view. This is a June 2026 order, so the silence reflects its age rather than any doubt about it: a practitioner may cite it as the only direct authority on the point but should not expect it to be treated as settled. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order as printed by indiankanoon wraps every section reference in square brackets as a hyperlink, so the text reads 'tax at source[u/s. 194Q] of the Act'. Those brackets are the site's markup and not the Tribunal's punctuation; they have been removed from the quoted sentence and nothing else has been altered. The quoted sentence was confirmed by a second, separate fetch of the same URL which returned the same paragraph with the hyperlink targets exposed. Two date errors appear in the order itself: para 1 records the assessment order as dated '17.3.024' while para 4 gives it as 17 March 2024, and para 4 records both 'Rs.5,66,27,114' and 'Rs.56,62,27,114' as the hire purchase figure. The figures in the facts below are as the order prints them. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed for statistical purposes. On the s.194Q limb the Tribunal recorded that the sellers had collected tax at source under s.206C(1H) as shown in Form 26AS, and that the Board's instructions on the applicability of s.194Q clearly provide that where tax is collected on the sales under s.206C there is no requirement of deduction under s.194Q (para 10). The whole issue, including the s.194C(6) declarations, was restored to the Assessing Officer for verification and fresh decision (para 12).
TaxSphere, “Mohammad Yunus v ITO, Ward-1 & TPS, Kalaburagi”, https://taxnotice.vittsphere.com/caselaw/case/mohammad-yunus-v-ito-194q-where-seller-already-collected-206c1h/ (validity last checked 2026-09-07)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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I pay a fabricator to make parts to my drawings and I pay lorry owners to move my goods. Do I deduct under section 194C, at what rate, and at what figure does the obligation start — is it thirty thousand rupees or one lakh?
The faceless unit has disallowed my purchases for not deducting under s.194Q and has said nothing at all about the Board's circular I quoted in my reply. Is that enough to get the order set aside?
Our purchase attracts both 194Q and 206C(1H). Do we deduct as buyer or does the seller collect?
What rate does an e-commerce operator deduct now, when is a small seller outside the section, and does the Board's guidance bind me?
