URBAN ADMINISTRATION AMD DEVELOPMENT,BHOPAL vs. DEPUTY COMMISSIONER OF INCOME TAX (TDS), BHOPAL

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ITA 477/IND/2025Status: DisposedITAT Indore30 January 2026AY 2015-16Bench: 24.11.2014 (payment made on 01.10.2014. TDS was deducted at 4% instead of 10% [194J]. The Assessee was in Default u/s 201(1) at Rs. 2,98,992/- & u/s 201(1A) at Rs. 2,60,123/-. The total amount of Default for (supra) Non-Deduction of TDS/ irregularity was worked out at Rs. 6,68,33,877 [u/s 201(1) & 201(1A)]. The aforesaid default order dated 28.12.2021 is herein after referred to as the "Impugned Default Order".8 pages

AI SummaryRemanded

Facts

The Assessee, Directorate of Urban Administrations & Development, Bhopal, was found to be in default for short deduction of TDS and liable for interest under sections 201(1) and 201(1A) of the Income Tax Act for AY 2015-16. The CIT(A) dismissed the assessee's first appeal due to non-compliance and failure to provide submissions or evidence, despite multiple notices.

Held

The Tribunal found that the "Impugned Order" by the CIT(A) was ex-parte and lacked the assessee's participation. Given the assessee's status as a government department and its desire to present its case effectively after retrieving old records, the Tribunal set aside the order.

Key Issues

Whether the CIT(A) was justified in dismissing the appeal ex-parte due to non-compliance, and whether the AO's findings regarding TDS short deduction and interest were correct.

Sections Cited

201(1), 201(1A), 250, 246A, 194A, 194J, 29

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

For Appellant: Shri Sapan Usrethe, Adv. &, Ms. Apoorva Garg, CA

For Respondent: Shri Anup Singh, CIT DR

Hearing: 21.01.2026Pronounced: 30.01.2026

Per Paresh M Joshi, J.M.:

This is an Appeal filed by the Assessee under section 253 of

the income tax Act 1961,[ herein after referred to as the Act

for the sake of brevity] before this Tribunal as & by way of

second appeal. The Assessee is aggrieved by the order bearing

Number:-ITBA/APL/S/250/2024-25/1074816130(1) dated

21.03.2025 passed by the Ld. CIT(A) u/s 250 of the Act,

which is herein after referred to as the “Impugned order”.

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The relevant assessment year is 2015-16 and the

corresponding previous year period is from 01.04.2014 to

31.03.2015.

Factual Matrix

2.1 That as and by way of an “ Default order” passed u/s

201(1) & 201(1A) of the Act by the DCIT(TDS), Bhopal

dated 28.12.2021, the assessee was found & deemed to be

an Assessee in Default for Short deduction of Tax of

Rs. 2,98,992/- u/s 201(1) of the Act-for AY 2015-16 & as per

provision of section 201(1A), the assessee was held liable to

pay simple interest at the rate of one percent per month on

the amount of Default for AY 2015-16 which was calculated at

Rs. 2,60,123/-. [CEPT University Ahmedabad] It was also

found out in the order that for AY 2015-16, the assessee-

deductor has made short deduction on payment made to

Spatial Decisions, 2. Prem Choudhary, 3. K.N. Gutgutia

& Co. at Rs. 81431/- u/s 201(1) of the Act. The interest was

worked out at Rs. 71,531/- u/s 201(1A) on said amount. For

non-deduction of TDS on interest payment to HUDCO for the

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period prior to 20.03.20219 [194A] short deduction was

worked out at Rs. 3,42,61,000/- u/s 201(1A) and interest

thereon was worked out at Rs. 3,18,61,000/- u/s 201(1A).

For the payment made to “ CEPT University” the TDS was

found to be deducted at 4% [194J] instead of 10%. The TDS

Certificate downloaded from TRACES (Certificate No. III

5DE160H) it was also found that it is valid from 24.11.2014

to 31.03.2015. However, on 26Q of 3rd Quarter the assessee

deductor had paid Rs. 48,62,400/- on 01.10.2014. Therefore

lower TDS Certificate (supra) issued to the CEPT University

is valid from 24.11.2014 to 31.03.2015 & not applicable on

payment made before 24.11.2014 (payment made on

01.10.2014. TDS was deducted at 4% instead of 10% [194J].

The Assessee was in Default u/s 201(1) at Rs. 2,98,992/- &

u/s 201(1A) at Rs. 2,60,123/-. The total amount of Default

for (supra) Non-Deduction of TDS/ irregularity was worked

out at Rs. 6,68,33,877 [u/s 201(1) & 201(1A)]. The aforesaid

default order dated 28.12.2021 is herein after referred to as

the “Impugned Default Order”.

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2.2 The Assessee is Directorate of Urban Administrations

Development, Bhopal which is Dept. of State Government of

M.P. & is looking after all the administrative work carried out

by various statutory bodies like Nagar Parishad, Nagar Nigam

& Nagar Panchayats of M.P. It also carries out development of

infrastructure, give guarantees Grants etc.

2.3 That the assessee being Aggrieved by the aforesaid

“Impugned Default Order” prefers the first appeal u/s 246A

of the Act before the Ld. CIT(A) who by the “Impugned Order”

has dismissed the 1st appeal of the Assessee on the grounds &

reasons stated therein. The core grounds & reasons for the

dismissal of the 1st appeal are as under:-

“6. OBSERVATION AND DECISION:- 6.1 Notices u/s 250 of the Act were issued to the appellant through ITBA. Last notice was issued on 17/03/2025 requiring compliance on 20/03 /2025. But no compliance was made. During the course of appellate proceedings, appellant has not uploaded any written submission.

6.2 On perusal of records, it is noticed that during the course of appellate proceedings, appellant had not filed or uploaded any response/written submissions in spite of three notices issued and delivered to the appellant. The non-compliance of the appellant in response to the notices issued u/s 250 of the Act on various dates is summarized as under: Sl Hearing – Due date Service of Notice on the e- Result No. Notice Date given for mail given

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& email compliance delivery date in the notice 1 06/10/2023 16/10/2023 shrutigarg.1308@gmail.com No ca.gargagrawal@gmail.com Compliance 2 13/03/2025 17/03/2025 shrutigarg.1308@gmail.com No ca.gargagrawal@gmail.com Compliance 3 17/03/2025 20/03/2026 shrutigarg.1308@gmail.com No ca.gargagrawal@gmail.com Compliance

6.3 The appellant has not filed any written submission and valid evidence for more than three years during the appellate proceedings, inspite of issuing three hearing notices by duly adhering to the principle of natural justice.

6.7 On perusal of the above order, and on merits of the case also, it is observed that the DCIT, TDS, Bhopal has rightly Assessed the total liability as Rs. 6,68,33,877/-, in the order u/s 201(1)/201(1A) dated 28.12.2021, as the appellant has not substantiated the claim.

6.8 In this regard, it is pertinent to highlight that the Burden of Proof lies on the assessee. But in this case, the appellant has not made valid submissions with valid evidences, during the appellate proceedings also to substantiate the claim made in Form 35. Accordingly, the assessment order u/s 201(1)/201(1A) dated 28.12.2021 is upheld, as the appellant has not substantiated the claim.

6.9 Moreover, considering the non-compliance as detailed above by the appellant, it seems that the appellant is not interested to pursue the appeal. The appellant has not made any submissions during the appellate proceedings. The appeal is also a long pending appeal relating to the A.Y. 2015-16. Therefore, it cannot be kept pending adjudication for indefinite period. If the appellant is not availing the opportunities given, they cannot allege contravention of principles of natural justice as held in the case of P.N. Balasubramaniam (AP) 112 ITR 512.

6.10 It must be mentioned here that the Hon'ble High Court of Madras in the case of T.N.Subash Thangam vs Income Tax Officer, Non-Corporate Ward 17(7) reported in 156 Taxmann.com 732 (2023) held that the assessee is duty bound to respond to notices, appear and offer explanation before the AO. In the instant case, inspite of giving sufficient opportunities, the appellant has failed to respond to the notices given and shown non co-operation.

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6.11 In respect of the present appeal, inspite of giving sufficient opportunities by issuing three hearing notices by duly following the procedure of principle of natural justice, the appellant has failed to furnish any written submission and shown non co- operation. 6.12 To conclude, on merits of the case, it is held that the above order is upheld and hence in the light of these observations, on merits of the case as well as due to the non-compliance of the appellant and failure to substantiate the claim made in Form 35, during the appellate proceedings also for more than three years, the grounds of appeal of the appellant stands dismissed.

6.13 In the result, the appeal is dismissed.”

2.4 The assessee being aggrieved by the “Impugned Order”

has preferred the instant second appeal before this Tribunal &

has raised the following grounds of appeal in the Form No. 36

against the “Impugned Order” which are as under:-

“1.The learned Commissioner of Income tax (Appeal) was not justified in dismissing the appeal without appreciating that appellant was prevented with reasonable cause in not filing the response as appellant has not received any notices on registered postal address and thus appellant was not able to file response.

The learned Commissioner of Income tax (Appeal) was not justified in dismissing the appeal without appreciating that the delay in filing the response was unintentional as appellant is State Government Organization and was not aware of the fixation of appeal and on perusal of order also the learned CIT Appeal - Kochi have not given sufficient opportunity to file reply and even otherwise appellant have not received any notice of hearing.

The learned Commissioner of Income tax (Appeal) NFAC was not justified in levying the TDS provisions of interest paid to HUDCO and confirmed the finding of AO who determined the demand of Rs.6,61,21,800 without appreciating that the HUDCO is a 100 percent government owned company and was exempted from the TDS provisions in Notification No. S.O. 3489 dated 22.10.1970.

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The learned Commissioner of Income tax (Appeal) NFAC was not justified in levying the TDS provisions of interest paid to HUDCO and confirmed the finding of AO who determined the demand of Rs.6,61,21,800 without appreciating that the HUDCO has already paid taxes on the interest earned by them and levying of TDS provision again on deductor would imply double taxation of same income.

The learned Commissioner of Income tax (Appeal) NFAC was not justified in determining short deduction of TDS of Rs.2,98,992 alongwith interest of Rs.2,60,123 under section 194J on payment made to CEPT University without appreciating that the total bill raised by CEPT was Rs.37,44,960 which was partly paid in the concerned assessment year and the respective TDS on it, at the rate of 10%, i.e. Rs. 1,87,240 was deducted in the same year, which is duly reflected in Form 26AS and there is no short deduction in the concerned assessment year.

The learned Commissioner of Income tax (Appeal) NFAC was not justified in levying the TDS provisions on payment to Spatial Decisions, Prem Choudhary and K.N. Gutgutia & Co. and confirmed the finding of AO who determined the demand without appreciating that the short deduction certificate was issued by the deductee.

The appellant craves for leave to amend, add to or omit any ground up to the time of hearing of the appeal.”

Record of Hearing

3.1 The hearing in the matter took place before this Tribunal

on 21.01.2026 when the Ld. AR for & on behalf of the

Assessee appeared before this Tribunal & interalia contended

that the “Impugned Order” is bad in law, illegal & not

Proper. It is in the violation of the principles of natural

justice. It therefore deserves to be set aside. The Ld. AR has

placed on the record of this Tribunal a compilation from pages

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1 to 153 & Appeal Memo compilation from pages 1 to 58. The

Ld. AR then took us to PB page 56 [Internal page of impugned

Default order] where the issue about Non Deduction of TDS

for HUDCO is discussed. The relevant paragraphs of it were

read out. It was submitted that HUDCO was established in

the year 1970 & is an Organisation completely owned by the

Central Government & is a Public Financial Institution. It was

submitted basis Notification No. 503489 [No. 170 CF No.

12/164/68-ITCC/OTJ)] dt. 22.10.1970 that the Assessee-

deductor is not liable to deduct TDS on payment made to

HUDCO as it is notified Public financial Institution. Reliance

was placed on Page 14 of PB wherein there is a reference to

this Notification by HUDCO’s letter dt. 29.09.2022 to assessee

which was relied upon. Attention was then invited to PB page

9 to demonstrate that HUDCO’s 100% equity shares are held

by the Government of India. Basis page 4 of PB it was

contended that Annual Reports of HUDCO too shows that it’s

100% equity are held by the Government of India as per

HUDCO website pages. It was also submitted that the

assessee argument now canvassed about the Constitution

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that it is 100% owned by Govt. Of India be considered and

admitted as additional material evidence u/r 29 of the

Income Tax Rules, 1963. Our attention is invited to PB page

12 which is Certificate of accountant under first Proviso to

sub-section (1) of section 201 of the Act. It was also submitted

basis page 9 of PB that HUDCO has joint venture with 4

corporate too. Other contention like payment made to the

CEPT University was discussed & it was submitted that there

is no short payment. Copy of e-mail correspondences PB page

16 to 19 were relied upon. The extract of email dt. 02.04.2025

was read out by the Ld. AR to demonstrate that “As per the

CEPT University’s books of accounts an invoice of Rs.

37.44 lacs (comprising Rs. 33.33 lacs + service tax) was

raised on UADD. A payment of Rs. 16.85 lacs was

subsequently received with tax deducted amounting to Rs.

1,87,248 lacs (TDS @10%). This tax deduction is duly

reflected in the 26AS statement.” Further content of said

e-mail were too read out. The payments were made to 3 other

parties too. The Ld. AR finally contended that entire issue of

payments & deductions of TDS is not clear & the necessary

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records are old. The attempt & efforts of serious nature would

now be made by the assessee to retrieve the old records &

connected papers. The Assessee is Department Of

Government of MP. Per contra, the Ld. CIT DR appearing for

the revenue stated that the assessee being Dept. Of

Government should be more responsible while dealing with

the Income Tax Department & should comply law & be

compliant in all aspects while dealing with Tax Dept. The

matter was closed.

Observations Findings & conclusions

4.1 We have to decide the legality, validity and proprietary of the

“impugned order” basis records of the case & the rival

submission canvassed before us.

4.2 We have carefully perused the records of the case and have

heard the submissions.

4.3 We basis records of the case & after hearing & upon

examining the rival contentions of the Ld. AR & the Ld. DR

canvassed before us, are of the considered view that while the

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“Impugned Default Order” of Ld. AO has spoken about the

merits of the case & even the assessee has replied to the

notices. But on the other hand we observe & notice that

“Impugned Order” is Ex-parte with no participation of

assessee. The assessee being Government itself now desires

that they would make effective representation before Ld. AO

after retrieving the old records. Revenue to expects the State

Govt. Department to be responsible while dealing with tax

matters particularly TDS payments. Under these facts &

circumstances, we deem fit to set aside the “Impugned

Order” and remand the matter back to Ld. AO on de novo

basis, who shall now pass a fresh order with reasons. We

direct the assessee to retrieve old records & make proper

presentation before the Ld. AO on merits of the case. The

issue now raised about payments made to HUDCO, CEPT,

three private parties should be clearly spelt out before the Ld.

AO in lucid manner including their contentions about Non-

deduction of TDS to HUDCO basis Notification cited above &