ACIT vs DLF New Gurgaon Retail Developers Ltd. – TDS Penalty Appeal Case – ITA 6330/DEL/2019

Case Analysis: ACIT vs DLF New Gurgaon Retail Developers Ltd. – ITA 6330/DEL/2019

Case Number: ITA 6330/DEL/2019

Appellant: ACIT, Circle-7(1), New Delhi

Respondent: DLF New Gurgaon Retail Developers Ltd., New Delhi

Assessment Year: 2013-14

Order Type: Final Tribunal Order

Date of Order: 30th September 2019

Pronounced on: 30th September 2019

Case Filed On: 26th July 2019

Background of the Case

The case of ACIT vs DLF New Gurgaon Retail Developers Ltd. pertains to the assessment year 2013-14. The Additional Commissioner of Income Tax (ACIT) filed an appeal against DLF New Gurgaon Retail Developers Ltd., challenging the decision of the Commissioner of Income Tax (Appeals) regarding a penalty imposed under Section 271C of the Income Tax Act, 1961. This penalty was related to the alleged non-deduction of tax at source (TDS) by DLF New Gurgaon Retail Developers Ltd. on certain payments.

The core issue in this appeal was whether DLF New Gurgaon Retail Developers Ltd. had violated TDS provisions under Chapter XVII-B of the Income Tax Act, leading to the imposition of a penalty under Section 271C.

Why the Case Was Filed

The ACIT filed the appeal against DLF New Gurgaon Retail Developers Ltd. because it was believed that the company had failed to deduct TDS as required by the provisions of the Income Tax Act, specifically under Section 194C, which mandates TDS on certain payments. The ACIT argued that this non-compliance warranted the imposition of a penalty under Section 271C of the Act, which deals with penalties for failure to deduct tax at source.

The appellant sought to overturn the decision of the Commissioner of Income Tax (Appeals), who had ruled in favor of DLF New Gurgaon Retail Developers Ltd. by canceling the penalty.

Tribunal Proceedings

The case was heard by the Delhi Bench “E” of the Income Tax Appellate Tribunal (ITAT), comprising Shri H.S. Sidhu, Judicial Member, and Shri Prashant Maharishi, Accountant Member. The hearing took place on 27th September 2019, and the order was pronounced on 30th September 2019.

During the proceedings, the respondent, DLF New Gurgaon Retail Developers Ltd., argued that the penalty was unjustified because the payment in question did not fall under the provisions requiring TDS deduction. The company further contended that the tax effect involved in this case was below the monetary threshold set by the Central Board of Direct Taxes (CBDT) for filing appeals, making the appeal non-maintainable.

The CBDT’s Circular No. 17/2019, dated 8th August 2019, was a significant aspect of the defense. This circular raised the monetary limits for filing appeals before the ITAT, High Courts, and the Supreme Court. According to the circular, appeals with a tax effect of less than Rs. 50 lakhs were not to be filed by the department.

Tribunal’s Decision

The tribunal reviewed the arguments presented by both sides, along with the relevant legal provisions and the CBDT circular. The tribunal noted that the tax effect in the present appeal was below Rs. 50 lakhs, which was the threshold set by the CBDT for filing appeals before the ITAT. Therefore, in accordance with the guidelines laid out in Circular No. 17/2019, the appeal was considered non-maintainable.

The tribunal also acknowledged that the instructions issued by the CBDT are binding on the income tax authorities, and the department should not have pressed the appeal given the clear guidelines provided by the circular. The tribunal further cited the decision in the case of Dinesh Madhavlal Patel, where it was held that the circular applies to all pending appeals, including those that were filed before the issuance of the circular.

Final Judgment

In light of the above considerations, the tribunal dismissed the appeal filed by the ACIT against DLF New Gurgaon Retail Developers Ltd. on the grounds that the appeal was not maintainable due to the tax effect being below the specified threshold. The tribunal emphasized that the CBDT circulars are meant to reduce unnecessary litigation and should be followed strictly.

The order was pronounced in the open court on 30th September 2019 by the bench comprising Shri H.S. Sidhu, Judicial Member, and Shri Prashant Maharishi, Accountant Member.

Conclusion

This case highlights the importance of adhering to the guidelines provided by the CBDT regarding the filing of appeals. The tribunal’s decision reinforces the principle that appeals with a low tax effect, below the prescribed limits, should not be pursued, as this leads to unnecessary litigation and a waste of resources.

The ruling in favor of DLF New Gurgaon Retail Developers Ltd. provides clarity on the application of CBDT Circular No. 17/2019 and underscores the need for tax authorities to exercise discretion when deciding whether to file appeals. The decision also serves as a precedent for future cases, where the applicability of the circular may be in question.

Overall, the tribunal’s thorough analysis and reliance on established guidelines ensure that the judgment is well-founded, providing a fair outcome for the respondent while promoting the efficient management of tax litigation.

ACIT vs DLF New Gurgaon Retail Developers Ltd. – TDS Penalty Appeal Case – ITA 6330/DEL/2019