Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH : C : DELHI
Before: SHRI SAKTIJIT DEY & SHRI M. BALAGANESH
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : DELHI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No.1102/Del/2016 Assessment Year: 2002-03 Green Line (Punjab), Vs ITO (TDS), I-25, Lajpat Nagar-III, Ward-50(5), New Delhi. New Delhi. PAN: AADFG5282H ITA No.1103/Del/2016 Assessment Year: 2002-03 Green Line (Delhi), Vs. ITO (TDS), I-25, Lajpat Nagar-III, Ward-50(5), New Delhi. New Delhi. PAN: AAAPS6803P ITA No.1104/Del/2016 Assessment Year: 2003-04 Green Line Earth Ltd., Vs. ITO (TDS), I-25, Lajpat Nagar-III, Ward-50(5), New Delhi. New Delhi. PAN: AAACG6500C (Applicant) (Respondent) Assessee by : Shri K.R. Manjani, Advocate & Shri Tarun Aswani, Advocate Revenue by : Shri J.S. Minhas, CIT-DR Date of Hearing : 02.05.2023 Date of Pronouncement : 10.05.2023
ITAs No.1102, 1103 & 1104//Del/2016
ORDER PER M. BALAGANESH, AM: These appeals in ITAs No.1102, 1103 & 1104/Del/2016 for AYs 2002-03, 2002-03 and 2003-04 respectively arise out of the orders of the Commissioner of Income Tax (Appeals)-41, New Delhi, [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeals No.411/14-15, 412/14-15 and 447/14-15 respectively dated 23.03.2015 against the orders of assessment passed u/s 201(1)/201(1A) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 29.03.2011 by the ld. Assessing Officer, Ward 50(5), New Delhi (hereinafter referred to as ‘ld. AO’).
The issues involved in all these appeals pertaining to different assessees are identical, hence, we deem it fit to pass a common order for the sake of convenience.
At the outset, there is a delay in filing the appeal of 8 ½ months by the assessee before this Tribunal. This Tribunal, in the first round of appeal had dismissed the appeal by not condoning the delay. The assessee preferred an appeal before the Hon’ble jurisdictional High Court which was disposed of in ITA 744/2018 in the case of Green Line (Punjab); in ITA No.1207/2018 in the case of Green Line (Delhi); and in ITA No.1217/2018 in the case of Green Line Earth Ltd., vide order dated 16.11.2022 wherein the Hon’ble Delhi High Court condoned the delay in filing the appeal before the Tribunal and restored the appeal to the file of this Tribunal to hear the matter on merits qua the grounds raised by the assessee. Hence, the appeals of the assessee are admitted for adjudication.
ITAs No.1102, 1103 & 1104//Del/2016
The only identical issue to be decided in these appeals is as to whether the ld.CIT(A) was justified in imposing interest and recovering TDS from the hands of the assessee in the facts and circumstances of the case. The interconnected issue involved is whether the order passed u/s 201(1)/201(1A) of the Act by the ld. TDS Officer in the case of different assessees are barred by limitation.
Let us take up the appeal of the assessee in the case of Green Line (Punjab) in ITA No.1102/Del/2016 for AY 2002-03.
We have heard the rival submissions and perused the material available on record. A survey operation u/s 133A of the Act was carried out on 17.03.2002 at the business premises of the assessee firm, Green Line (Punjab) situated at I-25, Lajpat Nagar-III, New Delhi – 110 024 to verify the compliance of TDS provisions. During the course of survey operation, the statement of Accountant of the company was recorded on oath. Subsequently, on verification of the TDS returns furnished by the assessee, the ld. TDS Officer came to the conclusion that the assessee firm had committed defaults on certain contractual payments u/s 194C of the Act and on certain cases payments u/s 194H of the Act, pursuant to which an order u/s 201(1)/201(1A) of the Act was framed in the hands of the assessee, Green Line (Punjab) on 29.03.2011 treating the assessee as an ‘assessee in default’ for not deducting tax at source on certain payments and also levying interest u/s 201(1A) of the Act for the delayed remittance.
ITAs No.1102, 1103 & 1104//Del/2016
Before the ld.CIT(A), the assessee stated that the order passed u/s 201(1)/201(1A) of the Act is time barred in view of the fact that the said order is passed beyond four years from the end of the financial year in which proceedings were initiated. It was the case of the assessee that the proceedings got initiated pursuant to the TDS survey conducted on 17.03.2003 and that the order was passed on 29.03.2011 which is much beyond the reasonable period of four years and, hence, the order passed thereon would be barred by limitation. The ld.CIT(A) called for a remand report in this regard from the ld. AO. In the said remand report, the ld. AO submitted that a notice dated 07.02.2011 was issued on the assessee pursuant to the survey operation carried out on 17.03.2002. The ld. AO, in the remand report, quoted the provisions of section 201(3) of the Act and stated that the order passed on 29.03.2011 would not be barred by limitation. The ld.CIT(A), following the same, dismissed the legal plea of the assessee apart from dismissing the plea of the assessee on merits of the case. Aggrieved, the assessee is in appeal before us.
It is not in dispute that the entire TDS proceedings in the instant appeal got initiated pursuant to a survey operation carried out on 17.03.2002. Pursuant to the survey operation, the ld. TDS Officer observed certain discrepancies in certain payments effected by the assessee without deduction of tax at source thereby violating various provisions of Chapter XVII-B of the Act. Subsequently, no proceedings were taken up by the taken up by the ld. TDS Officer till 06.02.2011. It is only on 07.02.2011, the notice was issued by the ld. TDS Officer for initiating 4
ITAs No.1102, 1103 & 1104//Del/2016
proceedings u/s 201(1)/201(1A) of the Act on the assessee firm. The ld. AR had argued that this initiation of proceedings on 07.02.2011 and subsequent order passed on 29.03.2011 are barred by limitation as it is in violation of the provisions of section 201(3) of the Act. For the sake of convenience, the provisions of section 201(3) as amended by the Finance Act, 2012 w.r.e.f. 01.04.2010 is reproduced hereunder:
“(3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of— (i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed; (ii) six years from the end of the financial year in which payment is made or credit is given, in any other case : Provided that such order for a financial year commencing on or before the 1st day of April, 2007 may be passed at any time on or before the 31st day of March, 2011.”
From a bare reading of the aforesaid provisions, it is evident that as per the provisions of section 201(3) of the Act as amended by Finance Act, 2012 w.r.e.f. 01.04.2010, proviso to section 201(3) categorically states that in respect of financial year commencing on or before 01.04.2007, the order u/s 201(1)/201(1A) could be passed at any time on or before 31.03.2011. In the instant case before us, the year under consideration is AY 2002-03. The ld. TDS Officer has passed the order u/s 201(1)/201(1A) of the Act on 29.03.2011. The said provisions of section 201(3) of the Act read with proviso thereon only states that order could be passed for A.Y. 2008-09 onwards (i.e financial year commencing on or after 1.4.2007) till 31.3.2011.
ITAs No.1102, 1103 & 1104//Del/2016
The said proviso cannot be interpreted in a way to enable the ld. TDS officer to pass orders for Assessment Years prior to A.Y. 2008-09. This understanding of ours is further fortified by the decision of the Hon’ble Delhi High Court in the case of Vodafone Essar Mobile Services Ltd. vs. Union of India, reported in 385 ITR 436, wherein it was held as under:- 8. The Court in NHK Japan Broadcasting Corp. case (supra) noted that there was no provision in the Act, which stipulated a time limit regarding initiation of the proceedings under Section 201 of the Act. It referred to Section 153(1)(a) of the Act, which required an assessment to be completed within two years from the end of the AY in which income was first assessable. It also noted that the ITAT had in a series of decisions taken the view that four years would be a reasonable time for initiating action, in case where no limitation is prescribed. In NHK Japan Broadcasting Corpn. (supra), the ITAT had applied the same aspect and reversed the decision of the CIT(A). This Court then held as under: "21. 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 Co-op. Milk Producers Union Ltd. [2007] 9 RC 637; 11 SCC 363 action must be initiated by the competent authority under the Income Tax Act, where no limitation is prescribed as in Section 201 of the Act within that period of four years." 16. This question, after the amendment to Section 201 of the Act brought about by the Finance (No. 2) Act, 2009 with effect from 1st April, 2010 came up for consideration by this Court in ITA No. 57/2015 CIT (TDS)-I v. C.J. International Hotels (P.) Ltd. [2015] 372 ITR 684/231 Taxman 818/56 taxmann.com 458 (Delhi). One of the questions addressed by the Court in the said case in its judgment dated 9th February, 2015 concerned the initiation of proceedings against the Assessee for declaring an Assessee to be an Assessee in default. The discussion in the said judgement on this issue is contained in paras 6 to 10, which read as under: '6. It is evident from the above discussion that the assessee was sought to be proceeded against Section 201 as one in default, after the period of four years. This Court is conscious that the text of the provision nowhere limits the exercise of powers. Equally, there are several provisions of enactment, i.e., Sections 143(2), 147, 148 and 263, and even through introduction of specific provisions in Section 153 of the Act, where the time limit is specifically prescribed. At the same time, this Court in NHK Japan (supra) was of the opinion that the power to treat someone as assessee in default is too drastic, vague and oppressive since it is conditioned by some measure of limitation. In these circumstances, the Court had insisted that for the purpose of initiation of proceedings under Section 201, the AO has to act within four years. In NHK Japan, the Court did take note of the judgment in State of Punjab v. Bhatinda District Co-op Milk Producers Union Ltd. [2007] 9 RC 637. 7. The judgment in NHK Japan to a certain extent was limited by the amendment to Section 201 by substitution of Section 201(3) w.e.f. 1.4.2010 by Finance Act No. 2/2009. This substitution was in turn amended w.e.f. 1.10.2014 – by Finance Act No. 2/2014. As a result, the provision which exists as on date is as follows:— 6
ITAs No.1102, 1103 & 1104//Del/2016
"201. (3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of seven years from the end of the financial year in which payment is made or credit is given." 8. Secondly, Section 201 itself was amended by introduction of sub-section 1(A) - with retrospective effect, from 1.4.1966. The provision underwent legislative changes on different occasions. The decision in NHK Japan was rendered on 23.04.2008. The Revenue's appeal was rejected on 3.7.2014. Although, the Supreme Court had granted special leave and has apparently stated in its final order rejecting the Revenue's appeal that the question is left open, the mere circumstance that the Parliament did not spell out any time limit before it did eventually in 2009 - and subsequently in 2014 – would not lead to the sequitur that this Court's ruling in NHK Japan requires consideration. In that judgment, the Division Bench had given various reasons, including the application of the rationale in Bhatinda District (supra). In NHK Japan, the Court had noticed that the facts in Bhatinda District (supra) judgment concern exercise of jurisdiction by a statutory authority in the absence of specific period of limitation. The Court in Bhatinda District (supra) held as follows: "17. It is trite that if no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period. What, however, shall be the reasonable period would depend upon the nature of the statute, rights and liabilities thereunder and other relevant factors. 18. 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." 9. More recently in Commissioner of Income Tax-III v. Calcutta Knitwears, Ludhiana [2014] 362 ITR 673 (SC), the Supreme Court had the occasion to deal with the correct position in law as to the initiation of income tax proceedings. Although, the context of the dispute was in respect of recording of a satisfaction note as to the initiation of proceedings against third parties under erstwhile Section 158BD of the Act which did not prescribe the period of limitation and left it to the discretion of the AO to decide on being satisfied that such proceedings were required to be initiated, the Court limited such discretion in the following terms: "44. In the result, we hold that for the purpose of Section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act; (b) along with the assessment proceedings under Section 158BC of the Act; and (c) immediately after the assessment proceedings are completed under Section 158BC of the Act of the searched person."
ITAs No.1102, 1103 & 1104//Del/2016
An added reason why the submission of the Revenue is unacceptable is that had the Parliament indeed intended to overrule or set aside the reasoning in NHK Japan (supra), it would have, like other instances and more specifically in the case of Section 201(1A), brought in a retrospective amendment, nullifying the precedent itself. That it chose to bring Section 201(3) in the first instance in 2010 and later in 2014 fortifies the reasoning of the Court. Accordingly, the issue is answered against the Revenue.' 17. It appears to the Court that the above decision settles the question whether to declare an Assessee to be an Assessee in default under Section 201 of the Court could be initiated for a period earlier than four years prior to 31st March, 2011. 24. The Court is unable to agree with the above submission of Mr. Shivpuri. As the Court sees it, its decision in NHK Japan Broadcasting Corpn. (supra) deals precisely with the situation where proceedings were sought to be initiated more than four years prior to 31st March, 2011. That law explained in NHK Japan Broadcasting Corpn. (supra) has not changed by the introduction of proviso to sub-section (3) to Section 201 by the Finance (No. 2) Act, 2009. Mr. Shivpuri was unable to explain how the Circular No. 5 of 2010 issued by the CBDT is not favourable to the Petitioners. With reference to the expression "pending cases", in respect of which orders have to be passed in terms of the proviso to Section 201(3) before 31st March 2011, Mr. Shivpuri sought to suggest that the Circular has to be harmoniously construed with Section 201(3) of the Act to glean an intention to permit the Department to initiate cases four years earlier than 31st March, 2011. The only requirement was that orders had to be passed by 31st March, 2011. 25. The Court is unable to agree with this approach of the Department either. There is no question of 'harmonious construction' of a CBDT Circular issued by the CBDT. At best, it is an external aid of construction of Section 201(3) and the proviso thereto. The Circular also gives an instance of contrary understanding of the legal position by the Department itself. It is well settled that if a Circular issued by the Department favours an Assessee then it should be so done even where such interpretation goes contrary to the legislative intent.
Circular 5 of 2010 of CBDT clarifying that the proviso to Section 201(3) of the Act was meant to expand the time limit for completing the proceedings and passing orders in relation to 'pending cases'. The said proviso cannot be interpreted, as is sought to be done by the Department, to enable it to initiate proceedings for declaring an Assessee to be an Assessee in default under Section 201 of the Act for a period earlier than four years prior to 31st March, 2011. 29. With respect to Vodafone Essar Mobile Services Limited (VEMSL), Mr. Shivpuri sought to contend that in these cases the initiation of the proceedings was triggered by the order dated 12th August 2010 passed by the Supreme Court in Civil Appeal No. 6692 of 2010 which pertained to the AY 2002-2003. 30. As rightly pointed out by Mr. Syali while the Supreme Court had sent the matter back for further proceedings for AY 2002-2003, as far as the orders under challenge in these writ petitions are concerned, they pertain to AYs 2003-2004, 2004-2005 and 2005-2006 in respect of which no orders have been passed by the Supreme Court. These notices, therefore, sought to initiate proceedings for declaring VEMSL to be an Assessee in default earlier than four years prior to 31st March, 2011. 8
ITAs No.1102, 1103 & 1104//Del/2016
The Court agrees that the notices issued to VEMSL for the aforementioned AYs are not covered by the order of the Supreme Court for AY 2002-2003. Accordingly, insofar as the notices for AYs 2003-2004, 2004-2005 and 2005-2006 are concerned, they are held to be unsustainable in law on the interpretation of Section 201(3) of the Act by the Court. 32. In view of the above conclusion, the Court does not consider it necessary to address the question of constitutional validity of Section 201(3) of the Act or the proviso thereto. In any event, the Petitioners also did not press for that relief in view of the acceptance of their submission on the interpretation of the said provision by the Court. 33. Consequently, the notices impugned in the present petitions issued by the Department seeking to initiate proceedings against the Petitioners for declaring them to be Assessees in default under Section 201(3) of the Act are hereby quashed. 10. Prior to the amendment in section 201(3) by the Finance Act, 2012 w.r.e.f. 01.04.2010, there was no stipulation provided in the Act for passing an order u/s 201(1)/201(1A) holding a person to be an assessee in default. In fact, this fact is also explained by the CBDT Circular No.05/2010 dated 03.06.2010 which explains the amended provisions w.r.e.f. 01.04.2010 prescribing time limit for framing an order u/s 201 of the Act. In fact, the said Circular says that this amendment would be effective from 01st April, 2010 only and would apply to such orders passed on or after 1st April, 2010. We find that the ld. DR took shelter based on this CBDT Circular before us stating that since the order in the instant case was passed on 29.03.2011 which is after 01.04.2010, the said order is passed within the time limit prescribed in section 201(3) of the Act r.w. proviso thereto. We find that the very same issue was subject matter of consideration before the Hon’ble jurisdictional High Court in the case of Vodafone Essar Mobile Services Ltd. vs. Union of India, reported in 385 ITR 436 referred to supra. The Circular has to be interpreted in such a manner that the time limit stipulated in section 201(3) of the Act would apply only for those orders passed on or after 1.4.2007 and not earlier. 9
ITAs No.1102, 1103 & 1104//Del/2016
In view of the aforesaid observations and respectfully following the decision of Hon’ble Jurisdictional High Court referred supra, we hold that the order passed by the ld. TDS officer u/s 201 / 201 (1A) of the Act is barred by limitation. Hence the demand raised thereon is directed to be quashed. In view of this, the other grounds raised by the assessee on merits, need not be adjudicated upon as they would become academic in nature.
In the result, the appeal of the assessee in the case of Green Line (Punjab) is allowed.
Now, let us take up the appeal of the assessee in the case of Green Line (Delhi) in ITA No.1103/Del/2016 for AY 2003-04.
The only identical issue to be decided in these appeals is as to whether the ld.CIT(A) was justified in imposing interest and recovering TDS from the hands of the assessee in the facts and circumstances of the case. The interconnected issue involved is whether the order passed u/s 201(1)/201(1A) of the Act by the ld. TDS Officer in the case of different assessees are barred by limitation.
We find that the facts prevailing in the case of Green Line (Delhi) are identical with the facts in Green Line (Punjab) adjudicated, supra, save that in the case of Green Line (Delhi) the default committed by the assessee in the TDS provisions were in respect of payments made on account of commission, interest, contract payments and salary. An order has been passed by the ld. Income-tax Officer,
ITAs No.1102, 1103 & 1104//Del/2016
Ward-55, New Delhi u/s 201(1)/201(1A) on 29.03.2011 treating the assessee as an assessee in default in respect of Rs.1,08,813/- for TDS default and levying an interest u/s 201(1A) of the Act on the assessee in the sum of Rs.1,05,821/-. The order passed by the ld.CIT(A) in the case of Green Line (Delhi) is identical to the order passed by him in the case of Green Line (Punjab), supra.
Since the ld.CIT(A) had adjudicated only the issue of order being passed by the ld. TDS Officer as not barred by limitation and the very same issue is also raised before us by the assessee, vide ground No.1, we find that the decision rendered by us in the case of Green Line (Punjab), supra, on the aspect of limitation shall apply mutatis mutandis, for round No.1 raised by the assessee in the case of Green Line (Delhi) also. Accordingly, ground No.1 raised by the assessee [Green Line (Delhi)] is allowed.
In view of the aforesaid observations and respectfully following the decision of Hon’ble Jurisdictional High Court referred supra, we hold that the order passed by the ld. TDS officer u/s 201 / 201 (1A) of the Act is barred by limitation. Hence the demand raised thereon is directed to be quashed. In view of this, the other grounds raised by the assessee on merits, need not be adjudicated upon as they would become academic in nature.
In the result, the appeal of the assessee in the case of Green Line (Delhi) in ITA No.1103/Del/2016 is allowed.
ITAs No.1102, 1103 & 1104//Del/2016
Now let us take up the appeal of the assessee Green Line Earth Ltd. in ITA No.1104/Del/2016 for AY 2002-03.
19.1 The only identical issue to be decided in this appeal is as to whether the ld.CIT(A) was justified in imposing interest and recovering TDS from the hands of the assessee in the facts and circumstances of the case. The interconnected issue involved is whether the order passed u/s 201(1)/201(1A) of the Act by the ld. TDS Officer in the case of different assessees are barred by limitation. We find that the facts prevailing in the case of Green Line Earth Ltd., are identical with the facts in Green Line (Punjab) adjudicated, supra, save that in the case of Green Line Earth Ltd., the default committed by the assessee in the TDS provisions were in respect of payments made on account of commission and deemed dividend u/s 194 of the Act. An order has been passed by the ld. Income-tax Officer, Ward-55, New Delhi u/s 201(1)/201(1A) on 29.03.2011 treating the assessee as an assessee in default in respect of Rs.86,835/- for TDS default and levying an interest u/s 201(1A) of the Act on the assessee in the sum of Rs.13,897/-. The order passed by the ld.CIT(A) in the case of Green Line Earth Ltd. is identical to the order passed by him in the case of Green Line (Punjab), supra.
Since the ld.CIT(A) had adjudicated only the issue of order being passed by the ld. TDS Officer as not barred by limitation and the very same issue is also raised before us by the assessee, vide ground No.1, we find that the decision rendered by 12
ITAs No.1102, 1103 & 1104//Del/2016
us in the case of Green Line (Punjab), supra, on the aspect of limitation shall apply mutatis mutandis, for round No.1 raised by the assessee in the case of Green Line Earth Ltd., also. Accordingly, ground No.1 raised by the assessee [Green Line Earth Ltd.] is allowed.
In view of the aforesaid observations and respectfully following the decision of Hon’ble Jurisdictional High Court referred supra, we hold that the order passed by the ld. TDS officer u/s 201 / 201 (1A) of the Act is barred by limitation. Hence the demand raised thereon is directed to be quashed. In view of this, the other grounds raised by the assessee on merits, need not be adjudicated upon as they would become academic in nature.
In the result, the appeal of the assessee in Green Line Earth Ltd., in ITA No.1104/Del/2016 is allowed.
To sum up, all the appeals of the assessee are allowed. Order pronounced in the open court on 10.05.2023. Sd/- Sd/- (SAKTIJIT DEY) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 10th May, 2023. dk
ITAs No.1102, 1103 & 1104//Del/2016