ITAT Delhi Mandates De Novo Assessment in Rs 1.15 Crore TDS Dispute Following Assessee's Retraction of Payment Denial

The intersection of real estate development charges and tax deduction at source (TDS) obligations has been a highly litigated domain under the Income Tax Act 1961. In a significant judicial development, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) recently adjudicated a complex dispute involving the applicability of TDS on External Development Charges (EDC) and administrative fees paid to state development authorities.

The case, titled ITO Vs Ashutosh Infra Private Limited, brings to the forefront critical procedural and substantive issues, particularly the consequences of an assessee altering its factual stance during appellate proceedings. The Tribunal's comprehensive order, pronounced on 31.08.2026, addresses the statutory obligations under Section 194C and the procedural mechanics of Section 201(1) and Section 201(1A) of the Income Tax Act 1961.

Factual Matrix and Genesis of the Dispute

The assessee, Ashutosh Infra Private Limited, operates within the real estate sector. The genesis of the present tax controversy traces back to an intelligence-gathering exercise conducted by the tax department. On 21.03.2017, the Assessing Officer (AO) received specific information from the office of the Deputy Commissioner of Income Tax (TDS) Circle, Panchkula.

This information was the byproduct of a survey and inspection operation executed under Section 133A of the Income Tax Act 1961. The survey took place on 09.02.2017 and 14.02.2017 at the business premises of the Haryana Urban Development Authority (HUDA)—subsequently renamed as Haryana Sheheri Vikas Pradhikaran (HSVP)—and SKY High Land Construction Private Limited.

During this investigative exercise, the TDS wing uncovered that HUDA/HSVP had been receiving substantial External Development Charges (EDC) from various private developers without the corresponding deduction of income tax at source. The Revenue department's fundamental premise was that HUDA constitutes a taxable entity, and the EDC collected for the utilization of urban development infrastructure possesses the character of income, thereby triggering TDS obligations.

The Specific Allegations Against the Assessee

Based on the survey report, the AO noted that the assessee had remitted EDC payments to HUDA/HSVP amounting to Rs. 18,00,000/- on 23.07.2015.

Furthermore, the AO received supplementary intelligence from the Joint Commissioner of Income Tax (OSD), TDS Circle, Panchkula. This data was sourced via inquiries under Section 133(6) from the Infrastructure Development Fund (IDF) operating under the Director of Town & Country Planning (DTCP), Haryana. The intelligence indicated that the DTCP was receiving Internal Development Charges (IDC) and Infrastructure Augmentation Charges (IAC) from private builders without the deduction of TDS.

The AO compiled a detailed schedule of payments allegedly made by the assessee towards IDC/IAC/EDC to HUDA(HSVP)/IDF during the Assessment Year 2016-17, which aggregated to Rs. 1,15,28,550/-. The transaction breakdown recorded by the AO was as follows: