TDS error: Father gets income tax notice after selling ancestral land jointly with son - how he won the case in Income Tax Appellate Tribunal

Selling joint property? Be careful of the tax implications, TDS deductions, and how it needs to show up in your income tax returns. Each beneficiary has to keep an eye on tax implications, calculations of capital gains and TDS when filing their income tax return.One such case where an income tax notice issued a father-son duo jointly selling their ancestral land for Rs 13 crore. The purchaser erroneously deducted the entire TDS amount of Rs 13 lakh solely under the father's name, instead of splitting it equally between both parties at Rs 6.5 lakh each. The son properly declared his Rs 6.5 crore share in his income tax return and settled the required taxes without taking any TDS credit.The father submitted his income tax return belatedly under Section 139(4) of the Income Tax Act, 1961 on December 28, 2022 for AY 2022-23, declaring a total income of Rs. 2.76 crore (2,76,47,210).In AY 2022-23, the jointly-owned ancestral land was sold for Rs 13 crore (13,00,00,000), with each party receiving Rs 6.5 crore (Rs 6,50,00,000). The purchaser withheld the complete TDS under Section 194A at 1%, totalling Rs 13,00,000, exclusively under the father's name.

Subsequently, the father claimed the entire TDS amount that was deducted and credited to his account as displayed in Form 26AS, amounting to Rs 13,00,000.

Sale of ancestral property: Tax and LTCG issues

According to an ET report, in this case the long term capital gain (LTCG) calculation was based on the equal distribution of the sale consideration at Rs 6.5 crore (6,50,00,000).The son's ITR included his Rs 6.5 crore (6,50,00,000) share without any TDS credit claim.

This discrepancy triggered a defective ITR notice, as the gross receipts shown in Form 26AS exceeded the total receipts declared under all income heads for which TDS credit was claimed in the submitted return, the ET report said.The parent submitted a reply to the notice, declaring that, "the sales figure was incorrectly reported in the SFT return twice and therefore value appears to be Rs 26 crore. The said land is proportionately distributed between the assessee (him) and his son in the ratio of 1:1.

The total sale consideration was Rs 13 crore, i.e. Rs 6.5 crore each. Accordingly, while filing ITR, the capital gains on sale of land is shown in the ITR of assessee and his son in ratio of 1:1 and paid the tax liability due thereon.

"Subsequently, the tax authority issued an intimation order under Section 143(1) on February 27, 2023, accepting the income as declared in the original ITR but refusing the proportionate TDS credit of Rs 6.5 lakh (6,50,000) and computed interest under Sections 234A, 234B and 234C accordingly.The parent submitted a revised ITR on March 3, 2023, claiming complete TDS credit of Rs 13 lakh (13,00,000) and declared gross receipts of Rs 6.5 crore (6,50,00,000) under "Income transferred to others" against his son's PAN.The tax authority ignored both the response and revised ITR, issuing a rectification order under Section 154 on March 3, 2023. Whilst accepting the income as per ITR, they denied the proportionate TDS credit of Rs 6.5 lakh (6,50,000) and calculated interest under Section 234A, 234B and 234C.Aggrieved by the rectification order, the father appealed to JCIT(A). After JCIT(A) rejected the appeal and maintained only the proportionate TDS credit, he approached the Income Tax Appellate Tribunal (ITAT) Pune. He finally won the case at ITAT Pune on September 22, 2025.

Ancestral property sale TDS tax notice: How did the father win the case?

ITAT Pune issued its ruling (ITA No.722/PUN/2025) on September 22, 2025, noting that according to the father's representative, the TDS was incorrectly allocated entirely to the father's PAN, as shown in Form 26AS, the ET report said.The property purchaser mistakenly applied the entire TDS under the father's name, rather than splitting it proportionally between the father and his son.The son included his portion of income in his ITR and fulfilled his tax obligations without seeking TDS credit. The father's representative highlighted Section 199(1) read with Rule 37BA of the Income Tax Rules, 1962, stating that when TDS is deducted and deposited under a deductee's name (the assessee in this instance), it should be credited to that individual.The ITAT Pune followed the precedent set by iGate Infrastructure (ITAT Bangalore) whilst delivering judgement in favour of the father.The counsel representing the father contended that his client ought to receive the entire TDS credit that the land purchaser had deducted in his name. The argument emphasised that an error by the deductor should not disadvantage the deductee's right to claim.The father's counsel referenced rulings from both the Bangalore Income Tax Appellate Tribunal in iGate Infrastructure Management Services Ltd.

and the Pune Tribunal in Anil Ratanlal Bohora, arguing that administrative errors should not invalidate fundamental rights, justifying the father's claim to the complete Rs 13 lakh (13,00,000) credit.ITAT Pune noted: "We find some force in the arguments advanced by the Ld. AR (father's representative). The Revenue cannot enrich itself at the cost of the assessee."ITAT Pune further stated: "The Bangalore Tribunal in iGate Infrastructure Management Services Ltd.'s

case under the similar set of facts as that of the assessee (father) in the present case, has set aside the matter to the file of the Assessing Officer to adjudicate the issue afresh after making necessary verification as to whether the deductor has deducted the TDS and deposited the same in the Government Account and if yes, allow the credit of the TDS to the assessee.

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What does the ruling mean for you?

Mitesh Jain from Dentons Link Legal told ET: "This is a welcome ruling for the taxpayers as it protects them from being unreasonably penalized for errors made by deductors and re-emphasis the principle that if TDS has been deposited with the government, the credit must be granted to the taxpayer.

This ruling would be helpful in genuine cases where TDS claims are disputed by tax authorities on account of mismatch in income as per Form 26AS and income as per return of income, if the taxpayer has duly offered the income in the return of income and TDS credit is appearing in Form 26AS.

"Chartered Accountant Prakash Hegde said: "This case is a prime example of how a minor oversight can spiral into prolonged and unnecessary litigation, draining the time and resources of the average taxpayer.

While income tax rules rightly require TDS and its corresponding gross income to be reconciled, the pedantic and inflexible approach of the Centralized Processing Centre (CPC) is creating a surge in avoidable disputes.

This rigidity forces taxpayers into a lengthy appeals process before the Commissioner of Income Tax and the Income Tax Appellate Tribunal, even for issues a senior authority could easily verify and conclude. Consequently, the valuable time of both taxpayers and judicial authorities is squandered on purely procedural matters."