2023 (2) TMI 1176 - HC - Income Tax

Assessee in default u/s 201(1)/201(1A) - failure to deduct withholding tax against External Development Charges (EDC) paid to Haryana Urban Development Authority (in short HUDA ) - HELD THAT - As what has been assailed is the order dated 31.01.2023 passed under Section 201(1)/201(1A) of the Act by the respondent and the notice of demand of even date i.e., 31.01.2023 passed under Section 156 of the Act. Issue notice. Respondents accepts notice on behalf of the respondent/revenue. Counter-affidavit will be filed within the next 10 days. Rejoinder thereto, if any, will be filed before the next date of hearing. List the above-captioned matter on 19.05.2023.

Summary

Issues Involved:
1. Interpretation of Section 201(1)/201(1A) of the Income Tax Act, 1961 regarding withholding tax on External Development Charges (EDC) paid to Haryana Urban Development Authority (HUDA).
2. Validity of the order dated 31.01.2023 passed under Section 201(1)/201(1A) of the Act and the notice of demand issued on the same date for Financial Year (FY) 2015-16.

Analysis:

Issue 1:
The petitioner sought interim relief in W.P.(C) 2485/2023 regarding the treatment of the petitioner as an assessee in default under Section 201(1)/201(1A) of the Income Tax Act for failure to deduct withholding tax against EDC paid to HUDA. Ms. Kavita Jha, representing the petitioner, highlighted that the issue on merits is already the subject matter of another writ petition, W.P.(C)No.4351/2021. In the previous writ petition, an interim order dated 08.04.2021 was passed. The primary question at hand is whether the petitioner can be considered an assessee in default for not deducting withholding tax on EDC payments to HUDA.

Issue 2:
The challenge in the present case pertains to the order dated 31.01.2023 passed under Section 201(1)/201(1A) of the Act and the accompanying notice of demand issued on the same date for FY 2015-16. The respondent/revenue accepted the notice through Mr. Puneet Rai, the learned senior standing counsel. The Court directed the filing of a counter-affidavit within the next 10 days, with a provision for a rejoinder before the next hearing date scheduled for 19.05.2023. Notably, the operation of the impugned order and demand notice was stayed until further directions from the Court, ensuring no immediate enforcement pending further proceedings.

This judgment underscores the procedural aspects of the case, including the filing of affidavits, scheduling of hearings, and the temporary stay on the enforcement of the impugned order and demand notice. The substantive legal issues revolve around the interpretation and application of Section 201(1)/201(1A) of the Income Tax Act concerning withholding tax obligations on EDC payments to HUDA, along with the challenge to the specific order and notice issued for FY 2015-16. The Court's decision to grant interim relief and allow for further submissions indicates a nuanced consideration of the legal complexities involved, setting the stage for a detailed examination of the merits in subsequent proceedings.