2025 (3) TMI 43 - AT - Income Tax

Penalty u/s 271(1)(c) and 270A - assessee has not deducted TDS on EDC External Development Charges charges paid by the assessee to HUDA - CIT(A) deleted the penalty - HELD THAT - We find as far as disallowance of the EDC payment u/s 40(a)(ia) it is stated that the assessee has not contested the disallowance made. However with respect to penalty we find that the assessee has given reasonable plausible explanation before us that at that point of time there was confusion and difference of opinion on this issue. We therefore hold that the explanation that the issue of TDS being deducted on EDC payment was not having legal clarity and there was a difference of opinion on this issue which needed clarification from the CBDT is a valid explanation. No evidence on record that payment of EDC charges is non-genuine or that the assessment order has demonstrated that there is any concealment of income or there is any inaccurate particulars of the income. Mere noncompliance with the TDS provisions do not imply concealment or furnishing of inaccurate particulars to encompass the assessee with the mischief of section 271(1)(c)/270A.We are of the considered view that by making an incorrect claim in law would not tantamount to furnishing of inaccurate particulars. In such a scenario following the ratio in the case of Reliance Petroproducts 2010 (3) TMI 80 - SUPREME COURT we hold that the learned CIT(A) has correctly deleted the penalty u/s 271(1)(c) Also order of CIT(A) deleting the penalty u/s 270A of the Act needs no interference. Appeal decided in favour of assessee.

Summary

The judgment by the Appellate Tribunal in the case involves appeals filed by the Revenue against the orders of the Commissioner of Income Tax (Appeals)/National Faceless Assessment Centre (NFAC) pertaining to penalty orders under sections 271(1)(c) and 270A of the Income Tax Act, 1961 for the assessment years 2016-17 and 2017-18. The core issue revolves around the deduction of TDS on External Development Charges (EDC) paid by the assessee to Haryana Urban Development Authority (HUDA).**Issues Presented and Considered:**1. Whether the assessee's failure to deduct TDS on EDC charges paid to HUDA warrants the imposition of penalties under sections 271(1)(c) and 270A of the Income Tax Act.2. Whether the confusion and differing opinions regarding the applicability of TDS on EDC payments constitute a valid explanation for non-compliance.**Issue-Wise Detailed Analysis:**- The Revenue argued that the assessee violated TDS provisions and offered no explanation, citing a decision by the Delhi High Court upholding the requirement to deduct TDS on EDC payments.- The assessee contended that there was confusion regarding the applicability of TDS on EDC charges paid to HUDA, supported by an Office Memorandum issued by the CBDT and pending legal challenges.- The Tribunal considered the conflicting arguments, the clarification provided by the CBDT, and the absence of evidence demonstrating concealment of income or inaccurate particulars.- Relying on the decision in Reliance Petroproducts case, the Tribunal held that the confusion surrounding the TDS issue constituted a valid explanation, leading to the deletion of penalties for both assessment years.**Significant Holdings:**- "We are of the considered view that mere noncompliance with the TDS provisions do not imply concealment or furnishing of inaccurate particulars... by making an incorrect claim in law, would not tantamount to furnishing of inaccurate particulars."- The Tribunal upheld the CIT(A)'s decision to delete the penalties under sections 271(1)(c) and 270A for both assessment years, dismissing the Revenue's appeals.In conclusion, the Tribunal dismissed the Revenue's appeals, emphasizing that the confusion surrounding the TDS issue and the absence of evidence of concealment or inaccurate particulars justified the deletion of penalties imposed on the assessee for non-deduction of TDS on EDC payments to HUDA.