Deputy Gothwal Constructions Private Limited vs Deputy Commissioner Of Income Tax Circle 74(1)

PER SATBEER SINGH GODARA, JM

This assessee’s appeal for assessment year 2016-17, arises against the Commissioner of Income Tax/National Faceless Appeal Centre (in short, the “CIT(A)/NFAC”) Delhi’s dated 21.08.2025 passed in DIN & Order No. ITBA/NFAC/S/250/2025-26/1079842382(1), involving proceedings u/s 271C of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties at length. Case file perused.

We now advert to the assessee’s sole substantive grievance herein directed against both the learned lower authorities’ respective findings levying section 271 TDS non-deduction penalty of Rs. 5,94,000/- in its hands in the assessing Officer’s order dated 30.10.2023 as upheld in the lower appellate discussion.

We have given our thoughtful consideration to the assessee’s and the Revenue’s vehement submissions reiterating their respective stands against and in support of the impugned penalty. We make it clear that the assessee/deductor appears to have paid external development charges “EDC” to the Haryana Uraban Development Authority “HUDA” without deducting any TDS thereupon. There does not appear to be further no quarrel that such builders/developers engaged in real estate development activity had to mandatorily pay such “EDS” charges as “HUDA” as per the recipients prescribed formula. And that the issue as to whether such EDC payments attracts TDS deduction or not came to be finally settled in the Revenue’s favour in (2024) 462 ITR 326(Del) in Puri Constructions (P) Ltd. vs. ACIT. This is what has made both the learned lower authorities have levied the impugned penalty for TDS non-deduction in the assessee’s hands. We are of the considered view that once the TDS deduction herein on such EDC charges had become a debatable issue, there was indeed a reasonable cause for the assessee not to have deducted the same forming mitigating circumstances so as to delete the impugned section 271C penalty. The same is directed to be deleted in very terms.

This assessee’s appeal is allowed.