2023 (5) TMI 60 - AT - Income Tax

Tribunal Rules in Favor of Assessee on Tax Penalty Appeal

Viresh Promoters & Developers P. Ltd. LGF-10 Versus Addl. CIT Range-78, New Delhi.

Viresh Promoters & Developers P. Ltd. LGF-10 Versus Addl. CIT Range-78, New Delhi. - TMI Issues involved:The appeal against the penalty levied under section 271C of the Income Tax Act, 1961 for the assessment year 2014-15 based on non-deduction of TDS on payments made by the assessee to Haryana Urban Development Authority (HUDA).Details of the judgment:The assessee, a company engaged in real estate business, paid External Development Charges (EDC) to HUDA as directed by the Department of Town and Country Planning (DTCP) for obtaining a license. The penalty notice under section 271C did not specify the section for TDS deduction, leading the assessee to contest the penalty imposition. The contention was that EDC payment to HUDA should be considered as payment to the State Government, exempt from TDS deduction. The absence of a contractor/contractee relationship between HUDA and the assessee further supported the argument against penalty imposition. Despite the assessee's submissions, the Ld. CIT(A) upheld the penalty, prompting the appeal. The Tribunal referred to similar cases where penalties were deleted under comparable circumstances, emphasizing that the EDC payments were not subject to TDS deduction due to the nature of the transaction and lack of contractual obligations between the parties.The Tribunal cited precedents where it was established that payments made for EDC to HUDA did not fall under the purview of TDS deduction requirements. The Tribunal highlighted that the payments were made to a government department, not based on any specific contract with the assessee, thus exempting them from TDS obligations. The Tribunal reasoned that the payments were directed towards external development works and were not in the nature of a works contract, further supporting the decision to delete the penalty under section 271C. The Tribunal also noted that the assessee acted in good faith based on clarifications provided by the government department, which negated any contumacious conduct warranting penalty imposition. Consequently, the Tribunal ruled in favor of the assessee, deleting the penalty levied under section 271C of the Act.In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the penalty orders and ruling in favor of the assessee based on the established legal precedents and the nature of the EDC payments to HUDA.