Eminence Township (India) Pvt. Ltd vs. CIT(TDS), Delhi-1, ITA No. 2296/Del/2024, ITAT Delhi
In a noteworthy judgment, the Delhi Bench of the Income Tax Appellate Tribunal held that revisionary jurisdiction under Section 263 cannot be exercised when the original assessment order, though erroneous, is actually in favor of the revenue and not prejudicial to it.
Facts in Brief:
- The assessee, a builder, paid ₹70 lakhs towards External Development Charges (EDC) to HUDA.
- The AO, relying on CBDT guidelines, treated the payment as rent and applied TDS @10% under Section 194I, raising a demand under Sections 201(1) and 201(1A).
- The CIT (TDS) later revised this order under Section 263, citing the Delhi High Court ruling in Puri Construction Pvt Ltd and directed application of Section 194C (TDS @2%).
ITAT’s Observation:
- Though the AO applied the wrong section, the result was higher tax deduction (10% instead of 2%), causing no prejudice to the revenue.
- Citing Malabar Industrial Co. and Max India Ltd., the Tribunal held that both conditions—error and prejudice to revenue—must exist to invoke Section 263. In this case, only an error existed, but it favored the revenue.
Verdict: The ITAT quashed the revision order, ruling in favor of the assessee.