I bought a flat and deducted 1 per cent under s.194-IA. CPC has raised a 20 per cent short-deduction demand because the seller's PAN was inoperative for want of Aadhaar linking. The seller has since linked it. Is there any way out?
Yes, but not the one most people reach for. The Delhi Bench held that the assessee fell outside the CBDT relief circulars on his dates, and that subsequent linking does not retrospectively cure the position. It nonetheless directed that no s.206AA liability be cast on him if the seller is shown to have declared the sale in her return and paid the tax, applying the Ansal Landmark principle by analogy, and remitted the matter for verification — observing that the department was equally responsible for not red-flagging inoperative PANs in its own system.
Decided by the ITAT (Ramit Kochar, Accountant Member and Yogesh Kumar U.S., Judicial Member) on 2026-05-21, reported as ITA No.8431/Del/2025, assessment year 2024-25 (ITAT Delhi Bench 'G'); heard 28 April 2026, pronounced 21 May 2026. It bears on section 206AA, section 194-IA, section 200A, section 139AA(2), section 201(1), section 40(a)(ia), section 119(2)(b), section 234H of the Income Tax Act 1961, in TDS Defaults, Penalty and Demand, Recovery & Stay matters.
This is one of the highest-volume automated demands in the system and it lands on people who did nothing wrong: the deductor's only fault is that somebody else did not link a PAN. Two routes exist and they must be taken in order. The first is the CBDT circulars, which are complete relief where they apply. As set out in this order: Circular No. 3/2023 dated 28 March 2023 provided that the consequences under rule 114AAA(3) take effect from 1 July 2023 and continue until the PAN becomes operative. Circular No. 6/2024 dated 23 April 2024 extended the date of compliance, for transactions entered into up to 31 March 2024, to 31 May 2024. Circular No. 9/2025 dated 21 July 2025 provided that for transactions entered into between 1 April 2024 and 31 July 2025 there is no liability on the deductor or collector under s.206AA or s.206CC if the PAN is made operative on or before 30 September 2025; and that where the amount is paid or credited on or after 1 August 2025, there is no such liability if the PAN is made operative within two months from the end of the month in which the amount is paid or credited. That last limb is now the standing rule and is the one to build a process around. The second route, for anyone outside those windows, is this order: show that the deductee returned the income and paid the tax. It is a remand, not a deletion, and it is a Tribunal order rather than a High Court decision, so it is persuasive rather than binding — but it is the only reasoned way out I could find for a deductor who missed the circular dates. Note also what is not the deductor's problem: the fee under s.234H, inserted by the Finance Act 2021, is payable by the person required to intimate his Aadhaar number under s.139AA(2) and is capped by the section at Rs 1,000. It is the deductee's fee, not the deductor's. The deductor's exposure is s.206AA short deduction, interest under s.201(1A), and, where the statement is late, fee under s.234E.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee purchased immovable property with two other co-owners in August 2023, his share of the consideration being Rs 30,60,000, and deducted and deposited Rs 30,600 at 1 per cent under s.194-IA by challan-cum-statement in Form 26QB dated 28 August 2023. The seller's PAN was not linked with Aadhaar and was therefore inoperative under rule 114AAA(3), which by then had effect from 1 July 2023. CPC processed the Form 26QB on 29 August 2023 and, applying s.206AA read with rule 114AAA(3) at 20 per cent, raised a demand of Rs 5,81,400 for short deduction with Rs 5,814 interest, in aggregate Rs 5,87,210. The CIT(A) dismissed the appeal, holding that an inoperative PAN is treated as non-furnishing of PAN for all purposes, that the obligation to comply with s.206AA rests on the deductor, and that subsequent linking does not retrospectively validate the transaction or reduce a liability already determined under s.200A. Before the Tribunal the assessee said he had never received the August 2023 intimation and only learnt of the demand when a recovery letter reached him in August 2024, whereupon he approached the seller, who linked her PAN with Aadhaar in August 2024 on payment of a Rs 1,000 late fee, by which time the extended date of 31 May 2024 had passed. Both sides asked that the matter be restored to the Assessing Officer for verification of the linking.
The appeal was allowed for statistical purposes. On the circulars, the assessee was held not entitled to the benefit of the extended period, the transaction being of August 2023 and the PAN having been linked only in August 2024 against an extended date of 31 May 2024, and he had not approached the CBDT or the jurisdictional Principal Commissioner under s.119(2)(b) for condonation; the Bench accepted that the onus is on the deductor to ensure the deductee's PAN is not inoperative. But the Bench held that it would be appropriate that no liability to higher TDS under s.206AA read with rule 114AAA be cast on the assessee provided evidence is brought on record that the seller declared and disclosed the sale in her return of income and paid the due taxes, and it remitted the matter to the Assessing Officer for de novo determination, directing the assessee to produce the evidence and directing the Revenue to verify from its own database whether the seller had declared the income and paid the tax, failing which proceedings could be initiated against her.
The Bench set out the statutory chain: s.206AA requires a person entitled to receive a sum on which tax is deductible to furnish his PAN, failing which tax is deducted at the higher of the rate specified, the rates in force, or 20 per cent; rule 114AAA(3) provides that a person allotted a PAN as on 1 July 2017 who was required to intimate his Aadhaar number under s.139AA(2) and failed to do so on or before 31 March 2022 has an inoperative PAN, with the consequence that tax is deducted at the higher rate under s.206AA; and s.139AA(2), with its proviso, is the source of the rule, the notified date being 31 March 2022. It then traced the circulars — Circular No. 3/2023 postponing the rule 114AAA(3) consequences to 1 July 2023 and continuing them until the PAN becomes operative, Circular No. 6/2024 extending compliance for transactions up to 31 March 2024 to 31 May 2024, and Circular No. 9/2025 relieving the deductor for transactions between 1 April 2024 and 31 July 2025 where the PAN is made operative by 30 September 2025 and, for amounts paid or credited on or after 1 August 2025, where the PAN is made operative within two months of the end of the month of payment. On those dates the assessee was outside every window. The Bench accepted that the provisions are stringent by design, to curb evasion and strengthen administration, since Aadhaar is a unique biometric identifier and the risk of non-filing or evasion attaching to an inoperative PAN is higher. It then held the department 'equally responsible', reasoning that a department which has been upgrading its systems for years should have red-flagged inoperative PANs automatically so that a deductor transacting with such a person would be auto-alerted that deduction under s.206AA read with rule 114AAA(3) was required. That being so, it applied by analogy the principle behind s.40(a)(ia) read with s.201(1) — that a taxpayer who failed to deduct does not face disallowance where the payee has included the receipt in his return and paid tax — and drew on the Delhi High Court's judgment in CIT v. Ansal Landmark Township Private Limited.
Under these facts and circumstances, it will be appropriate that no liability to higher TDS u/s 206AA read with Rule 114AAA be cast on the assessee provided evidence is brought on record that the deductee i.e. seller of the property has declared and disclosed the said sale transaction of sale of property in her return of income filed with the department and due taxes paid.
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Handle my notice → Ask a CA on WhatsAppYes, but not the one most people reach for. The Delhi Bench held that the assessee fell outside the CBDT relief circulars on his dates, and that subsequent linking does not retrospectively cure the position. It nonetheless directed that no s.206AA liability be cast on him if the seller is shown to have declared the sale in her return and paid the tax, applying the Ansal Landmark principle by analogy, and remitted the matter for verification — observing that the department was equally responsible for not red-flagging inoperative PANs in its own system. This was decided by the ITAT (Ramit Kochar, Accountant Member and Yogesh Kumar U.S., Judicial Member) and bears on section 206AA, section 194-IA, section 200A, section 139AA(2), section 201(1), section 40(a)(ia), section 119(2)(b), section 234H of the Income Tax Act 1961. It is reported as ITA No.8431/Del/2025, assessment year 2024-25 (ITAT Delhi Bench 'G'); heard 28 April 2026, pronounced 21 May 2026. This is one of the highest-volume automated demands in the system and it lands on people who did nothing wrong: the deductor's only fault is that somebody else did not link a PAN. Two routes exist and they must be taken in order. The first is the CBDT circulars, which are complete relief where they apply. As set out in this order: Circular No. 3/2023 dated 28 March 2023 provided that the consequences under rule 114AAA(3) take effect from 1 July 2023 and continue until the PAN becomes operative. Circular No. 6/2024 dated 23 April 2024 extended the date of compliance, for transactions entered into up to 31 March 2024, to 31 May 2024. Circular No. 9/2025 dated 21 July 2025 provided that for transactions entered into between 1 April 2024 and 31 July 2025 there is no liability on the deductor or collector under s.206AA or s.206CC if the PAN is made operative on or before 30 September 2025; and that where the amount is paid or credited on or after 1 August 2025, there is no such liability if the PAN is made operative within two months from the end of the month in which the amount is paid or credited. That last limb is now the standing rule and is the one to build a process around. The second route, for anyone outside those windows, is this order: show that the deductee returned the income and paid the tax. It is a remand, not a deletion, and it is a Tribunal order rather than a High Court decision, so it is persuasive rather than binding — but it is the only reasoned way out I could find for a deductor who missed the circular dates. Note also what is not the deductor's problem: the fee under s.234H, inserted by the Finance Act 2021, is payable by the person required to intimate his Aadhaar number under s.139AA(2) and is capped by the section at Rs 1,000. It is the deductee's fee, not the deductor's. The deductor's exposure is s.206AA short deduction, interest under s.201(1A), and, where the statement is late, fee under s.234E. If it applies to you, the first step is this: Check the deductee's PAN status on the department's portal before every payment, and keep the screenshot with the voucher. The Bench's own conclusion is that the onus is now on the deductor to ensure the deductee's PAN is not inoperative.
The assessee purchased immovable property with two other co-owners in August 2023, his share of the consideration being Rs 30,60,000, and deducted and deposited Rs 30,600 at 1 per cent under s.194-IA by challan-cum-statement in Form 26QB dated 28 August 2023. The seller's PAN was not linked with Aadhaar and was therefore inoperative under rule 114AAA(3), which by then had effect from 1 July 2023. CPC processed the Form 26QB on 29 August 2023 and, applying s.206AA read with rule 114AAA(3) at 20 per cent, raised a demand of Rs 5,81,400 for short deduction with Rs 5,814 interest, in aggregate Rs 5,87,210. The CIT(A) dismissed the appeal, holding that an inoperative PAN is treated as non-furnishing of PAN for all purposes, that the obligation to comply with s.206AA rests on the deductor, and that subsequent linking does not retrospectively validate the transaction or reduce a liability already determined under s.200A. Before the Tribunal the assessee said he had never received the August 2023 intimation and only learnt of the demand when a recovery letter reached him in August 2024, whereupon he approached the seller, who linked her PAN with Aadhaar in August 2024 on payment of a Rs 1,000 late fee, by which time the extended date of 31 May 2024 had passed. Both sides asked that the matter be restored to the Assessing Officer for verification of the linking. The matter was decided on 2026-05-21 by the ITAT (Ramit Kochar, Accountant Member and Yogesh Kumar U.S., Judicial Member). On those facts the ITAT held as follows. The appeal was allowed for statistical purposes. On the circulars, the assessee was held not entitled to the benefit of the extended period, the transaction being of August 2023 and the PAN having been linked only in August 2024 against an extended date of 31 May 2024, and he had not approached the CBDT or the jurisdictional Principal Commissioner under s.119(2)(b) for condonation; the Bench accepted that the onus is on the deductor to ensure the deductee's PAN is not inoperative. But the Bench held that it would be appropriate that no liability to higher TDS under s.206AA read with rule 114AAA be cast on the assessee provided evidence is brought on record that the seller declared and disclosed the sale in her return of income and paid the due taxes, and it remitted the matter to the Assessing Officer for de novo determination, directing the assessee to produce the evidence and directing the Revenue to verify from its own database whether the seller had declared the income and paid the tax, failing which proceedings could be initiated against her.
The Bench set out the statutory chain: s.206AA requires a person entitled to receive a sum on which tax is deductible to furnish his PAN, failing which tax is deducted at the higher of the rate specified, the rates in force, or 20 per cent; rule 114AAA(3) provides that a person allotted a PAN as on 1 July 2017 who was required to intimate his Aadhaar number under s.139AA(2) and failed to do so on or before 31 March 2022 has an inoperative PAN, with the consequence that tax is deducted at the higher rate under s.206AA; and s.139AA(2), with its proviso, is the source of the rule, the notified date being 31 March 2022. It then traced the circulars — Circular No. 3/2023 postponing the rule 114AAA(3) consequences to 1 July 2023 and continuing them until the PAN becomes operative, Circular No. 6/2024 extending compliance for transactions up to 31 March 2024 to 31 May 2024, and Circular No. 9/2025 relieving the deductor for transactions between 1 April 2024 and 31 July 2025 where the PAN is made operative by 30 September 2025 and, for amounts paid or credited on or after 1 August 2025, where the PAN is made operative within two months of the end of the month of payment. On those dates the assessee was outside every window. The Bench accepted that the provisions are stringent by design, to curb evasion and strengthen administration, since Aadhaar is a unique biometric identifier and the risk of non-filing or evasion attaching to an inoperative PAN is higher. It then held the department 'equally responsible', reasoning that a department which has been upgrading its systems for years should have red-flagged inoperative PANs automatically so that a deductor transacting with such a person would be auto-alerted that deduction under s.206AA read with rule 114AAA(3) was required. That being so, it applied by analogy the principle behind s.40(a)(ia) read with s.201(1) — that a taxpayer who failed to deduct does not face disallowance where the payee has included the receipt in his return and paid tax — and drew on the Delhi High Court's judgment in CIT v. Ansal Landmark Township Private Limited. In the words reproduced by the source cited on this page: "Under these facts and circumstances, it will be appropriate that no liability to higher TDS u/s 206AA read with Rule 114AAA be cast on the assessee provided evidence is brought on record that the deductee i.e. seller of the property has declared and disclosed the said sale transaction of sale of property in her return of income filed with the department and due taxes paid." The decision followed or applied CIT v. Ansal Landmark Township Private Limited, ITA No. 160/2015 (Delhi High Court, 26 August 2015) — applied by analogy; CBDT Circular No. 3/2023 dated 28 March 2023 — considered; CBDT Circular No. 6/2024 dated 23 April 2024 — considered; CBDT Circular No. 9/2025 dated 21 July 2025 — considered.
It was decided by the ITAT on 2026-05-21 and is reported as ITA No.8431/Del/2025, assessment year 2024-25 (ITAT Delhi Bench 'G'); heard 28 April 2026, pronounced 21 May 2026. 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 206AA, section 194-IA, section 200A, section 139AA(2), section 201(1), section 40(a)(ia), section 119(2)(b), section 234H, 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 circulars, the assessee was held not entitled to the benefit of the extended period, the transaction being of August 2023 and the PAN having been linked only in August 2024 against an extended date of 31 May 2024, and he had not approached the CBDT or the jurisdictional Principal Commissioner under s.119(2)(b) for condonation; the Bench accepted that the onus is on the deductor to ensure the deductee's PAN is not inoperative. But the Bench held that it would be appropriate that no liability to higher TDS under s.206AA read with rule 114AAA be cast on the assessee provided evidence is brought on record that the seller declared and disclosed the sale in her return of income and paid the due taxes, and it remitted the matter to the Assessing Officer for de novo determination, directing the assessee to produce the evidence and directing the Revenue to verify from its own database whether the seller had declared the income and paid the tax, failing which proceedings could be initiated against her. It arises in TDS Defaults, Penalty and Demand, Recovery & Stay matters, on section 206AA, section 194-IA, section 200A, section 139AA(2), section 201(1), section 40(a)(ia), section 119(2)(b), section 234H of the Income Tax Act 1961, and was decided by Ramit Kochar, Accountant Member and Yogesh Kumar U.S., 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. Map your transaction date against the circulars first: up to 31 March 2024 with the PAN operative by 31 May 2024, or 1 April 2024 to 31 July 2025 with the PAN operative by 30 September 2025, or paid or credited from 1 August 2025 with the PAN operative within two months from the end of the month of payment. If you are inside a window, the demand simply does not arise and you need go no further. If you are outside every window, build the Ansal Landmark case: get the deductee's return, the computation showing the sum included, and proof of tax paid, and ask for the s.206AA liability to be dropped on that footing rather than on hardship. Chase the deductee to link the PAN anyway and put the linking on record — it did not save this assessee by itself, but the direction on remand is conditioned on verification of the deductee's return, and an operative PAN is what makes that verification possible. Consider an application under s.119(2)(b) to the CBDT or the jurisdictional Principal Commissioner for condonation where you have missed a circular date. The Bench pointedly recorded that the assessee had not approached either. Do not assume the demand is confined to the differential tax. The intimation here carried interest on the short deduction as well, and in a TDS-statement case would carry s.234E fee too.
Validity check could not be completed. Validity check could not be completed. The order is recent (21 May 2026). It has been followed by the same Tribunal: the Delhi Bench in Manoj Kumar (Proprietor M/s Manoj Metals) v. ITO, ITA Nos.1499 to 1501/Del/2026, decided 31 August 2026, expressly applied it on identical facts for assessment year 2024-25 and remitted three appeals on the same terms, in a case where s.194Q, s.206AA at the higher rate, s.234E fee, s.201(1A) interest and s.220(2) interest were all in issue. I located no High Court decision on the inoperative-PAN and s.206AA question, and none on s.234H itself. 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 was fetched twice and the two sentences quoted came back identical on both passes. Points a reader should know. The order records that the assessee 'purchased property along with two other co-owners' for a consideration paid or payable by him of Rs 30,60,000, deducted Rs 30,600 at 1 per cent under s.194-IA and was met with a demand of Rs 5,81,400 for short deduction and Rs 5,814 interest — but then gives the aggregate as Rs 5,87,210, which does not equal the sum of those two figures (Rs 5,87,214). The date of the CPC intimation is given as 29 August 2023 against a Form 26QB filed on 28 August 2023. The reference in para 3 to 'Section 206AA read with Rule 114AAA(3)' requiring deduction 'at the higher of' the specified rate or 20 per cent is stated in the order as an obligation to deduct at 20 per cent of the consideration or the stamp duty value, whichever is higher. On s.234H: the order records at para 5 that the deductee got her PAN linked in August 2024 'after paying late fee of Rs. 1000/-' but does not cite s.234H by number; the identification of that fee as the s.234H fee is mine, drawn from the text of s.234H as inserted by s.61 of the Finance Act 2021, which caps the prescribed fee at one thousand rupees. The commencement of s.234H has since been verified against the department's own section page, https://www.incometaxindia.gov.in/w/section-234h — inserted by Act No. 13 of 2021 (the Finance Act 2021) with effect from 1 April 2021, the fee being 'such fee, as may be prescribed, not exceeding one thousand rupees'. The rule prescribing the Rs 1,000 amount itself was still not retrieved. I did not retrieve CBDT Circular No. 3/2023, No. 6/2024 or No. 9/2025 in their own full texts, so what this entry says about their content is what this order records of them. Their numbers, dates and operative cut-offs have, however, since been verified independently and are sound: Circular No. 3/2023 dated 28 March 2023 (confirmed from the title of Circular No. 9/2025 on the department's own site, which is styled a partial modification of 'Circular No.3 of 2023 dated 28-3-2023'); Circular No. 6/2024 dated 23 April 2024, F.No. 275/4/2024-IT(B), under which there is no liability to deduct or collect under s.206AA or s.206CC for transactions up to 31 March 2024 where the PAN becomes operative by 31 May 2024; and Circular No. 9/2025 dated 21 July 2025. A practitioner is not to be warned off those figures. No decision on s.234G was located at all: an indiankanoon search for 'section 234G' returned only the statute and the Finance Act 2020 insertion clause, and no judgment. 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 circulars, the assessee was held not entitled to the benefit of the extended period, the transaction being of August 2023 and the PAN having been linked only in August 2024 against an extended date of 31 May 2024, and he had not approached the CBDT or the jurisdictional Principal Commissioner under s.119(2)(b) for condonation; the Bench accepted that the onus is on the deductor to ensure the deductee's PAN is not inoperative. But the Bench held that it would be appropriate that no liability to higher TDS under s.206AA read with rule 114AAA be cast on the assessee provided evidence is brought on record that the seller declared and disclosed the sale in her return of income and paid the due taxes, and it remitted the matter to the Assessing Officer for de novo determination, directing the assessee to produce the evidence and directing the Revenue to verify from its own database whether the seller had declared the income and paid the tax, failing which proceedings could be initiated against her.
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