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Facts
The assessee paid External Development Charges (EDC) to HUDA without TDS, assuming exemption under Section 196 of the Income Tax Act. The AO reopened the assessment under Section 147, holding that EDC has income character and is subject to TDS. The CIT(A) sustained the addition.
Held
The Tribunal held that the reassessment proceedings were initiated based on a change of opinion and were beyond the time limitation prescribed, as there was no new information. Furthermore, the AO sought to apply circulars retrospectively, which is not permissible.
Key Issues
Whether reassessment proceedings under Section 147 are valid when based on a change of opinion and initiated beyond the prescribed time limit, and whether circulars can be applied retrospectively.
Sections Cited
143(3), 147, 148, 196, 194C, 201(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCHES: G : NEW DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G : NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER Assessment Years: 2014-15 Sterling Infrastructure Private Vs ACIT, Limited, Central Circle-15, 20A, Rajpur Road, Delhi. Civil Lines, Delhi – 110 054. PAN: AAKCS7108Q (Appellant) (Respondent) Assessee by : Shri Ranjan Chopra, Advocate & Shri Jaspal Singh Sethi, Advocate Revenue by : Shri Mahesh Kumar, CIT-DR Date of Hearing : 03.07.2025 Date of Pronouncement : 30.07.2025 ORDER PER ANUBHAV SHARMA, JM:
This appeal is preferred by the assessee against the order dated 26.06.2024 of the Ld. Commissioner of Income-tax (Appeal)-26, Delhi for AY 2014-15.
Heard and perused the record. Appellant filed return for the AY on 30.09.20214 wherein total loss declared was Rs. 7,80,571/-. The case was selected for scrutiny and order was passed u/s 143(3) of the Income Tax Act, 1961 ( hereinafter referred as ‘the Act’) by the learned Assessing Officer on 30.12.2016 wherein the return filed by the appellant had been duly accepted by the department. During the year, appellant had paid External Development Charges (EDC) to HUDA without TDS on the assumption that as provisions of non-deduction of tax u/s Section 196 of the Act was applicable to Government and other Authorities and HUDA is a development authority of State Government of Haryana. Notice u/s 148 of the Act was issued to the appellant on 30.03.2021 i.e. at the end of 6th year. In reassessment proceedings AO examined the issue that Assessee has paid External Development Charges (EDC) of Rs. 79,937,000 to HUDA without deducting TDS and held that as EDC has income character same should have been subjected to TDS. The same was sustained by ld. CIT(A) and for which assessee is in appeal raising following grounds ; “1 That the assessment order as passed is against law and facts of the case.
2. That the assessing officer has erred in completing the proceedings u/s 147 of the I.T. Act and learned Commissioner of Income Tax (Appeals) erred in confirming the proceedings u/s. 147 / 143(3) of the I.T. Act beyond time limitation as per the provision of S. 147 of the I.T. Act specifically, when there was nothing new information which came into existence after the assessment u/s. 143(3) of the I.T. Act was completed on an earlier occasion.
3. That the assessing officer erred in making an addition of Rs. 11,77,69,000/- and the Commissioner of Income Tax (Appeals) erred in confirming the same without providing an opportunity to the assessee and bringing the facts of the case before the Commissioner of Income Tax (Appeals). The appellate order as passed is against the principle of natural justice since no time was allowed to the assessee to furnish written submissions against the grounds of appeal raised by the assessee.
4 That the addition as made amounting to Rs.11,77,69,000/- is bad-in-law since the assessee is not a “assessee in default” as per the provisions of S.201(1) of the I.T. Act. 5 That the assessment order as passed is not sustainable on the facts and circumstances of the case.”
Ld. AR has submitted that in the present case, reassessment proceedings initiated is clearly based on mere change of opinion, which is not permissible in law. The appellant had fully and truly disclosed all the material facts necessary for assessment of income for the year under reference and the same were duly examined by the Assessing Officer. Thus, in the absence of any new/fresh material coming on record in respect of the aforesaid issue, the reassessment proceeding is, it is submitted, nothing but an attempt to reappraise the material already available on record, which is not permissible in law. It is also settled law that where reassessment proceedings are sought to be initiated for any assessment year beyond a period of 4 years from the end of such assessment year, the proviso to the Section 147 places further fetters on the powers of the assessing officer by providing that reassessment proceedings cannot be initiated unless the income has escaped assessment by reason of the failure of the assessee to disclose fully and truly all material facts necessary for assessment. Reliance was placed on the decision in CIT Vs Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) 4. Though ld. DR vehemently defended the impugned reopening and consequent orders and has relied the decision of Hon’ble Delhi High Court in the case of Puri Constructions (P) Ltd. Versus ACIT [2024]159 taxmann.com 444 (Delhi) to contend that it is now settled that EDC payments would be covered under section 194C of the Act, what we find that after the assessment was completed, an office memorandum had been issued by CBDT being OM F.No. 370133/37/2017-TPL dated 23.12.2017 wherein it was clarified that EDC payments by the builders/ developers in Haryana to HUDA is liable to TDS. Thereafter, another clarification was issued by Directorate of Town and Country Planning, Haryana on TDS deduction on EDC Payments vide letter dated 19.06.2018 according to which payment to HUDA in effect payment to State Government and therefore such payment is exempt from obligations to deduct TDS in view of Section 196 of the Act.
Thus as such there was nothing on the part of assessee which was lacking in disclosure in the return of income of assessment concluded u/s 143(3) of the Act as it was only subsequently, the issue about deductibility of TDS was judicially settled in favour of revenue and at the same time the Circular relied by ld. AO for reopening certainly doesn’t have retrospective effect as it is settled law that CBDT circulars are binding on the department but cannot override judicial interpretation or cannot be applied retrospectively to completed assessments. Reliance for this can be placed on Suchitra Components Ltd. Vs CCE [2007] 208 ELT 321 (SC) and CIT Vs SIL Investments Ltd. [2011] 9 taxmann.com 143 (Delhi). So reopening is not only bad being illegal exercise of jurisdiction u/s 147 of the Act being hit by Proviso to section 147 of the Act it is 4