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Facts
A survey found Hubtown Bus Terminal (Ahmedabad) Pvt. Ltd. deducted but failed to deposit TDS totaling ₹2.89 crore for various financial years. The assessee argued TDS was not applicable on concessionaire fees and interest, citing a CBDT circular. The Assessing Officer treated the assessee as in default under Section 201(1) and levied interest under Section 201(1A), which the CIT(A) upheld.
Held
The Tribunal observed that the lower authorities failed to properly verify crucial aspects, including the nature of concessionaire fees, interest liability, applicability of the CBDT circular, and whether the deductee had paid tax. Consequently, the matter was remanded back to the Assessing Officer for de novo consideration and fresh examination after providing a reasonable opportunity to the assessee.
Key Issues
Whether the assessee was in default for non-deposit of TDS and liable for interest under Section 201(1A) on concessionaire fees and interest, considering the applicability of a CBDT circular and payment of tax by the deductee.
Sections Cited
133A, 201(1), 201(1A), 194-I, 194-J, 194A, 195
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), ADDL/JCIT(A)-2, Mumbai vide order dated 13.02.2025 passed for A.Y. 2015-16.
The assessee has raised the following grounds of appeal:
“1. On the facts and circumstances of the case as well as in Law the Learned ADDL/JCIT (A)-2, Mumbai, has erred in confirming the order of the Learned Income Tax officer, TDS Circle (TDS) and has upheld the order levying interest u/s 201(1A) of the Act.
2. On the facts and circumstances of the case as well as in Law the Learned predecessor Income Tax officer, TDS Circle (TDS), Ahmedabad, was satisfied that interest was not leviable. Hence he did not pass order after initiating proceedings and considering reply of the assessee and therefore the successor Income Tax officer, TDS Circle (TDS), Ahmedabad, was not justified, after more than 5 years, in taking a Hubtown Bus Terminal (Ahmedabad) Pvt. Ltd. vs. DCIT Asst.Year –2015-16 - 2– different view and in passing order u/s 201(1A). The Learned ADDL/JCIT (A)-2, Mumbai, has erred in confirming this order.
Without prejudice to above, the Learned ADDL/JCIT(A)-2, Mumbai, was not justified in confirming entire amount of interest levied by Learned Income Tax officer, TDS Circle (TDS); some amounts were not at all chargeable to interest and some amounts related to proceeding year TDS.
On the facts and circumstances of the case as well as in Law the Learned ADDL/JCIT(A)-2, Mumbai, has erred in confirming interest levied by Learned Income Tax officer, TDS Circle (TDS), Ahmedabad without first ensuring that the deductee has also not paid tax on interest amount on which TDS was not made; or without confirming that deductee was in fact liable to tax on such interest.
Under the circumstances the Appellant has been denied a reasonable opportunity to present its case.
6. The order under appeal is not only bad in law and invalid, but also against the principles of natural law of equity and justice.
7. The appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal
on or before the final hearing.”
3. The brief facts of the case are that the assessee, Hubtown Bus Terminal (Ahmedabad) Private Limited, is a company engaged in the business of construction and operation of bus terminals under a Public Private Partnership (PPP) model. A survey under section 133A of the Income-tax Act, 1961 (“the Act”) was carried out on 07.08.2015 at the business premises of the assessee for verification of TDS compliance. During the course of survey, it was noticed that the assessee had deducted TDS aggregating to ₹2,89,37,379/- for the financial year 2014-15 under various sections, which pertained to deductions made during Financial Years 2012-13, 2013-14 and 2014-15, but the same had not been deposited into the Central Government account up to the date of survey. In response to the survey findings, the assessee submitted that the concessionaire fees payable to GSRTC under the concession agreement Hubtown Bus Terminal (Ahmedabad) Pvt. Ltd. vs. DCIT Asst.Year –2015-16 - 3– did not attract TDS under section 194-I or section 194-J of the Act, relying upon CBDT Circular No. 35/2016 dated 13.10.2016. It was explained that TDS entries were initially made in the books due to an incorrect understanding of law and were subsequently reversed on 31.12.2015. Thereafter, the Assessing Officer issued notices under sections 201(1) and 201(1A) of the Act calling upon the assessee to explain the non-deposit of TDS and to furnish details of payments made after the survey. The assessee filed multiple replies explaining that substantial amounts had been paid post survey and that the remaining balance mainly related to interest claimed by GSRTC on delayed payment of concession fees, on which TDS was not applicable.
4. The Assessing Officer, however, did not accept the explanation of the assessee. He observed that the assessee had admittedly deducted tax at source under various sections and failed to deposit the same within the prescribed time. According to the Assessing Officer, once tax was deducted, the assessee was mandatorily required to deposit it into the Government treasury, irrespective of whether the deduction was correct or not. Accordingly, the Assessing Officer treated the assessee as an assessee in default under section 201(1) of the Act and also levied interest under section 201(1A). The total demand raised was ₹3,45,28,003/-, comprising TDS of ₹1,41,50,821/- and interest of ₹2,03,77,182/-.
5. Aggrieved by the said order, the assessee filed an appeal before the Ld. CIT(Appeals). During the appellate proceedings, the assessee reiterated that TDS was not applicable on concessionaire fees and interest Hubtown Bus Terminal (Ahmedabad) Pvt. Ltd. vs. DCIT Asst.Year –2015-16 - 4– thereon in view of CBDT Circular No. 35/2016, as the payments were in the nature of premium for acquiring long-term land rights. It was further explained that the interest liability was only a provisional book entry based on demand letters issued by GSRTC and that no actual payment of interest had been made during the relevant period. The assessee also submitted that due to disputes with GSRTC regarding handing over of possession of land, the matter had reached the Hon’ble Gujarat High Court, which finally resulted in settlement payments made pursuant to court directions, on which TDS was not applicable as the amounts had the character of judgment debt. The assessee filed detailed written submissions along with supporting documents before CIT(Appeals) and a video hearing was also attended by the authorised representative of the assessee. The Ld. CIT(Appeals), after considering the submissions and material placed on record, held that the main default pertained to non-deposit of TDS deducted under sections 194A and 195 of the Act. The CIT(Appeals) observed that the CBDT Circular relied upon by the assessee dealt only with section 194-I and had no application to TDS on interest under section 194A of the Act. The CIT(Appeals) further held that there was no evidence on record to show that the interest liability had been waived by GSRTC. According to the Ld. CIT(Appeals), once the assessee had deducted tax at source, the obligation to deposit the same into the Government account was absolute, and failure to do so clearly attracted the provisions of section 201(1) and 201(1A) of the Act. Consequently, the Ld. CIT(Appeals) confirmed the action of the Assessing Officer in treating the assessee as an Hubtown Bus Terminal (Ahmedabad) Pvt. Ltd. vs. DCIT Asst.Year –2015-16 - 5– assessee in default and upheld the demand raised. The appeal of the assessee was accordingly dismissed.
The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.
The learned counsel for the assessee submitted that the predecessor Assessing Officer, after examining the issue and considering the replies filed by the assessee, was satisfied that interest was not leviable and therefore did not pass any order, and in such circumstances the successor Assessing Officer was not justified in reopening the matter after a lapse of more than five years and taking a contrary view by passing an order under section 201(1A) of the Act, which has been mechanically upheld by the appellate authority. It was further contended that, without prejudice, even otherwise the entire interest confirmed is unsustainable as part of the demand is not chargeable to interest at all and part of it relates to TDS of preceding years, an aspect which has not been examined by the learned ADDL/JCIT (Appeals). The learned counsel also submitted that interest under section 201(1A) of the Act cannot be sustained unless it is first established that the deductee had not paid tax on the relevant income or that the deductee was in fact liable to tax, and in the absence of such verification there is no loss to the Revenue. It was thus submitted that the assessee was denied a reasonable opportunity of being heard and that the impugned order is bad in law, invalid and contrary to the principles of natural justice, equity and fairness, and therefore liable to be set aside.
Hubtown Bus Terminal (Ahmedabad) Pvt. Ltd. vs. DCIT Asst.Year –2015-16 - 6– 8. We have heard the rival contentions and perused the material available on record. In the facts of the present case, we find that the issue relates to determination of default under section 201(1) of the Act and levy of interest under section 201(1A) of the Act, arising out of non-deposit of TDS which, according to the assessee, was deducted erroneously and subsequently reversed, and which also involves examination of the nature of concessionaire fees, interest claimed by GSRTC, applicability of CBDT Circular No. 35/2016, and the effect of subsequent settlement pursuant to directions of the Hon’ble Gujarat High Court. We further note that the assessee has raised specific contentions that part of the demand relates to earlier years, that interest under section 201(1A) of the Act has been levied without verification as to whether the deductee had discharged its tax liability, and that the predecessor Assessing Officer was satisfied that interest was not leviable, which aspects have not been properly verified and examined by the lower authorities.
Considering the totality of the facts and circumstances of the case, and in the interest of justice, we are of the view that the matter requires fresh examination at the level of the jurisdictional Assessing Officer after proper verification of the factual matrix and the legal contentions raised by the assessee. Accordingly, we restore the matter to the file of the jurisdictional Assessing Officer for de novo consideration. The Assessing Officer shall verify the assessee’s claim regarding applicability of TDS provisions, reversal of TDS entries, nature of interest liability, year-wise breakup of TDS and interest, and whether the deductee has paid tax on the Hubtown Bus Terminal (Ahmedabad) Pvt. Ltd. vs. DCIT Asst.Year –2015-16 - 7– relevant income, and thereafter afford due and reasonable opportunity of being heard to the assessee before passing a fresh order in accordance with law.
In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 16/12/2025
Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 16/12/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��थ� / The Respondent. 2. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,