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

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”.

Directorate of Urban Administration & Development A.Y.2015-16 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

& 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.

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.

2. 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.

3. 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.

4. 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.

Directorate of Urban Administration & Development A.Y.2015-16 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

Directorate of Urban Administration & Development A.Y.2015-16 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

Directorate of Urban Administration & Development A.Y.2015-16 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.

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 Page 10 of 12

Directorate of Urban Administration & Development A.Y.2015-16 “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 & other contentions.

Directorate of Urban Administration & Development A.Y.2015-16 4.4 In view of the premises drawn up by us, we set aside the “Impugned order” and remand the case back to the Ld. AO on denovo basis who shall now pass a fresh speaking order which should be a reasoned one. The assessee to make effective representation as directed aforesaid. Assessee is directed not to seek adjournment on flimsy grounds.

5 Order 5.1 In the result, the impugned order is set aside as & by way of remand back to the file of the Ld. AO on denovo basis.

5.2. In result, appeal of Assessee is allowed for statistical purpose.

Pronounced in open court on 30.01.2026.