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Income Tax Appellate Tribunal, DELHI BENCH “A”, NEW DELHI
Before: SHRI R. K. PANDA & BEFORE SUCHITRA KAMBLE
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER And BEFORE SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A. No.3273 /Del/2014 AY: 2006-07 Bony Polymers Pvt. Ltd. Vs. JCIT C/o, RRA Taxindia, D-28, TDS Range South Extension, Part-1 Gurgaon New Delhi PAN-RTKBO1868G
[Appellant] [Respondent]
Assessee by: Sh. Ashwani Taneja & Sh. Shantanu Jain, Adv Respondent by: Sh. R.C. Dandey, Sr. DR
Date of Hearing: 28 09 2017 Date of Pronouncement: 09 2017
O R D E R PER R.K. PANDA, A.M:
This appeal filed by the assessee is directed against the order dated 27th March, 2014 passed by the CIT(A), Faridabad relating to assessment year 2006-07.
Facts of the case in brief are that the JCIT(TDS) on a perusal of information available on system found that the assessee had filed its quarterly TDS return/statement in Form 24Q/26Q late as per details given below:
S. No. Qtr. Date of Filing Delay in TDS Liability Days 1. Q-1 07.09.2005 54 12,22,599/-
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Q-2 - 2311 7,68,499/- 3. Q-3 31.07.2006 47 35,96,490/- 4. Q-1 24.05.2005 40 11,27,596/- 5. Q-2 15.12.2005 61 5,10,390/- 6. Q-4 25.10.2006 132 31,58,756/-
In view of the aforesaid default, a show cause notice u/s 272A(2)(k)/274 read along with Section 200(3) of the Income Tax Act was issued and served on the assessee. However, no reply was filed resulting in JCIT (TDS) going ahead with imposition of penalty amounting to Rs. 2,50,400/- u/s 272A(2)(k) of the Income Tax Act.
In appeal, the learned CIT(A) dismissed the appeal filed by the assessee by observing as under: “I have considered the facts of the case and gone through the submissions of the appellant. The JCIT (TDS) imposed penalty u/s 272A(2)(k) of the Income Tax Act since the appellant had not filed its TDS returns/statements in Form 24Q/26Q within the statutory time limit laid down in Rule 31A of the Income Tax Rules. The JCIT (TDS) on noticing the aforesaid default gave an opportunity to the appellant to explain as to why penalty u/s 272A(2)(k) of the Income Tax Act be not imposed on it for default committed as per rovision of Section 200(3)read along with Rule 31A of the Income Tax Rules. Since the appellant did not bother to comply with the show cause notice, the JCIT (TDS) went ahead with imposition of penalty. During the course of appellate proceedings, the submissions given by the learned counsel of the appellant were analyzed. As per the submissions, the penalty order u/s 272A(2)(k) of the Income Tax Act was challenged on the basis of the following 4 arguments. The four arguments along with the response thereto is given hereunder: (i) The appellant submitted that the Quarterly TDS Return in Form 26Q for the 4th Quarter was submitted in time and thus there was no default on the part of the appellant. In view of the submissions of the appellant, the JCIT (TDS) needs to verify the said facts and cancel the penalty u/s 272A(2)(k) of the Income Tax Act in relation to the 4th Quarter, if on verification of the facts stated by the appellant, the same are found to be true. (ii) As regards, default in respect of the 2nd Quarter of TDS return, the appellant submitted that the Chartered Accountant employed by the appellant, Shri Raj Kumar Aggarwal, C.A, left on 08.09.2005 as a result of which the matter of filing of TDS return was over-looked. This statement of
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the appellant shows that he was not very serious about filing TDS returns/statements in time. Had it given proper attention, the requisite form should have been filed by the due date specified in Rule 31A which would not have led to the attraction of penalty u/s 272A(2)(k) of the Income Tax Act. Hence, I do not find any force in this submission of the appellant. (iii) The appellant has submitted that the penalty order was barred by limitation and thus deserved to be cancelled. However, realizing that there was not much substance in this argument, the appellant submitted that though no time limit has been prescribed for initiation of penalty proceedings under the Act, a reasonable time limit would apply. I do not find any merit in the appellant's contention as there is no time limit for initiating penalty proceedings u/s 272A(2)(k) of the Income Tax Act. It is amply clear that the question of the order getting barred by limitation is ruled out. (iv) The appellant's submissions that no show cause notice was received by it deserves to be rejected in view of the fact that the JOT (TDS) in his penalty order has specifically mentioned that a show cause notice was issued and served on the appellant, but since the appellant did not bother to comply with the said notice, the JCIT (TDS) was left with no option but to impose penalty under the aforesaid Section. Hence, after a careful consideration of the facts of the case, I hold that the AO rightly imposed penalty of Rs. 2,50,400/- u/s 272A(2)(k) of the Income Tax Act. Grounds no. 1 to 4 are accordingly.”
Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law in upholding the action of the Ld. A.O. in sustaining penalty to the extent of Rs. 2,50,400/- u/s 272A(2)(k) and that too without giving an opportunity of being heard on the aspect.
That in any case and in any view of the matter action of Ld. CIT(A) in confirming the action of Ld. A.O in making the impugned penalty is bad in law and against the facts and circumstances of the case.
That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts in levying penalty without giving an adequate opportunity of being heard and by not observing the principles of natural justice.
That the appellant craves the leave to add, alter or amend the grounds of appeal at any stage and all the grounds are without prejudice to each other.
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The learned counsel for the assessee at the outset submitted that there is a delay in filing only for the second quarter and the delay is on account of bonafide reasons. He submitted that Mr. Raj Kumar Agarwal, a Chartered Accountant and employed by the company was looking after the TDS matters and he left the company on 8th September, 2005 for which the quarterly return could not be filed. In his absence, the entire work load could not be handled by the junior employees for which there was a delay in e-Filing of the TDS return. Further the penalty levied by the JCIT is also barred by limitation since such penalty has been is levied in the year 2012 for the AY 2005-06. Referring to the decision of Hon’ble Delhi High Court in the case of CIT vs. NHK Japan Broadcasting Corporation reported in 305 ITR 137, he submitted that such penalty having been initiated beyond a reasonable period of four years should be held as barred by limitation. 6. The learned DR, on the other hand heavily relied on the order of the CIT(A). He submitted that the learned CIT(A) has categorically held that the question of the order getting barred by limitation does not exist. He has decided the appeal on merit and therefore the same should be upheld. 7. We have considered the rival arguments made by both the sides. It is an admitted fact that the penalty order under Section 272A(2)(k) has been passed on 23rd February, 2012 for the AY 2005-06. A perusal of the material available on record shows that the penalty proceedings were initiated in financial year 2011-12 for the AY 2006-07 which is after a gap of more than five years. Although, there is no time limit prescribed under the Act for initiation of penalty proceedings under Section 272A(2)(k), however, the courts have held that such penalty proceedings should be initiated within a reasonable period of four years. The Hon’ble Delhi High Court in the case of CIT vs. NHK Japan Broadcasting Corporation (Supra) has held that initiation of proceedings under
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Section 201 against the assessee in respect of the assessment year 1990-91 was barred by limitation having been initiated beyond a reasonable period of time of four years. The Hon’ble High Court while deciding the issue has relied on various decisions. The relevant observation of Hon’ble High Court reads as under:- “We are unable to agree with learned counsel for the Revenue inasmuch as the decision relied upon by him deals with reasonable time for completing the assessment or for completing the task on hand. In Bharat Steel Tubes Ltd. (supra) the question that arose before the Court (and which has been stated on p. 130 of the report) is whether an order of assessment under s. 11(3) of the Punjab General Sales-tax Act, 1948 or s. 28(3) of the Haryana General Sales-tax Act, 1973 could now be completed or it would be barred by limitation. In that case, the assessment proceedings had been unduly delayed and the Supreme Court came to the conclusion that for completing the assessment proceedings there is no period of limitation prescribed and that would depend upon the facts of each case. Considering the facts of the case, the Supreme Court gave a direction to the assessing authority to complete all the pending assessments within a period of four months from the date of delivery of the judgment. Insofar as Bhatinda District Coop. MIL P. Union Ltd. (supra) is concerned, the question that arose before the Supreme Court was regarding initiation of proceedings by exercise of jurisdiction by the statutory authority. The Supreme Court held that exercise of jurisdiction must be within a reasonable period of time and considering the provisions of the Punjab General Sales-tax Act, 1948, it was held that a reasonable period of time for initiating proceedings would be five years. There is a qualitative difference between Bharat Steel Tubes Ltd. (supra) and Bhatinda District Coop. MIL P. Union Ltd. (supra). In the former case, the question pertained to completion of proceedings, while in the latter case it pertained to initiation of proceedings. We are concerned with initiation of proceedings. Insofar as the IT Act is concerned, our attention has been drawn to s. 153(l)(a) thereof which prescribes the time-limit for completing the assessment, which is two years from the end of the assessment year in which the income was first assessable. It is well known that the assessment year follows the previous year and, therefore, the time-limit would be three years from the end of the financial year. This seems to be a reasonable period as accepted under s. 153 of the Act, though for completion of assessment proceedings. The provisions of reassessment are under ss. 147 and 148 of the Act and they are on a completely different footing and, therefore, do not merit consideration for the purposes of this case. Even though the period of three years would be a reasonable period as prescribed by s. 153 of the Act for completion of proceedings, we have been told that the Tribunal has, in a series of decisions, some of which have been mentioned in the order which is under challenge before us, taken the view that four years would be a reasonable period of time for initiating action, in
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a case where no limitation is prescribed. The rationale for this seems to be quite clear—if there is a time-limit for completing the assessment, then the time-limit for initiating the proceedings must be the same, if not less. Nevertheless, the Tribunal has given a greater period for commencement or initiation of proceedings. We are not inclined to disturb the time-limit of four years prescribed by the Tribunal and are of the view that in terms of the decision of the Supreme Court in Bhatinda District Coop. MIL P. Union Ltd. (supra) action must be initiated by the competent authority under the IT Act, where no limitation is prescribed as in s. 201 of the Act within that period of four years. Learned counsel for the Revenue submitted that the Department came to know that the assessee was an assessee in default only in November, 1998 when a survey was conducted and it came to be known only then that the assessee had not deducted tax at source on the global salary. We are of the opinion that the date of knowledge is not relevant for the purposes of exercising jurisdiction insofar as the provisions of the IT Act are concerned. If it were so, the limitation period, as for example prescribed under s. 147/148 of the Act would become meaningless if the concept of knowledge is imported into the scheme of the Act. The second part of the argument of learned counsel for the Revenue in this regard was that the question of limitation did not at all arise because the assessee had itself admitted its liability and it voluntarily paid the tax and interest on that amount. Again, we are not in agreement with learned counsel for the Revenue in this regard. It appears that the assessee paid the tax voluntarily as well as interest thereon but the acceptance of the liability by the assessee would not by itself extend the period of limitation nor would it extend the reasonable time that is postulated by the scheme of the IT Act. The assessee cannot be put, in a sense, in a worse position merely because it has admitted its liability. If the assessee had denied its liability, the question that would have arisen would be whether the Revenue could have initiated proceedings after a lapse of four years. The answer to that would of course have to be in the negative in view of the reasons that we have already indicated above. The fact that the assessee agreed to pay the tax voluntarily cannot put the assessee in a situation worse than if it had contested its liability. We may also note that under s. 191 of the Act, the primary liability to pay tax is on the person whose income it is, that is the deductee. Of course, a duty is cast upon the deductor, that is the person who is making the payment to the deductee, to deduct tax at source but if he fails to do so, it does not wash away the liability of the deductee. It is still the liability of the deductee to pay the tax. In that sense, the liability of the deductor is a vicarious liability and, therefore, he cannot be put in a situation which would prejudice him to such an extent that the liability would remain hanging on his head for all times to come in the event the IT Department decides not to take any action to recover the tax either by passing an order under s. 201 of the Act or through making an assessment of the income of the deductee. For the reasons given by us, we are not inclined to disturb the order passed by the Tribunal and, therefore, we answer the question in the affirmative, in favour of the assessee and against the Revenue and hold that the initiation of proceedings under s. 201 of the Act against the assessee in respect of the asst. yr. 1990-91 was barred by limitation having been initiated beyond a reasonable period of time of four years. The appeal is disposed of accordingly.”
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Since, in the instant case admittedly the penalty proceedings have been initiated after a gap of more than five years, therefore, respectfully following the decision of Hon’ble Delhi High Court cited (Supra) we hold that the proceedings are barred by limitation. We, therefore, set aside the order of the CIT(A) and direct the AO to cancel the penalty so levied. The grounds raised by the assessee are accordingly allowed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 29.09.2017.
Sd/- Sd/- [SUCHITRA KAMBLE] [R.K. PANDA] JUDICIAL MEMBER ACCOUNTANT MEMBER
DATED: 29.09.2017 SH Copy forwarded to:- 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT Assistant Registrar Sl. No. Particulars Date 1. Date of dictation 2. Date on which the draft is placed before the Dictating Member 3. Draft placed before the other Member 4. Approved draft comes to the Sr. PS/PS 5. Kept for pronouncement on 6. Final order received after pronouncement 7. File sent to the Bench Clerk 8. Date on which files goes to the Head Clerk 9. Date on which file goes to the Assistant Registrar 10. Date of dispatch of order