TaxTMI 
TaxTMI 
2017 (7) TMI 664
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....eply dated 30.10.2015 pursuant to earlier notice dated 12.08.2015, holding that proceedings initiated by C.I.T. under Section 201(1)/ 201(1A) is not barred by time. D.C.I.T. required petitioner to show-cause why amount of T.D.S. not deducted, and interest thereon be charged from it. C. Order dated 30.12.2015 passed under Section 195 read with Section 201(1)/201(1A) of Act, 1961 for Assessment Years 2004-05, 2005-06 and 2006-07 (Financial Years 2003-04, 2004-05 and 2005-06) declaring that petitioner is in deemed default under Section 201(1)/201(1A) read with Section 195(1) of Act, 1961 for an amount of Rs. 28,17,326/-. Aforesaid amount includes non-deducted T.D.S. of Rs. 12,63,000/-, and, interest of Rs. 15,81,326. The order further says that penalty proceedings under Section 271C would be initiated separately. D. Notice of demand under Section 156 of Act, 1961 dated 30.12.2015 issued by D.C.I.T. for Assessment Years 2004-05, 2005-06 and 2006-07. 2. Facts in brief, giving rise to present dispute, are narrated as under:- 3. Petitioner-assessee is a private limited company registered under Companies Act, 1956. Its registered office earlier was at 1, British India Street, K....
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....llahabad. 5. Sri Atul Tripathi, son of (Late) Dr. Surendra Prasad Tripathi resident of 9/11, Rana Pratap Marg, Sarvodaya Housing Colony, Lucknow 6. Assessee was not aware that any of the sellers was Non- Resident-Indian (herein-after referred to as "N.R.I.") at the time of execution of sale-deed since neither any one's address was that of N.R.I. nor this fact was disclosed to Assessee by vendors. For Assessment Year (herein-after referred to as "A.Y.") 2006-07, Assessee filed return under Section 143 of Act, 1961 disclosing factum of purchase of aforesaid property vide sale-deed dated 14.06.2005. Assessment order was passed by Assessing Authority (herein-after referred to as "A.A.") in respect of A.Y. 2006-07 on 30.12.2008. Assessment was made after thorough scrutiny inasmuch as Assessee was selected for scrutiny under "CASS" and notice under Section 143(2) was issued and thereafter assessment was finalized. 7. Thus, factum of purchase of land in question vide sale-deed dated 14.06.2005 came to the knowledge of A.A. through return filed by Assessee and in any case when order of assessment was passed on 30.12.2008. It is also said that along-with return for A.Y. 2006-07....
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....t assessment on Smt. Nidhi Raman by arranging to serve notice at her United Kingdom's address through Central Board of Direct Tax (hereinafter referred to as "C.B.D.T."). C.I.T.(A) Kanpur also directed A.D.I.T. to explore possibility of recovering tax from purchaser of property since it was liable under Section 195 of Act, 1961 for deduction of TDS from payments made to an N.R.I. 10. Income Tax Department (hereinafter referred to as "Revenue") felt aggrieved by C.I.T.(A) Kanpur's order dated 16.02.2012, preferred Appeal i.e. I.T.A. No.330/LKO/2012 before Tribunal who vide order dated 28.06.2013 upheld and confirmed order of C.I.T.(A) Kanpur. Tribunal however said that order shall not prejudice any other remedy, which Revenue may pursue in the matter. This order of Tribunal was received in the Office of C.I.T.-3, (International Taxation), New Delhi on 16.07.2015. 11. In compliance of directions of C.I.T.(A) and Tribunal, D.C.I.T. issued notice on 12.08.2015 to Assessee under Section 201(1)/201(1A) of Act, 1961. Assessee replied aforesaid notice dated 12.08.2015 vide letter dated 30.10.2015, raising broadly following three objections: i. It was not possible to know t....
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....ithout relegating parties to avail statutory alternative remedy. 15. Sri N.K. Seth, learned Senior Counsel, appearing for petitioner has submitted that for the purpose of initiating proceedings under Section 201, limitation will commence from the date of execution of sale-deed dated 14.06.2005 and since notice was issued after almost 10 years, thereafter apparently it is barred by limitation. He argued, where no limitation is prescribed in a statute, competent authority is bound to act within a reasonable time. In case it has acted after a long time, i.e. beyond 3, 4 or 5 years, its action would be patently without jurisdiction. He also placed reliance upon authorities of Supreme Court and various other Courts, which we shall deal while discussing matter on merits. 16. Rival submissions, including preliminary objection, give rise to following questions:- 1) Whether writ petition deserves to be dismissed on the ground of statutory alternative remedy available to Assessee or facts of the case justify interference by this Court that impugned notice is without jurisdiction and that is one of the exceptions when this Court does not relegate a petitioner to avail alternative rem....
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....erson responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB or section 194LC)] [or section 194LD] or any other sum chargeable under the provisions of this Act (not being income chargeable under the head "Salaries" shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force : Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode : Provided further that no such deduction shall be made in respect of any dividends referred to in section 115-O. Explanation 1: For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called "Interest payable account" or "Suspense accoun....
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....and 12 ganthas. With passage of time, substantial land of Survey No. 417 was acquired by State under Land Acquisition Act, 1894 (herein after referred to Act, 1894) and Patil Raghav Natha was left with only 2 acres and 10 ganthas of agricultural land. On October 20, 1958, he applied for permission to convert this land to non-agricultural use. The application was submitted before Collector under Section 65 of Bombay Land Revenue Code, 1879. Collector initially rejected application. In appeal, Divisional Commissioner remanded the matter to Collector. Thereafter, Collector made inquiry and granted permission for use of land for non-agricultural purpose vide order dated 02.07.1960. In furtherance of the permission granted, Collector also issued a Sanad on 27.07.1960 to petitioner. Sanad was amended on 03.11.1960 and 01.12.1960. Sanad was in Form M-1 and number of conditions were appended to Sanad. One of the conditions of Sanad was that the grant shall be subject to the provisions of Bombay Land Revenue Code. Initially, there was one important condition that land shall be used exclusively for constructing residential houses and this condition was altered on 03.11.1960. When sketch of l....
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....after more than a year it was too late. However, for setting-aside order passed by Commissioner, Court also held that it did not give any reason and further that it has gone into the question of title, which it should not. 25. In State of Punjab and others Versus Bhatinda District Cooperative MilkProducers Union Limited (2007) 11 S.C.C. 363, question came up for consideration was about "reasonable period for reopening an order of assessment" under Punjab General Sales Tax Act, 1948 (herein-after referred to as "Punjab Act,1948"). M/s Bhatinda District Cooperative Milk Producers Union Limited (hereinafter referred to as "Milk Union"), a cooperative society registered under Punjab Cooperative Society Act, and is also a registered "dealer" under Punjab Act, 1948. Milk Union was running milk plants under the control of Punjab State Cooperative Milk Producers Federation Limited, Chandigarh (herein after referred to as "Milk Federation"). Punjab Act, 1948 provided for levy of purchase tax on milk, when purchased for use in manufacture of goods specified in Schedule-C. Tax was leviable when Milk is purchased and used in manufacture of any goods other than tax free goods. For A.Y. endin....
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....diction within a reasonable period. What, however, shall be the reasonable period would depend upon the nature of the statue, rights and liabilities thereunder and other relevant factors. 19. Revisional jurisdiction, in our opinion, should ordinarily be exercised within a period of three years having regard to the purport in terms of the said Act. In any event, the same should not exceed the period of five years. The view of the High Court, thus, cannot be said to be unreasonable. Reasonable period, keeping in view the discussions made hereinbefore, must be found out from the statutory scheme. As indicated hereinbefore, maximum period of limitation provided for in sub-section (6) of Section 11 of the Act is five years." (Emphasis added) 26. Court referred to similar earlier matters in State of Orissa Versus Debaki Debi AIR 1964 SC 1413, S. B. Gurbaksh Singh Versus Union of India (1976) 2SCC 181 and CST Versus Halari Store (1997) 7 SCC 715, wherein it has been observed that if no time-limit has been prescribed, a power of suo motu revision should be exercised within a reasonable time and any unreasonable delay may effect its validity. It was also held, that what a reasonabl....
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....was already paid by Assessee, therefore, only apprehension of Assessee was in regard to penalty under Section 271C and 221 of Act, 1961. Delhi High Court agreed with Tribunal that initiation of proceedings against Assessee for treating it in default should have been within a reasonable period of time and there must be some time limit within which Revenue must have initiated proceeding of such nature. Court said that in a case where question of completion of proceedings arose, time limit, if not prescribed by Statute, may not be prescribed by Court but when question arose with regard to initiation of proceedings, it is other way round. Thereafter to find out a reasonable period, Court referred to Section 153 and observed, if there is a time for completing assessment,then limit of initiation of proceedings must be the same, if not less. However, since Tribunal has given four years period for initiation of proceedings under Section 201 (1) and 201 (1A), High Court agreed with the same and did not disturb its findings. It also held, that the fact when department got knowledge, neither is relevant nor that Assessee paid tax or interest would be relevant. Further Court also took support ....
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....ere with the impugned order. The special leave petition stands disposed of." (emphasis added) 30. Thus question of limitation vis-a-vis Section 201(1) and 201 (1A) has been left open by Supreme Court in C.I.T. Versus N.H.K.Japan Broadcasting Corporation (supra). 31. In C.I.T. Versus U. B. Electronics Instruments Limited (2015) 371 ITR 314 (T & AP), Telangana and Andhra Pradesh High Court has also taken a view of four years of initiation of proceedings under Section 201 (1) and 201 (1A). Therein Assessee submitted returns every year disclosing relevant information. It raised loans from its Associate companies and for some period paid interest. When it started incurring losses, requested creditors to waive interest. Loanees waived interest. Assessee did not make any deduction on TDS on the component of interest for A.Ys. 1989-1990, 1990-1991 and 1991-1992. A.A took a view, since TDS was not deducted or paid hence notice is to be issued. Assessee responds that there was no occasion to deduct TDS. A.A. passed order on 31.03.1999 under Section 201(1A). Not only it demanded tax but also interest. Assessee's appeals before C.I.T.(A) were dismissed. Tribunal allowed and decide....
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....7ITD 536 (Bom) and this was concurred. 33. In Bhura Exports Ltd Vs. The Income Tax Officer (TDS) (2014) 365 ITR 548 (Cal), A.Y. 2002-2003, Assessee filed return and it was completed under Section 143(3), vide order dated 27.03.2006. In April 2006, Income Tax Officer issued a notice to Assessee alleging that it had paid interest on certain loans, but not deducted TDS in A.Y. 2002-2003. Assessee submitted reply whereafter another notice dated 21.11.2007 was issued proposing to initiate proceedings under Section 201(1) and 201(1A) and requiring Assessee to show cause why it should not be treated as an "Assessee in default". Assessee gave reply whereafter, A.A. passed order dated 07.03.2008, treating Assessee as an "Assessee in default" and demanded tax of Rs. 21,64,471/-. Assessee lost before C.I.T.(A). However, C.I.T.(A) while confirming order of A. A. considered question of limitation raised by Assessee and held that time limit for initiating action should be six years. Before Tribunal also, Assessee failed except partial relief of reduction in amount of default. Tribunal, however, did not deal with the question of limitation raised by Assessee. Question of limitation was specifi....
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....mmitted an error of law in applying the time limit prescribed in Section 149 of the Act of the facts of the present case and the Tribunal also committed substantial error of law in not dealing with the said point before maintaining the order under Section 201 with a reduced amount. (emphasis added) 34. Calcutta High Court then proceeded to hold, if no period of limitation is prescribed in the statute for taking action thereunder, neither Limitation Act, 1963 (hereinafter referred to as "Act, 1963") would apply nor any bar of limitation would be imported unless there is a contrary intention expressed in the Statue. In Para 13 of judgment, Court said : "13. In our opinion, if no. period of limitation is prescribed under a Statute for taking action under it and at the same time, the Limitation Act does not apply to such a Statute, there cannot be any prohibition of the period of limitation for taking action under the said Statute unless there is any contrary intention expressed in the said Statute." (Emphasis added) 35. Calcutta High Court relied on the decision of Supreme Court in Uttam Namdeo Mahale Versus Vithal Deo and others AIR 1997 SC 2695 and Ishar Singh Vs. Fin....
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.... relevant financial year in the absence of any expressed provision in the Income Tax Act, 1961" 37. Tribunal answered the question by applying limitation of one year from the end of financial year in the proceedings under Section 201(1) were initiated and held that limitation of four years from the end of relevant financial year cannot be applied. It gave reasons, in short, as under: "(ii) Section 195(1) casts a duty on the person responsible for paying or crediting to the account of an non-resident any sum chargeable to tax under this Act for deducting tax at source. On failure to deduct or pay to the Government after deducting, the person responsible is treated as assessee in default under section 201(1). (iii) ''Any such person' referred to in section 201(1) extends not only the person deducting and failing to deposit the tax but also the person failing to deduct the tax at source. (iv) Where no time limit is prescribed for taking an action under the statute, the action can be taken only within a reasonable time by harmoniously considering the scheme of the Act. (v) Tax recovery proceedings are initiated only after the passing of order under section 20....
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....at Versus Patil Raghav Natha and others (supra) and Government of India Versus Citadel Fine Pharmaceuticals (1990) 184 ITR 467 (SC). It also considered Delhi High Court judgment in C.I.T. VersusN.H.K.Japan Broadcasting Corporation (supra) and Commissioner of Income Tax Vs. Hutchison Essar Telecom Limited (supra) and held "though section 201 does not prescribe any limitation period for the Assessee being declared as "Assessee in default", yet, Revenue will have to exercise the powers in that regard within a reasonable time. In such circumstances we are of the view that Tribunal's order in this case does not suffer from any error of law apparent on the face of record or perversity warranting our interference in appellate jurisdiction." 40. It also considered Calcutta High Court Judgment in Bhura Exports Ltd Vs. The Income Tax Officer (TDS) (supra), but disagreed therewith. 41. Thus period of limitation has been applied by Bombay High Court, but its commencement and end is different than what was held by Delhi High Court. 42. At this stage, reasons given by Tribunal, which have found favour with Bombay High Court, we may notice here at in brief. The scheme of Section 201 ....
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....If person responsible is deemed to be an "Assessee in default" after assessment of the payee or the time available for making assessment has expired, then such amount of tax will be incapable of adjustment against tax liability of the payee and would be required to return to such person who has been treated as Assessee in default. Thus both, initiation of proceedings under Section 201 (1) as well as completion of such proceedings by passing order, have to be prior to the time limit within which tax can be determined in the hands of payee. It cannot be beyond such period. There may be different situation in the assessment of payee. If payee has included the amount received from payer in his total income but tax has not been paid in full or part, then payer can be treated as "Assessee in default" to the extent of non-payment of tax on the sum paid to him provided the tax is not recovered from the payee. If the payee has furnished return of income without disclosing the sum paid by payer on which tax was deductible then such Tax can be recovered from payer by treating him as "Assessee in default" if the income has not been assessed in the hands of the payee. In another situation where....
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....icense fee of Rs. 4.11 crores per annum, to be paid as a minimum guarantee payment to KKFHPL. Assessee did not deduct TDS as required under Section 194 I of Act, 1961. It was held liable for consequences for failure of deduction of TDS under Section 201 of Act, 1961. The dispute relates to A.Y. 2002-03 (F.Y.2001-02). Assessee filed regular return in prescribed format for Assessment Year in question. Certain other tax deductions made at source were declared, but neither TDS was deducted in regard to payment to KKFHPL nor declared in return. The licence fee for relevant period, amounted to Rs. 1.37 crores; plus 24.90 crores, which was further paid by Assessee as upfront fee to KKFHPL. On both these amounts, Revenue claimed TDS. The assessement of KKFHPL was completed on 28.02.2005. Return of Assessee for A.Y. 2002-03 was also accepted by Revenue, in which payment to KKFHPL was reflected. No question regarding TDS on the amount paid to KKFHPL was ever raised by Revenue. A survey was conducted on 19.09.2007 at the premises of Assessee, when question of non-deduction of TDS during A.Y. 2002-03 was raised. Subsequently notice was issued to Assessee. Assessing Officer passed order dated 2....
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....pra), held as under: "Thus, we can safely say that the law is well settled that when there is no period of limitation prescribed for taking action under any provision of law, the same should be taken within a reasonable period, which would depend upon the facts of the case and the provisions of the Act under which action has to be taken. This is necessary, also because if any right has accrued in favour of a person or party by passage of time, same cannot be unsettled by a statutory authority at any time or after an indefinite period, as the same would amount to unsettling a settled position, which can only be done within a reasonable period, and not at any time in the future after an unlimited period." (Emphasis added) 46. Thereafter, Court followed judgment of Delhi High Court in Commissioner of Income Tax Vs. NHK Japan Broadcasting Corporation (supra) and observed that reasonable period of limitation would be four years from the end of financial year in question for the purpose of passing order under Section 201 (1) and 201(1A) of Act, 1961. 47. In Sharda Devi Vs. State of Bihar and another (2003) 3 SCC 128, question with regard to limitation cropped up with respect ....
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....certificates in 1989. High Court set aside order of Joint Collector cancelling validation certificate on the ground that suo motu power under Section 50B(4) should have been exercised within a reasonable period. Supreme Court held that there was no complaint that the power was exercised in obtaining validation certificates by playing fraud. Under Section 50B(4), though it was said that power could be exercised at any time, but, that would depend on facts and circumstances of each case. In the case of fraud, power can be exercised within a reasonable time from the date of detection or discovery of fraud. While exercising such power, several factors need to be kept in mind such as effect on the rights of the third parties over immovable property due to passage of considerable time, change of hands by subsequent bona fides transfers, the orders attaining finality under provisions of other Acts. Court said that word "at any time" cannot be rigidly read letter by letter. It must be read and construed contextually and reasonably. Any literal interpretation which allowed an exercise of power after decades, if leads to anomalous situation, leading to uncertainty and complications affecting....
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....lande Versus Pune Municipal Transport and others (2010) 8 SCC 467. 54. State of Andhra Pradesh and another Versus T. Yadagiri Reddy and others (supra) have arisen from the proceedings under Andhra Pradesh (Telangana Area) Tenancy and Agricultural Lands Act, 1950 and here also again the question was with regard to Section 50B (4), which was already considered in Ibrahimpatnam Taluk Vyavasaya Coolie Sangham Versus K.Suresh Reddy and others (supra). 55. Court followed and reiterated the same in Sulochana Chandrakant Galande Versus Pune Municipal Transport and others (supra). Dispute has arisen from the proceedings under Urban Land (Ceiling and Regulation) Act, 1976. Here again the question with regard to revisional power and the period within which the same could have been exercised was raised. Since no period was prescribed, Court held that it can be exercised within a reasonable period and not at any time i.e. unlimited. Here, it relies on earlier judgment in State of Gujarat versus Patil Raghav Natha and others (supra) and Ibrahimpatnam Taluk Vyavasaya Coolie Sangham Versus K.Suresh Reddy and others (supra) . In Para-29 of the judgment Court held that "we reach the inescapabl....
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....once proceedings have already been held barred by limitation for the purpose of Section 201, subsequent notice was not permissible. 58. Per contra, Sri Mathur, Learned Counsel for Revenue has relied on three Judges judgment in Uttam Namdeo Mahale Versus Vithal Deo and others (supra). A Notice of eviction was issued, which was challenged. It became final since confirmed by Supreme Court in a Special Leave Petition. Thereafter proceeding of execution was initiated. An objection was raised, since more than 12 years had passed, execution could not proceed. High Court held that in Section 21 of Mamlatdar Court Act,1906 there is no period of limitation and relied on an earlier Division Bench judgment in Babaji Khanduji Versus Kushaba Ramji, (1906) 8 BLR 218. Argument advanced before Supreme Court was that in absence of fixation of rule of limitation, power can be exercised within a reasonable time and reliance was placed on State of Gujarat Versus Patil Raghav Natha and others (supra); Ram Chand Vs. Union of India (supra) and Mohamad Kavi Mohamad Amin Versus Fatmabai Ibrahim (supra). It was rejected by Court. It was held that order of rejection had already become final. Section 21 Mam....
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....at the firm being a legal person, profession tax can be levied on the Firm, and not on individual partners. Suit was dismissed by Trial Court but in appeal judgment of Trial Court was reversed by Additional District Judge and suit decreed. Matter went in appeal and High Court affirmed the judgment of lower appellate Court. A Letters Patent Appeal was filed by Municipal Committee which was allowed and Division Bench held that tax cannot be levied on a firm or factory as it was leviable on individual owners of factory or Firm. This order was challenged in appeal before Apex Court. 61. The aforesaid judgment does not help Revenue on the question of exercise of power under Section 201 and 201(1A). In fact Court has held therein that suit was barred for the reason, when a statute provides a particular remedy in a particular forum, it should be sought and enforced in that particular forum and not by filing a suit as it is implicitly barred. Para 23 of the judgment reads as under: "It is well-recognized that there a Revenue Statute provides for a person aggrieved by an assessment thereunder, a particular remedy to be sought in a particular forum, in a particular way, it must be soug....
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....rnative remedy, but in the present case from the facts and the precedents, we find that the issue raised is purely legal and there exists contrary judgments of various High Courts hence it is a fit case where the matter should be settled by this Court. We do not find any reason to dismiss this petition only on the ground of alternative remedy. 67. Entire discussions made above show that in respect of the matters where passage of time has resulted in accrual of certain rights to a person, such rights cannot be divested by exercising power at any indefinite period of time and in such case, if power is not exercised within reasonable period, it can be held barred and not exercisable. In Sharda Devi Vs. State of Bihar and another (supra), Court said, what a reasonable period in such case would depend on the facts and circumstances of each case. In State of Punjab and others Versus Bhatinda District Cooperative Milk Producers Union Limited (supra), Court said that what a reasonable period would be, it will depend on the nature of statute, rights and liabilities thereunder and other relevant factors. In State of Orissa Versus Debaki Debi (supra), S. B. Gurbaksh Singh Versus Union of I....
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..... Shanti Tripathi an order issued/passed under Section 163 was already set aside. CIT (A), Kanpur, however, directed Assessing Officer, under Section 150 of Act, 1961, to exercise power of jurisdiction to begin fresh proceedings under Section 161/163 of Act, 1961 or to make direct assessment of Smt. Nidhi Raman by arranging to serve notice at her U.K. address through C.B.D.T. CIT (A), Kanpur also directed Assessing Officer to explore possibility of recovering tax from purchaser of property since deduction at source of tax was liable to be made, in the present case, under Section 195 where payment was received by an N.R.I. 70. Revenue challenged order of CIT (A) dated 16.02.2012 in Appeal before Tribunal, but it also confirmed CIT (A)'s order by dismissing appeal vide order dated 28.06.2013. Tribunal, however, left it open to Revenue to pursue any other remedy. This order of Tribunal was received in the office of C.I.T.-3, New Delhi on 16.07.2015. Thereafter notice was issued to petitioner on 12.08.2015. All these facts show that Revenue first explored possibility of recovering entire tax from the person ultimately liable to pay tax since petitioner was only an "Assessee in d....
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.... like a period of limitation. 73. In Uttam Namdeo Mahale Versus Vithal Deo and others (supra), the judgment delivered by Three Judge Bench, Court has said as under: "Mr. Bhasme, learned counsel for the appellant, contends that in the absence of fixation of the rule of limitation, the power can be exercised within a reasonable time and in the absence of such prescription of limitation, the power to enforce the order is vitiated by error of law. He places reliance on the decisions in State of Gujarat v. Patil Raghav Natha; Ram Chand v. Union of India and Mohd. Kavi Mohamad Amin v. Fatmabai Ibrahim. We find no force in the contention. It is seen that the order of ejectment against the applicant has become final. Section 21 of the Mamlatdar's Court Act does not prescribe any limitation within which the order needs to be executed. In the absence of any specific limitation provided thereunder, necessary implication is that the general law of limitation provided in the Limitation Act (Act 2 of 1963) stands excluded. The Division Bench, therefore, has rightly held that no limitation has been prescribed and it can be executed at any time, especially when the law of limitation for ....