Perfect Constech Pvt Ltd, New Delhi V. Addi. CIT Range-76, New Delhi

ITA 6907/DEL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0300 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 20-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 133A; 194C; 27; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F: NEW DELHI BEFORE, SHRI G. S. PANNU, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER I.T.A NO.6907/DEL/2019 (ASSESSMENT YEAR -2014-15) M/S PERFECT CONSTECH PVT. LTD., A-307, ANSAL CHAMBER-I BHIKAJI CAMA PLACE, NEW DELHI-110066 PAN-AAGCP 0389Q VS. ADDL. CIT, RANGE-76. (APPELLANT) (RESPONDENT) APPELLANT BY SH. KAPIL GOEL, ADV. RESPONDENT BY SH. SANDEEP KUMAR, SR. DR DATE OF HEARING 21.12.2020 DATE OF PRONOUNCEMENT 29.12.2020 ORDER PER SUDHANSHU SRIVASTAVA, JM: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST OR DER DATED 21.06.2019 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), NEW DELHI [CIT (A)] FOR ASSESSMENT Y EAR 2014-15, WHEREIN HE HAS UPHELD THE IMPOSITION OF PENALTY OF R S.83,80,000/- 2 ITA NO.6907/DEL/2019 M/S. PERFECT CONSTE CH PVT. LTD. VS. ACIT IMPOSED U/S 271C OF THE INCOME TAX ACT, 1961 (HEREI NAFTER CALLED THE ACT). 2.0 THE BRIEF FACTS OF THE CASE ARE THAT A SURVEY/ INSPECTION U/S 133A OF THE ACT WAS CARRIED OUT AT THE PREMISES OF HARYANA URBAN DEVELOPMENT AUTHORITY (HUDA), PANCHKULA ON 09 /02/2017 AND 14/02/2017. DURING THE COURSE OF SEARCH, IT WAS NOTICED THAT THE ASSESSEE HAD MADE A PAYMENT OF EXTERNAL DEVELOP MENT CHARGES (EDC) TO HUDA AMOUNTING TO RS.41,90,00,000/- DURING THE FINANCIAL YEAR UNDER CONSIDERATION. THE ASSESSING O FFICER (AO) NOTED THAT THE PARTICIPATING PRIVATE DEVELOPERS WER E REQUIRED TO PAY EDC AS PROVIDED IN THE LICENSE FOR SETTING UP A COM MERCIAL COLONY ON URBANISABLE LAND HELD BY IT IN VICINITY AND DEVE LOPED BY HUDA AND THAT THE LICENSE IS ISSUED BY DIRECTOR, TOWN AN D COUNTRY PLANNING, HARYANA. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAD FAILED TO DEDUCT/DEPOSIT TAX AT SOURCE AS REQUIRED UNDER VARIOUS APPLICABLE PROVISIONS OF THE ACT WITH RESPECT TO TH E EDC PAID TO HUDA. THEREFORE, PENALTY PROCEEDINGS U/S 271C OF TH E ACT WERE INITIATED AND A PENALTY OF RS.83,80,000/- WAS IMPOSE D BEING 2% OF 3 ITA NO.6907/DEL/2019 M/S. PERFECT CONSTE CH PVT. LTD. VS. ACIT THE EDC AMOUNT PAID TO HUDA ON WHICH TAX WAS ALLEGED TO BE DEDUCTED AT SOURCE U/S 194C OF THE ACT. 2.1 AGGRIEVED, THE ASSESSEE APPROACHED THE LD. FIR ST APPELLATE AUTHORITY CHALLENGING THE LEVY OF PENALTY . THE LD. CIT (A), HOWEVER, UPHELD THE IMPOSITION OF PENALTY. 2.2 THE ASSESSEE IS NOW BEFORE THIS TRIBUNAL CHALLE NGING THE LEVY OF PENALTY BY THE LD. FIRST APPELLATE AUTHORIT Y BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS, CIRCUMSTANCES AND LEGA L POSITION OF THE CASE, THE WORTHY CIT(A) IN APPEAL NO.149/18-19/ 289/17- 18 DATED 21.06.2019 HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF THE PROVISIONS OF SECTION 250(6) O F THE INCOME TAX ACT, 1961. 2. THAT ON THE FACTS, CIRCUMSTANCES AND L EGAL POSITION OF THE CASE, THE WORTHY CIT(A) WAS UNJUSTIFIED IN CONF IRMING THE ACTION OF THE LD. AO WHEREIN HE IMPOSED PENALTY OF RS.83,80,000/- U/S 271C OF THE ACT ON ALLEGED FAILU RE TO DEDUCT TAX AT SOURCE EVEN WHEN THE SAID PENALTY WAS NOT EX IGIBLE AND MORE-SO WHEN THE SHOW CAUSE NOTICE FOR PENALTY PROC EEDINGS WAS TOTALLY VAGUE. 4 ITA NO.6907/DEL/2019 M/S. PERFECT CONSTE CH PVT. LTD. VS. ACIT 3. THAT ON THE FACTS, CIRCUMSTANCES AND LEGA L POSITION OF THE CASE, THE WORTHY CIT(A) WAS UNJUSTIFIED IN CONFIRMI NG THE ACTION OF THE LD. AO WHEREIN HE HAS IMPOSED PENALTY OF RS. 83,80,000/- U/S 271C OF THE ACT BEYOND THE LIMITATI ON PERIOD AND HENCE THE SAME DESERVES TO BE QUASHED. 4. THAT ON THE FACTS, CIRCUMSTANCES AND LEGA L POSITION OF THE CASE, THE WORTHY CIT(A) WAS UNJUSTIFIED IN CONFIRMI NG THE ACTION OF THE LD. AO WHEREIN HE HAS ERRED IN IMPOSING PENA LTY OF RS. 83,80,000/- U/S 271C OF THE ACT IN HASTE, WITHOUT A FFORDING REASONABLE OPPORTUNITY AND WITH A BIASED AND PREJUD ICED MIND. 5. THAT THE APPELLANT CRAVES LEAVE FOR ANY ADDIT ION, DELETION OR AMENDMENT IN THE GROUNDS OF APPEAL ON OR BEFORE THE DISPOSAL OF THE SAME. 3.0 THE LD. AUTHORIZED REPRESENTATIVE (AR) SUBMITT ED THAT THE IMPOSITION OF PENALTY WAS INCORRECT IN AS MUCH A S THE PAYMENT OF EDC HAD BEEN MADE BY THE ASSESSEE IN ACCORDANCE WITH THE LICENSE GRANTED BY THE DEPARTMENT OF TOWN AND COUNTR Y PLANNING (DTCP) AND THE PAYMENT TO HUDA WAS NOT MADE IN PURSU ANCE OF ANY WORKS CONTRACT OR UNDER ANY STATUTORY OBLIGATION MEANING THEREBY THAT WHEN THE ASSESSEE HAD NO PRIVITY OF CON TRACT WITH HUDA, THE ASSESSEE CANNOT BE HELD LIABLE FOR IMPOSI TION OF PENALTY 5 ITA NO.6907/DEL/2019 M/S. PERFECT CONSTE CH PVT. LTD. VS. ACIT U/S 271C OF THE ACT. THE LD. AUTHORIZED REPRESENTAT IVE REITERATED THAT THE ASSESSEE HAD PRIVITY OF CONTRACT WITH DTCP AS PER THE AGREEMENT AND THAT HUDA HAD MERELY RECEIVED THE PAY MENT FOR AND ON BEHALF OF THE DTCP. THE LD. AUTHORIZED REPRESENT ATIVE PLACED RELIANCE ON NUMEROUS ORDERS OF THE ITAT WHEREIN A SI MILAR LEVY OF PENALTY HAD BEEN DIRECTED TO BE DELETED BY THE CO-O RDINATE BENCHES OF THIS TRIBUNAL. 4.0 PER CONTRA, THE LD. SR. DEPARTMENTAL REPRESENT ATIVE (DR) LAID EMPHASIS ON SECTION 194C OF THE ACT AND CONTEN DED THAT HUDA WAS NEITHER A GOVERNMENT DEPARTMENT NOR A LOCAL AUTH ORITY AND, THEREFORE, ANY PAYMENT BEING MADE TO IT WAS TO BE SU BJECTED TO DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT. 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE A LSO PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT IN PARA 4.3.2, SUB- PARAGRAPH (IV) OF THE ORDER PASSED U/S 271C OF THE ACT, THE AO HAS HIMSELF NOTED THAT THE DEMAND DRAFT OF THE EDC AMOU NTS ARE DRAWN IN FAVOUR OF THE CHIEF ADMINISTRATOR, HUDA THOUGH R OUTED THROUGH THE DIRECTOR GENERAL, TOWN AND COUNTRY PLANNING, SEC TOR-18, 6 ITA NO.6907/DEL/2019 M/S. PERFECT CONSTE CH PVT. LTD. VS. ACIT CHANDIGARH. HE HAS ALSO REFERRED TO THE NOTES TO AC COUNTS TO THE FINANCIAL STATEMENTS OF HUDA WHEREIN IT HAS BEEN STA TED THAT OTHER LIABILITIES ALSO INCLUDE EXTERNAL DEVELOPMENT CHARG ES RECEIVED THROUGH DGTCP, DEPARTMENT OF HARYANA FOR EXECUTION OF VARIO US EDC WORKS. THE EXPENDITURE AGAINST WHICH HAVE BEEN BOOKED IN D EVELOPMENT WORK IN PROGRESS, ENHANCEMENT COMPENSATION AND LAND COST. UNDISPUTEDLY, THE PAYMENT OF EDC WAS ISSUED IN THE N AME OF CHIEF ADMINISTRATOR, HUDA. IT IS ALSO NOT IN DISPUTE THAT HUDA HAS SHOWN EDC AS CURRENT LIABILITY IN THE BALANCE SHEET, BUT IN THE NOTES TO THE ACCOUNTS FORMING PART OF THE BALANCE SHEET, IT HAS BEEN SHOWN THAT EDC HAS BEEN RECEIVED FOR EXECUTION OF VARIOUS EXTERNAL DEVELOPMENT WORKS AND AS AND WHEN THE DEVELO PMENT WORKS ARE CARRIED OUT, THE EDCS LIABILITIES ARE RED UCED ACCORDINGLY. IT IS ALSO NOT IN DISPUTE THAT HUDA IS ENGAGED IN A CQUIRING LAND, DEVELOPING IT AND FINALLY HANDING IT OVER FOR A PRI CE. IT IS ALSO NOT IN DISPUTE THAT EDC IS FIXED BY HUDA FROM TIME TO TIME . HOWEVER, THE FACT OF THE MATTER REMAINS THAT PAYMENT HAS BEEN MA DE TO HUDA THROUGH DTCP WHICH IS A GOVERNMENT DEPARTMENT AND T HE SAME IS NOT IN PURSUANCE TO ANY CONTRACT BETWEEN THE ASSESS EE AND HUDA. 7 ITA NO.6907/DEL/2019 M/S. PERFECT CONSTE CH PVT. LTD. VS. ACIT THUS, THE PAYMENT OF EDC IS NOT FOR CARRYING OUT AN Y SPECIFIC WORK TO BE DONE BY HUDA FOR AND ON BEHALF OF THE ASSESSE E BUT RATHER DTCP WHICH IS A GOVERNMENT DEPARTMENT WHICH LEVIES T HESE CHARGES FOR CARRYING OUT EXTERNAL DEVELOPMENT AND E NGAGES THE SERVICES OF HUDA FOR EXECUTION OF THE WORK. THEREFOR E, IT IS OUR CONSIDERED VIEW THAT THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE AT THE TIME OF PAYMENT OF EDC AS THE SAME WAS NOT OUT OF ANY STATUTORY OR CONTRACTUAL LIABILITY TOWARDS HUDA AND, THEREFORE, THE IMPUGNED PENALTY WAS NOT LEVIABLE. WE NOTE THAT SIMILAR VIEW HAS BEEN TAKEN BY THE CO-ORDINATE BENCHES OF ITAT D ELHI IN THE CASES OF SANTUR INFRASTRUCTURE PVT. LTD. VS. ACIT I N ITA 6844/DEL/2019 VIDE ORDER DATED 18.12.2019, SARV EST ATE PVT. LTD. VS. JCIT IN ITA NO.5337 & 5338/DEL/2019 VIDE ORDER DATED 13.09.2019 AND SHIV SAI INFRASTRUCTURE (PVT.) LTD. VS. ACIT IN ITA NO.5713/DEL/2019 VIDE ORDER DATED 11.09.2019. A SIM ILAR VIEW WAS ALSO TAKEN BY THE CO-ORDINATE BENCH OF ITAT DELHI I N CASE OF R.P.S INFRASTRUCTURE LTD. VS. ACIT IN 5805, 5806 & 5349/D EL/2019 VIDE ORDER DATED 23.07.2019. THEREFORE, ON AN IDENTICAL FACTS AND RESPECTFULLY FOLLOWING THE ORDERS OF THE CO-ORDINATE BENCHES AS 8 ITA NO.6907/DEL/2019 M/S. PERFECT CONSTE CH PVT. LTD. VS. ACIT AFORESAID, WE HOLD THAT THE IMPUGNED PENALTY U/S 27 1C OF THE ACT IS NOT SUSTAINABLE. THE ORDER OF THE LD. CIT (A) IS SE T ASIDE AND THE PENALTY IS DIRECTED TO BE DELETED. 6.0 IN THE FINAL RESULT, THE APPEAL OF THE ASSES SEE STANDS ALLOWED. ORDER PRONOUNCED ON 29 TH DECEMBER, 2020. SD/- SD/- (G.S.PANNU) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEMBER DATED: 29/12/2020 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI