No Penalty u/s 271C when delay in filing appeal occurred due to ambiguity on direction contained in statutory document, so was held by the Income Tax Appellate Tribunal (ITAT), New Delhi.
The assessee, M/s. Vipul Ltd filed a return declaring income of Rs. 2,33,94,820/- and the case was taken up for scrutiny. The assessee company is engaged in the business of real estate development and related activities and is following the percentage completion method.
The AO observed that the assessee had paid external development charges (EDC) to HUDA for which advance tax has not been deducted. The AO observed that HUDA is a taxable entity carrying out activities to acquire, develop and dispose of land for residential, commercial and institutional purposes in urban states of Haryana. It is not a part of Government or Corporation established under a Central Act which is exempted u/s 196 for deduction of TDS and accordingly 30% of Rs. 4,95,24,157/- was added back to the income of assessee.
The Counsel for the assessee, submitted that the CIT(A) has erred both in facts and law in rejecting the contention of the appellant that the payments of EDO have been made to comply with the terms and conditions of the agreement executed between the appellant and the Governor of Haryana, acting through Director Town and Control Planning, Haryana and thus provisions of TDS are not applicable on such payments, and therefore disallowance of Rs. 1,48,57,247/- made u/s 40(a)(ia) of the Act is highly unjustified, uncalled for and bad in law.
The Bench consisting of Dr BRR Kumar, Accountant Member and Anubhav Sharma, Judicial Member relied on the judgment in TDI Infrastructure Ltd v. Addl CIT, and held that “Once the fact of receipt of amounts received by HUDA being deposited in Consolidated Fund of State is established, there can be no second opinion that Assessee was rightly directed by DTCP, Haryana to not deduct the TDS. Even otherwise no intentional default is attributed to assessee and the default, if any, was on account of ambiguity which had arisen out of a direction contained in a statutory document, so no penalty can be justified u/s 271C of the Act, which is meant to address contumacious conduct.”