INCOME TAX OFFICER, GURGAON V. ISH KRIPA PROPRITES PRIVATE LIMITED, GURGAON

ITA 2770/DEL/2024

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The case involves Ish Kripa Properties Pvt. Ltd., which was penalized by the Income Tax Officer for not deducting TDS on EDC payments made to the Haryana Urban Development Authority (HUDA) during the assessment years 2016-17 and 2017-18. The penalties were initially upheld by the Assessing Officer but were later deleted by the CIT(A). The Revenue appealed against this decision, arguing that the penalties were justified as the assessee had violated TDS provisions under section 194C of the Income Tax Act. The Tribunal, however, agreed with the CIT(A)'s decision, noting the confusion and lack of clarity regarding the applicability of TDS on such payments at the relevant time.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 37121 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Other Referred Cases: Reliance Petroproducts P Ltd vs. ITO, Nayan C Shah vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHRIAJIT GANDHI; OM PRAKASH
• Keywords: Difference of opinion; TDS
• Section: 271(1)(c); 194C

Judgement Text

"ITA Nos. 2761 &2770/Del/2024 ITO,Ward 2(2),Gurgaon Vs Ish Kripa Properties Pvt. Ltd., IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘C’ NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER&SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 2761/Del/2024 Assessment Year: 2016-17 ITA No.2770/Del/2024 Assessment Year: 2017-18 Income-Tax Officer, Ward 2(2), Gurgaon (Hr.) Vs. Ish Kripa Properties Pvt. Ltd., 15 Lord Shiva Properties P. Ltd. Sector 10A, Gurgaon, Haryana PAN :AABCI7823B (Applicant) (Respondent) ORDER PERNAVEEN CHANDRA, ACCOUNTANT MEMBER, Both the appealsfiled at the instance of the Revenue are directed against the orders of the Commissioner of Income Tax (Appeals)/National Faceless Assessment Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment years 2016-17 and 2017-18 and arises out of the penalty orders dated Assessee by ShriAjit Gandhi,CA Respondent by Shri Om Prakash, Sr.DR Date of hearing 25.02.2025 Date of pronouncement 27.02.2025 ITA Nos. 2761 & 2770/Del/2024 ITO,Ward 2(2),Gurgaon Vs Ish Kripa Properties Pvt. Ltd. 2 08.09.2022passed under sections 271(1)(c) and 270A of the Income Tax Act, 1961 respectively[hereinafter referred to as ‘the Act’]. 2. At the outset, it was prayed by the learned counsel appearing for the Revenue that the appeal is delayed by 23 days.The Revenue has filed a petition for the condonation of the delay and finding reasons as sufficient for delay for filing appeal, the delay is hereby condoned. 3. Brief facts of the case are that the assessee has made payment for External Development Charges(EDC) to Haryana Urban Development Authority (HUDA). The assessee has not deducted TDS on EDC charges paid by the assessee to HUDA. The AO in the assessment order initiated penalty proceedings u/s 271(1)(c) and 270A for the respective AYs 2016-17 and 2017-18. In absence of any explanation coming forth from the assessee, the AO levied penalty u/s 271(1)(c ) and 270A for the respective AYs. 4. The aggrieved assessee approached the CIT(A) who deleted the penalty for both the years. The Revenue is now aggrieved and is before us. 5. The ld DR heavily relied upon the order of the Assessing Officer and vehemently argued that the assessee has committed a violation of TDS provisions u/s 194Cand has offered no explanation, and hence the penalty should be sustained.The Learned DR further argued that ITA Nos. 2761 & 2770/Del/2024 ITO,Ward 2(2),Gurgaon Vs Ish Kripa Properties Pvt. Ltd. 3 Hon’ble Delhi High Court has upheld the decision on TDS being deducted on external development charges (EDC) in a Real Estates Project and the court upheld that section 194C of the Act is applicable to EDC paid to HUDA. 6. On the other hand the learned AR stated vehemently that there was prevailing confusion at that point of time whether TDS is to be deducted on EDC charges paid to HUDA. The Learned AR further pointed out that the Finance Secretary of Haryana Government had raised the issue of TDS on EDC charges paid to HUDA for clarification before the CBDT as HUDA was considered to be Government Body.Thereafter, the TPL division of CBDT has come out with an OM vide F.No. 370133/372017-TPL dated 23.12.2017 to clarify that TDS provision would be applicable on EDC charges made to HUDA as HUDA is taxable entity under Income Tax Act. The OM further advised that HUDA may resort to provisions of section 194 for exemption of TDS from payment of EDC charges. It was further submitted by the Learned AR that though the Hon'ble Delhi High Court has decided the issue in favour of the Revenue, the matter is subjudice before the Hon'ble Supreme Court. 7. The Learned AR further placed reliance on the decision of Hon'ble Supreme Court in the case of Reliance Petroproducts P Ltdreported ITA Nos. 2761 & 2770/Del/2024 ITO,Ward 2(2),Gurgaon Vs Ish Kripa Properties Pvt. Ltd. 4 in(2010) 322 ITR 158(SC). Learned AR also placed reliance on the Hon'ble Gujarat High Court’s decision in the case of Nayan C Shah Vs ITO reported in (2016) 69 Taxmann.com 256(Guj). 8. We have heard the rival submissions and carefully perused the material available on the record. We find that the learned CIT(A) vide his order dated 07.03.2024 has deleted the penalty under Section 271(1)(c) for AY 2016-17and penalty under Section 270A of the Act for AY 2017-18. 9. We find that the assessee has made payment on account of EDC charges to HUDA and has not deducted TDS. During assessment years 2016-17 and 2017-18,the issue of deduction of TDS on EDC payment made to Real Estates Developers including HUDA needed a clarification.There was confusion with regard to whether HUDA was a state government body or an independent taxable entity. These issue were clarified by the Office Memorandum dated 23rd December 2017 issued by the TPL Division of the CBDT.Further, the issue was under legal challenge before the court of law. 10. We find as far as disallowance of the EDC payment u/s 40(a)(ia), it is stated that the assessee has not contested thedisallowance made.However, with respect to penalty, we find that the assessee has given reasonable plausible explanation before us that at that point of ITA Nos. 2761 & 2770/Del/2024 ITO,Ward 2(2),Gurgaon Vs Ish Kripa Properties Pvt. Ltd. 5 time, there was confusion and difference of opinion on this issue. We therefore hold that the explanation that the issue of TDS being deducted on EDC payment was not having legal clarity and there was a difference of opinion on this issue which needed clarification from the CBDT, is a valid explanation.Moreover, we do not find anyevidence on record that payment of EDC charges is non-genuineor that the assessment order has demonstrated that there is any concealment of income or there is any inaccurate particulars of the income.In such a factual matrix, we are of the considered view that mere non- compliance with the TDS provisions do not imply concealment or furnishing of inaccurate particulars to encompass the assessee with the mischief of section 271(1)(c)/270A.We are of the considered view that by making an incorrect claim in law, would not tantamount to furnishing of inaccurate particulars. In such a scenario, following the ratio of the Hon’ble Supreme Court in the case of Reliance Petroproducts (supra),we hold that the learned CIT(A) has correctly deleted the penalty under Section 271(1)(c) of the Act for AY 2016- 17.Ground no 1 of the Revenue is dismissed. 11. Similar is the position in ITA No.2770/Del/2024 where facts and circumstances are identical and the decision as above stands mutatis mutandis for AY 2017-18. The order of learned CIT(A) dated 07.03.2024 ITA Nos. 2761 & 2770/Del/2024 ITO,Ward 2(2),Gurgaon Vs Ish Kripa Properties Pvt. Ltd. 6 deleting the penalty under Section 270A of the Act needs no interference. Hence, the AO is directed to delete the penalty for both the AYs. The ground 1 and 2 of the Revenue is dismissed. 12. In the result, both the appeal filed by the Revenue are dismissed. Order pronounced in the open court on 27.02.2025. Sd/- Sd/- (CHALLA NAGENDRA PRASAD) (NAVEEN CHANDRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 27th February, 2025 Mohan Lal Copy forwarded to: 1. Applicant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi "