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―26. The Assessing Officer in paragraph 2 of the recorded reasons quotes that "External development charges is covered by the provisions of section 194 of the Income-tax Act, 1961. The assessee has failed to deduct tax at source on the payments made to the Haryana Urban Development Authority". There is no explanation or rationale for the aforesaid observation made by the Assessing Officer. We, therefore, cannot understand as to how the payment of external development charges being in the nature of statutory fees, could be subject to withholding tax under section 194 of the Act, a provision that is applicable to dividends. The nature of dividend payment is intrinsically different from external development charges and, therefore, the apparent reason for reopening seems to be erroneous, irrational and fallacious. The subsequent observation in paragraph 2 "as per the provisions of section 40(a)(ia) of the Income-tax Act, any sum payable on which tax is deductible at source under Chapter XVII-B but the same has not been deducted" appears to be based on the understanding that the provisions of section 194 are attracted to external development charges and, therefore, it is subject to withholding tax and consequently the provisions of section 40(a)(ia) of the Act would be attracted. Even if one were to ignore the provision of law quoted and relied upon by the Assessing Officer, and we were to agree with the contention of Revenue that while exercising the power, the source may not be specifically referred to or if wrongly mentioned to, it would not render the exercise of such power to be invalid, yet, we are unable to fathom as to how the Assessing Officer has arrived at the conclusion that the external development charges payment was subject to tax deduction at source. The Revenue in its counter-affidavit has sought to elaborate on the aforesaid reasons by contending that the external development charges payment is akin to rent.

27. If the Assessing Officer harboured a reason to believe that the payment of external development charges requires deduction of tax at source under the provisions of the Income-tax Act, it ought to have disclosed the basis for such a view. The entire reasoning disclosed in the recorded reasons, for initiating the proceedings is completely silent on this aspect. It merely states that "Since, external development charges has income character, therefore it should have been subjected to tax deducted at source by assessee". The Assessing Officer has further proceeded to observe since the assessee is a development authority of State Government of Haryana and is a taxable entity, deduction of tax at source provisions could be applicable on external development charges payable by the assessee through Haryana Urban Development Authority. Apart from making aforenoted observations and referring to section 194 and section 40(a)(ia), there is no apparent rationale for assumption of jurisdiction by the Assessing Officer. The judgment in Greater Mohali Area (supra) is of no assistance to the Revenue as the same is distinguishable on facts. In the said case, the petitioner who was recipient of external development charges had approached the court seeking quashing of the order disposing of its objections to the reasons recorded for reopening the assessment under sections 147 and 148 of the Act. In the assessment under section 143 (3) of the Act, the effect of external development charges upon petitioner's income was not referred to, the Assessing Officer sought to reopen the assessment on the basis of reason to believe that income on account of external development charges had escaped assessment. In these circumstances, since, the assessment order, did not deal with the character of the income of external development charges or its effect on petitioner's income, the court upheld the action of reopening on the ground that the issue had not been considered at the time of the assessment. Likewise, the other judgment relied upon by the Revenue in the case of New Okhla Industrial Development Authority (supra) is also distinct on facts. In the said case, the court was examining as to whether Greater Noida and Noida Authorities were local authorities within the meaning of section 10(20) of the Income-tax Act and whether their income was exempt from Income-tax. Deciding this question, the court held that the Noida and Greater Noida are not local authorities for the purpose of the Act. Therefore, the aforesaid decision has no relevance to the facts of the present case.

(c) The owner shall furnish bank guarantee equal to 25% of the amount worked out at the tentative rate of Rs.______ lacs per gross acre.
(iii) The external development charges rates are under finalization. In the event of increase tentative external development charges rates, the owner shall pay the enhanced amount of external development charges and the interest on installment, if any, from the date of grant of licence.
(vii) The owner shall submit the certificate to the Director within thirty days of the full and final completion of the project from a Chartered Accountant that the overall net profits (after making provisions for the payment of taxes) have not exceeded 15% of the total project cost of the scheme.
(viii) In case Haryana Urban Development Authority executes external development works before final payment of external development charges, the Director, shall be empowered to call upon the owner to pay the balance amount of external development charges in lumpsum even before the completion of licence period and the owner shall be bound to make the payment within the period so specified.