Aggrieved, the CHB had challenged the order in October before an Income Tax Commissioner, the appellate authority in the case. Crying foul, the board had submitted that the penalty slapped by the I-T Department was grossly unfair since the original demand, made by the department, stood stayed by the Punjab and Haryana High Court.
Finding no force in the contentions raised by the CHB, the I-T Department has dismissed the board’s appeal and directed it to pay the penalty. Left with no option, the CHB filed an appeal in the Punjab and Haryana High Court on Saturday. It will come up for hearing next week.
It was in May this year that the High Court had stayed recovery of over Rs 300 crore by the I-T Department. In June 2010, the department had slapped notices on the CHB to cough up over Rs 300 crore as income tax on the amount it received from the deal with realtor Parsvnath.
The stay was granted by the High Court on an appeal filed by the CHB. The appeal was admitted and the recovery notices were stayed by the High Court till further orders. New Delhi-based realtor Parsvnath Developers Ltd’s Pride Asia project in Chandigarh is stuck in arbitration with the CHB.
The project, which was expected to generate a revenue of Rs 4,500 crore, allegedly did not receive a portion of the 123-acre land committed by the CHB for the development of residential and commercial property. As per available information, Parsvnath had paid Rs 516 crore to the housing board between 2006 and 2008 as per the schedule in their agreement. The company had also invested close to Rs 300 crore on publicity and building of sample flats.
At Rs 7,150 per square feet, the cost of flats ranged from around Rs 50 lakh to Rs 2 crore. The project also offered penthouses and villas ranging from Rs 2 crore to Rs 6 crore. However, construction could not be taken up due to arbitration even as the buyer-seller agreements were signed in 2008.
Pride Asia went into arbitration in 2009 as the amount that Parsvnath had put in an escrow account was frozen by the CHB. Additionally, the CHB also imposed penalty on the developer for allegedly violating the terms of the agreement. In June 2010, the I-T Department had issued notices to the CHB to pay up Rs 300 crore as the income tax on the amount it received from the deal with Parsavnath
Out of the land deal, the CHB got Rs 514 crore but the I-T Department slapped a notice on it asking for Rs 300 crore as tax. Though the board had deposited Rs 60 crore as tax so far, the I-T Department had demanded the remaining amount.
The same was stayed by the High Court. Much to the shock of the CHB, two weeks back, it received notices from the Income Tax Department demanding Rs 270 crore as penalty for not showing the amount received as “income”.
Submitting that since the High Court has already stayed the original “income tax” charged from it, the CHB had said that despite a High Court stay, a demand by the I-T Department was totally unjust and unfair. Moreover, the CHB had stated, in its appeal, that it acted only as a “nodal agency” and that a major portion of the money received by it from the deal was submitted to Consolidated Fund of India.