Mumbai

ITAT Deletes Rs 5.8 Lakh Tax Penalty on Haji Ali Homebuyer After Seller Links PAN

By Editorial·14 June 2026·2 min read

A photorealistic wide shot of the Haji Ali coastline in Mumbai during the golden hour, showcasing modern luxury resident...

On June 15, 2026, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) relieved a homebuyer in Haji Ali, Mumbai, of an additional tax demand of over Rs 5.8 lakh. The tax department had penalised the buyer because the seller's Aadhaar and PAN were not linked at the time of the property transaction, but the tribunal deleted the demand after the seller subsequently linked the documents.

The case involved a Mumbai resident who had jointly purchased a flat in Haji Ali for Rs 1.9 crore with her husband. The buyer held a 15% share in the property, valued at Rs 28.5 lakh, and had deducted Tax Deducted at Source (TDS) of Rs 28,500 under Section 194-IA on her share of the purchase price.

However, the income tax department subsequently raised a demand exceeding Rs 5.8 lakh. The department alleged a short deduction of tax, arguing that the seller's PAN was inoperative at the time of the transaction, which should have triggered higher TDS provisions under Section 206AA.

The ITAT ruled in favour of the buyer and deleted the demand. The tribunal noted that the seller had subsequently linked their Aadhaar with PAN, thereby regularising the PAN within the timeline prescribed by a Central Board of Direct Taxes (CBDT) circular issued in July 2025.

Additionally, the tribunal observed that the seller had already disclosed the capital gains from the transaction in his tax return and paid the applicable taxes. Consequently, the ITAT ruled that it was inappropriate to treat the buyer as an "assessee in default."

Tax experts noted that such disputes often catch ordinary homebuyers off guard. Chartered accountant Ketan Vajani cautioned that property buyers must remain highly aware of their TDS obligations. He noted that for resident sellers, TDS under Section 194-IA is generally 1%, and buyers must ensure it is computed on the higher of the transaction value or the stamp duty value, including additional charges like parking fees.

Chartered accountant Ameet Patel added that while the tax department uses TDS to track transactions, the compliance burden on homebuyers can be onerous, especially when properties are jointly held and funded.