By the Court.—Heard Sri Dhruv Agarwal for petitioner, Sri Krishna Agrawal for respondent No. 1, Sri Manish Goyal for respondent Nos. 2 and 3, and Sri Shambhu Chopra for respondent No. 5.

2. In both these writ petitions, dispute relates to validity of orders passed by Income Tax Officer (TDS and Survey) (hereinafter referred to as “ITO (TDS)”) in purported exercise of powers under Section 201 (1) of Income Tax Act, 1961 (hereinafter referred to as “Act, 1961”) demanding amount of tax deductible at source (hereinafter referred to as “TDS”) and interest under Section 201 (1A) in respect to Financial Year 2000-01 (Assessment Year 2001-02) and Financial Year 2001-02 (Assessment Year 2002-03).

3. The facts in brief giving rise to present dispute are as under.

4. Petitioner - Ghaziabad Development Authority (hereinafter referred to as “GDA”) is a Statutory body constituted under provisions of U.P. Urban Planning and Development Act, 1973 (hereinafter referred to as “Act, 1973”) for the purpose of undertaking planned development within area of Ghaziabad and others as notified by State Government while constituting GDA.

5. Petitioner in order to provide housing accommodation etc. borrows funds from various institutions from time to time. It also pays interest on said borrowed sum. For disputed period, petitioner paid interest to “Punjab National Bank Housing Finance Limited” (hereinafter referred to as “PNBHFL”) and “Life Insurance Corporation Housing Finance Limited” (hereinafter referred to as “LICHFL”) as follows:

Sl.No.	Financial Year/ Assess. Year	AMOUNT OF INTEREST PAID TO LICHFL	AMOUNT OF INTEREST PAID TO PNBHFL
1	2000-01/2001-02	Rs. 8,13,07,509/-	Rs. 2,05,11,232/-
2	2001-02/2002-03	Rs. 6,64,22,867/-	Rs. 1,67,00,556/-

6. GDA did not deduct any TDS on the aforesaid amount of interest paid to aforesaid two bodies. ITO (TDS) issued notice dated 13.2.2006 to GDA to show-cause, why GDA be not treated as “assessee in default” and order under Section 201 (1) and (1A) of Act, 1961, be not passed. Petitioner vide reply dated 3.3.2006 informed ITO (TDS) that no TDS was deductible under Section 194A hence GDA cannot be held to be an “assessee in default” under Section 201 (1).

7. ITO (TDS) thereafter passed orders dated 5.4.2006 in respect to both assessment years demanding amount of TDS as tax, and, interest under Section 201 (1A) and also surcharge to the following effect:

Sl. No.	Assess. Year	AMOUNT OF TDS	SURCHARGE	AMOUNT OF INTEREST	TOTAL
1	2001-02	Rs. 2,03,63,740/-	Rs. 1,71,80,520/-	Rs. 26,47,281/-	Rs. 4,01,91,541/-
2	2002-03	Rs. 1,66,24,683/-	Rs. 3,32,496/-	Rs. 99,90,446/-	Rs. 2,69,47,625/-

8. Petitioner has also stated that in respect to assessment orders passed by Assessing Officer for disputed period of assessment in respect to PNBHFL and LICHFL, tax on the amount of interest received by both bodies was already paid by them and in support thereof copy of assessment orders of both aforesaid PNBHFL and LICHFL have been filed.

9. Respondents have filed counter-affidavit stating that petitioner was under statutory obligation of deduction of TDS under Section 194A on the amount of interest paid to PNBHFL and LICHFL. Since no TDS was deducted and deposited with the department, therefore, competent authority was entitled to demand amount of TDS and interest thereon from GDA in exercise of powers under Section 201 of Act, 1961.

10. The rival submissions advanced by both the parties have given rise to following questions :

(i) Whether GDA was under an obligation to deduct TDS under Section 194A?

(ii) Whether non-deduction of TDS was bona fide and for valid reasons?

(iii) Whether ITO (TDS) ha