TWENTY FIRST CENTURY FINANCE LTD. vs. COMMISSIONR OF INCOME TAX

Whether Reporters of Local newspapers may be allowed to see the Judgment? 2. To be referred to the Reporter or not? 3. Whether the Judgment should be reported in the Digest?

Admit 2. Following common question of law arises for determination of this Court in both these appeals:- “Whether the Income Tax Appellate Tribunal was justified in law in not holding that the order made u/s 201 (1) & 201 (1A) of the Income Tax Act, 1961 dated 24.01.2000 was barred by limitation?” 2010:DHC:5400-DB

With the consent of the learned counsel for the parties, we have finally heard the matters and proceed to dictate the order. Few facts which need to be noticed for the disposal of these two appeals are as under. 4. These appeals pertain to the assessment years 1994-95 and 1995-96. A search was conducted at the premises of the assessee’s company under Section 132 of the Income Tax Act on 26th February, 1997. During the search, certain documents were seized. These documents include certain audit objections from the company’s Auditors wherein it was pointed out that company had failed to discharge its obligation in compliance with the provisions of Section 192 to 206 of the Act. On the basis of these documents, summons under Section 131 of the Act were issued to the Managing Director of the Assessee’s Company asking him to furnish the details. We may point out at this stage that as per the Auditor’s objections, the assessee company had paid interest on the borrowings from M/s Mesco Airlines Ltd. and M/s Mideast India Ltd. on which tax was also deducted at source. However, this tax amount was not deposited with the Central Government and it was for this reason that the Auditors had raised the objections that the assessee’s company had violated the provisions of Section 192 to 206 of the Act. On this premise, penalty proceedings under Section 201 and 201 (1A) of the Act were initiated which culminated in passing of orders dated 24th January, 2000 whereby the penalty on the assessee company was imposed and the interest was also levied. 5. The appellant filed appeal thereagainst which was dismissed. 2010:DHC:5400-DB

Mr. Salil Aggarwal, learned counsel appearing for the appellant has submitted that the aforesaid premise is completely erroneous. In support of this plea, he has drawn out attention to the orders passed by the Assessing Officer under Section 201(1A) of the Act. In this order, the Assessing Officer has reproduced the relevant portion of the explanation furnished by the assessee vide its letter dated 24th December, 1999. The reading of the extracted portion shows that the assessee had taken a specific plea before the Assessing Officer that even when the assessee had deducted the tax at source, no certificate of Tax Deducted at Source was furnished to M/s Mesco Airlines Ltd. and M/s Mideast India Ltd. Therefore, there was no occasion for the said two companies to take benefit of the said TDS in the Income Tax Return filed by them as assessees. 8. Another specific plea which is taken is that the said two companies had shown the interest as their income in the Income Tax Return and had infact paid the tax on their total income. It is thus argued that the Income Tax Appellate Tribunal gathered a wrong impression which was contrary to the record, that the interest income has escaped the tax net and the revenue had suffered in that behalf. It is his argument that keeping in view this escape in amount which is factually incorrect, the Tribunal has distinguished the judgment of this Court in the case of NHK Japan Broadcasting Corporation (supra). We find from the orders of the Assessing Officer, CIT (A) as well as the ITAT that the aforesaid explanation furnished by the assessee before the Assessing Officer, namely, no TDS certificate was issued to the recipient of the interest amount and further that those recipient had in any case paid the entire tax from the interest 2010:DHC:5400-DB