1. This appeal under Section 260A of the Income-tax Act, 1961 (“Act”) is at the instance of an alleged “deemed assessee in default” and is directed against an order dated February 18, 2011, passed by the Income-tax Appellate Tribunal, “B” Bench, Kolkata in I. T. A. No.495/ Kol/ 2010 for the Assessment Year 2002-03 modifying the order of the CIT(A) and partly allowing the appeal preferred by the appellant before us.
Being dissatisfied, the alleged deemed assessee in default has come up with this appeal.
The facts giving rise to filing of this appeal may be summed up thus:
a) The appellant is an assessee within the meaning of Section 2(7) of the Act and at the material time was engaged in the business of importing and dealing in pulses and edible oil.
b) For the Assessment Year 2002-03, relevant to the previous year ending on March 31, 2002, the appellant filed a return of income disclosing an income of Rs.4,66,844/- and ultimately the assessment was completed under Section 143(3) of the Act by an order dated March 27, 2006 and the net tax and the interest payable by the appellant was determined at Rs. 20,607/-.
c) In the month of April, 2006 the appellant received a notice dated April 6, 2006 issued by the Income tax officer, Ward 5(3) alleging, inter alia, that it appeared from record that the appellant paid interest on loan but had not deducted tax at source from three companies, viz. 1) M/s. MMTC Ltd, 2) M/s. P. G. Foils Ltd. and 3) M/s. Globe International Ltd for the Financial Year 2001-02 relevant to the Assessment Year 2002- 03. The appellant was, thus, directed to appear before the said Income tax officer with the relevant documents for non-deduction of tax at the source.
d) The Appellant by a letter through its learned Advocate replied to the said notice stating that the appellant paid interest of Rs.2,96,390/- to the MMTC Ltd. which is a Government of India Enterprise and no TDS was required to be deducted in view of Section 194A (e) of the Act. It was further stated that the appellant had paid Rs.7,54,521 to M/s. P. G. Foils Ltd and Rs.6,05,430/- to M/s. Globe International Ltd. and the documents were sent through Bank and the since the appellant did not have sufficient Bank Letter of Credit limits (“L.C”) for import of materials from foreign countries, it had utilized the L.C. limit of M/s. Globe International and M/s. P. G. Foils Ltd. for which the appellant paid commission @ 1% on utilized L.C. limits and Bank charges etc.. According to the appellant, for utilizing the L.C. limits of those two parties, interest had been charged by the Bank which was paid by those two parties to the Bank on behalf of the appellant. Thus, the amount paid by the appellant to those two parties was the reimbursement of interest and consequently, no TDS was liable to be deducted.
e) Thereafter a show cause notice dated November 21, 2007 was issued by the Respondent proposing to initiate proceedings under Section 201(1) and 201(1A) of the Act asking the appellant to show cause why the appellant should not be treated to be an assessee in default and order under Section 201(1) and 201(1A) should not be passed and further, why the provisions of penalty under Section 271C should not be applied against the appellant.
f) The appellant gave reply to the said notice reiterating its stance earlier taken but the Assessing Officer by order dated March 7, 2008 treated the appellant as an assessee in default and demanded a sum of Rs.21,64,471 as total tax payable.
g) The appellant preferred an appeal before the CIT(A) challenging the order dated March 7, 2008 not only on merit but also on the ground that initiation of proceedings was barred by the period of limitation. The appellate authority, however, affirmed the order of assessing officer by overruling the objections taken by the appellant and further held that the time limit for initiating action for the period in question should be 6 years which is the maximum period available under the Act for reopening an assessment of the amount in question and in this case, it was passed within the said period.
h) Being dissatisfied, the appellant preferred an appeal before the Tribunal. The Tribunal by the order impugned accepted the reasons assigned by the CIT(A) on the question whether the amount paid by the appellant to the Globe International came within the purview of Section 194A of the Act but reduced the amount of default from Rs.60,54,301/- to Rs.49,20,681/- as according to the Tribunal the appellant was really in default of that amount in deducting the TDS. The Tribunal, accordingly, directed the Assessing Officer to recompute the tax on that amount and to calculate the consequential interest under Section 201(1A). The Tribunal, however, did not deal with the question of the period of limitation raised by the appellant.
i) Against the aforesaid order passed by the Tribunal this appeal has been filed.
A Division Bench of this Court at the time of admission of this appeal formulated the following questions of law for determination:
“(I) Whether the learned Tribunal below committed substantial error of law in not deciding the question raised by the appellant as to whether the Assessing Officer was competent to initiate proceeding under Section 201(1)/201(1A) of the Income Tax in the year 2007 for the assessment year 2002-03.
(II) Whether the learned Tribunal below committed substantial error of law in deciding the question whether Section 194A of the Act is applicable as no interest was paid to M/s. Globe International.” Ms. Sutapa Roy Chowdhury, the learned Counsel appearing on behalf of the appellant strenuously contended before us that although at the relevant point of time, the period of limitation provided in Section 231 of the Act for taking action under Section 201 had already been deleted from the Act and the said provision was re-introduced by way of incorporation of sub-section (3) of Section 201 of the Act subsequently only with effect from April 1, 2010, the Revenue cannot, at its sweet will, take action under Section 201 of the Act after such a long time when the time fixed for making ordinary assessment under the Act had already expired. Ms. Roy Chowdhury contends that even if there is no period of limitation prescribed in any statute for taking any action under its provision, such step should be taken within a reasonable period and in this case, the period which was earlier prescribed in Section 231 and has been reintroduced subsequently in the year 2010 by way of sub-section (3) of Section 201 should be held to be a reasonable period and if the said period is applied, the action taken by the Revenue against her client was patently barred by limitation. At any rate, Ms. Roy Chowdhury continues, the period of limitation prescribed for initiating action under Section 147 cannot have any application as wrongly held by the CIT(A) because it is not a case of “income escaping assessment” as provided therein. Ms. Roy Chowdhury, therefore, prays for quashing of the order under Section 201 of the Act on the above ground alone.
Even on merit, according to Ms. Roy Chowdhury, her client merely utilized the unspent credit limit of Globe International Ltd. and in lieu thereof, her client paid the amount to Globe International by way of reimbursement of the interest paid by the latter to the bank and thus, there was no liability to deduct in terms of Section 194A of the Act as her client did not pay anything to Globe International as interest. Ms. Roy Chowdhury, therefore, prays for setting aside the order of the Tribunal as well as the assessing officer on the ground that Section 194A had no application to the payment in question.
In support of her contentions, Ms. Roy Chowdhury placed strong reliance upon the following decisions:
1) State of Punjab vs. Bhatinda District Co-operative Milk Procucers Union Ltd reported in (2007) 11 SCC 363;
2) Commissioner of Income tax vs. Kelvinator of India Ltd reported in (2010) 320 ITR 561 (SC)= (2010) 2 SCC 723;
3) Commissioner of Income tax vs. NHK Japan Broadcasting Corporation reported in (2008) 305 ITR 137 (Delhi).
Mr. Nizamuddin, the learned Advocate appearing on behalf of the Revenue, has, on the other hand, opposed the aforesaid contentions of Ms. Roy Chowdhury and has contended that as the legislature at the relevant point of time had withdrawn the provisions of the period of limitation prescribed under Section 231 of the Act, the intention of the legislature was that there should not be any period of limitation for taking action under Section 201 and the liability to pay interest was mandatory and continuing so long the same was not paid. Mr. Nizamuddin further submits that the re-introduction of the selfsame period of limitation, which was earlier subsisting in Section 231 of the Act, by way of subsection (3) of Section 201 and that too, with effect from the year 2010, itself manifests the intention of the legislature that for the period in question, the action under Section 201 of the Act could be taken at any point of time so long the interest was not paid.
On merit, Mr. Nizamuddin submits that in whatever name the appellant paid the amount to the Globe International, it was really the amount of interest in substance and thus, Section 194A of the Act was clearly attracted. Mr. Nizamuddin, thus, prays for dismissal of the appeal. In support of his contention, Mr. Nizamuddin relied upon the following decisions:
1) M/S Hindustan Coca Cola Beverage Pvt. Ltd vs. CIT reported in (2007) 293 ITR 226 (SC)= AIR 2007 SC 2930;
2) Kanoi Industries P. Ltd vs. Asst. Commissioner of Income tax reported in 261 ITR 488 (CAL);
3) CIT vs. Trichur Co-operative Bank Ltd. reported in (2004) 266 ITR 574 (Kerala).
Therefore, the first question that arises for determination in this appeal is whether in the absence of any period of limitation for taking action under Section 201 at the relevant point of time which was earlier provided in Section 231 of the Act since repealed, the Revenue could be bound by any reasonable period of limitation for taking such action as contended by Ms. Roy Chowdhury.
After hearing the learned Counsel for the parties and after going through the relevant provisions of the Act as it stood at the relevant point of time, we find that the embargo of limitation provided earlier in Section 231 of the Act for taking action under Section 201 had been omitted with effect from April 1, 1989 and the selfsame bar of limitation was re-introduced by way of addition of sub-Section (3) of Section 201 with effect from April 1, 2010 and thus, in between these periods, there was no bar of the period of limitation of taking action under Section 201 of the Act. We, however, find substance in the contention of Ms. Roy Chowdhury that the time limit prescribed in Section 149 of the Act for taking action under Section 147 by giving notice under Section 148 cannot have any application for taking action under Section 201 of the Act as it is not a case of income escaping assessment but a case of inaction of a debtor to deduct tax on interest while making payment of the interest in violation of Section 194A of the Act. As pointed out the Supreme Court in the case of M/s. Hindustan Coca Cola Beverage Pvt. Ltd Vs. CIT (supra), relied upon by Mr. Nizamuddin, the Circular No. 275/201/95-IT (B), dated January 29, 1997 issued by the Central Board of Direct Taxes, has put an end to the controversy as regards the extent of liability of the deductor. The circular is quoted below:
"No demand visualized under Section 201(1) of the Income-tax Act should be enforced after the tax deductor has satisfied the officer-in-charge of TDS, that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under Section 201 (1A) of the Act till the date of payment of taxes by the deductee-assessee or the liability for penalty under Section 271C of the Income-tax Act."
Even if the person to whom interest was paid without deduction of tax had subsequently paid tax on that income, the deductor cannot escape the liability to pay interest under Section 201(1A) of the Act till the date of payment of taxes by the deductee-assessee nor can the deductor avoid the liability of penalty under Section 271C of the Act and the said provision is mandatory in nature. It is a different kind of a situation from the one of “income escaping assessment” and for the above reason, the legislature made a separate provision of bar of limitation as prescribed in Section 231 of the Act in spite of existence of the provision contained in Section 149 being conscious that the said provision cannot have any application in the matter of taking action under Section 201 and again re-introduced the same period of limitation by way of incorporation of subsection (3) of Section 201. Thus, the CIT(A) definitely committed an error of law in applying the time limit prescribed in Section 149 of the Act to 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.
Therefore, the next question is if in any given Statute, there is no period of limitation prescribed for taking an action under that Statute, whether such action should be taken within a reasonable period as contended by Ms. Roy Chowdhury.
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.
In this connection, we may profitably refer to decision of a Three-JudgeBench of the Supreme Court in the case of Uttam Namdeo Mahale Vs. Vithal Deo and others, reported in AIR 1997 SC 2695 where the contention that in the absence of any period of limitation for filing application for execution under a given Statute, a reasonable period of limitation should be applied and an application for execution filed after 12 years should not be entertained was turned down by making the following observations:
“Mr. Bhasme, learned counsel for the appellant, contends that in the absence of fixation of 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. Patel Raghav Natha (1970) 1 SCR 335: (AIR 1969 SC 1297); Ram Chand v. Union of India, (1994) 1 SCC 44: (1993 AIR SCW 3479) and Mohamad Kavi Mohamad Amin v. Fatmabai Ibrahim [CA No. 5023/85 decided on August 22, 1996]. 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 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 the purpose of this appeal is not there. Where there is statutory rule operating in the field, the implied power of exercise of the right within reasonable limitation does not arise. The cited decisions deal with that area and bear no relevance to the facts.”
(Emphasis supplied by us).
Even if we go back earlier to the year 1984, a Three-Judge-Bench of the Supreme Court in the case of Ishar Singh Vs. Financial Commissioner and others, reported in AIR 1984 SC 1719 by taking similar view held that no period of limitation would apply to the filing of an application under Section 43 of the Pepsu Tenancy Act of 1955 since no such period was prescribed by that Act and the Limitation Act had also no application to a proceeding under the Pepsu Tenancy Act.
Under the Income-tax Act, there is no scope of applying the provisions of the Limitation Act as would appear from the fact that in Section 260A itself, the power of condonation of delay in filing the appeal has been incorporated by the legislature by introducing sub-section 2A with effect from April 1, 2010 only and if the Limitation Act of its own had the application to such an appeal, there was no necessity of incorporation of such a provision in Section 260A and that too, with effect from April 1, 2010. So far as the Income-tax Act is concerned, its scope and the nature has been defined by the Supreme Court in the case of Rao Bahadur Ravulu Subba Rao Vs. CIT, reported in (1956) 30 ITR 163 thus:
“To sum up, the Indian Income tax Act is a self-contained code exhaustive of the matters dealt with therein and its provisions show an intention to depart from the common rule, qui facit per alium facit per se.”
Therefore, in applying the provisions contained in Section 201 of the Act where the previous bar of limitation was lifted by amendment and there was no period of limitation fixed for exercising such power at the relevant point of time, no question of invoking a reasonable period of limitation arises.
We now propose to deal with the decisions cited by Ms. Roy Chowdhury in this regard.
In the case of State of Punjab Vs. Bhatinda District Co-operative Milk Procucers Union Ltd (supra), a Two-Judge-Bench of the Supreme Court was dealing with a question as to what should be the period of limitation for taking suo motu action of revision under Section 21 of the Punjab General Sales Tax Act in the absence of any period mentioned therein when under the said Act the period of limitation fixed for completing assessment is three years which can be extended to maximum five years on recording reasons by the Commissioner. In such a case, the said Bench held that if no period of limitation is prescribed, the statutory authority must exercise its jurisdiction within a reasonable period.
According to the said Bench, what should be the reasonable period would depend upon the nature of the statute, rights and liabilities thereunder and other relevant factors. In that case, it was held that the revisional power should also be exercised within three years and in any event, should not exceed five years. With great respect to the learned judges of the Bench, we are unable to accept that decision as a precedent for the general proposition of law that when there is no period of limitation prescribed in a Statute for exercising a power, that must be exercised in all cases within the reasonable period even in the absence of any intension of the legislature to the contrary because the attention of the Bench was not drawn to the earlier decisions of the Supreme Court of larger bench in the cases of Uttam Namdeo Mahale Vs. Vithal Deo and others (supra) and Ishar Singh Vs. Financial Commissioner and others (supra) indicated by us above taking a contrary view.
In the case of CIT Vs. NHK Japan Broadcasting Corporation (supra), the Division Bench of Delhi High Court by relying upon the decision of the Supreme Court in the case of Punjab Bhatinda District Co-operative Milk Producers Union Ltd (supra), held that the period prescribed under Sections 147 and 148 of the Act should be reasonable period of time within which the power under Section 201 of the Act is required to be exercised. For the selfsame reason of nonconsideration of the decisions of the Supreme Court in the cases of Uttam Namdeo Mahale Vs. Vithal Deo and others (supra) and Ishar Singh Vs. Financial Commissioner and others (supra), we are unable to accept the said view of the Delhi High Court as a correct view. Moreover, we have already pointed out that the provisions of Sections 147 and 148 of the Act deal with a situation where income escaped assessment whereas Section 194A deals with the liability to deduct tax at the source although there may not be any escape of income from assessment in future. Therefore, in our opinion, the above Division Bench decision of the Delhi High Court does not reflect the correct position of law.
In the case of Kelvinator of India Ltd (supra), the Supreme Court was considering the question whether the concept of “change of opinion” stands obliterated with effect from 1-4-1989 i.e. after substitution of Section 147 of the Income Tax Act, 1961 by the Direct Tax Laws (Amendment) Act, 1987. In answering the above question, the Bench observed as follows:
“On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the assessing officer to make a back assessment, but in Section 147 of the Act (with effect from (1- 4-1989), they are given a go-by and only one condition has remained viz. that where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1-4-1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words “reason to believe” failing which, we are afraid, Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of “mere change of opinion”, which cannot be per se reason to reopen.
We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of “change of opinion” is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place.”
We fail to appreciate how the said decision can be of any help to the appellant for resolving the question as to the applicability of any reasonable period of limitation for invoking the power under Section 201 of the Act. In our opinion, the said decision is totally irrelevant for our purpose.
Thus, the decisions cited by Ms. Roy Chowdhury are of no assistance to her client. We, therefore, find no substance in the first point raised by Ms. Roy Chowdhury as regards the question of limitation.
On merit, Ms. Roy Chowdhury tried to convince us that her client did not take any loan from Globe International but utilized its unspent credit limits for importing the goods and thus, interest payable by the Global to the Bank was paid back to Global and as such, the interest was really payable by Globe International to the Bank and in such a circumstance, Section 194A was not attracted.
The word “interest” has been defined in Section 2 (28A) of the Act as follows:
“Section 2(28-A)- “interest” means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised;”
(Emphasis supplied by us).
Thus, the case of the appellant that it really paid commission to Globe International for utilizing its unspent credit facilities for import clearly comes within the definition of interest as it is a debt incurred by the appellant, which includes an obligation to pay fee or other charges in respect of the unspent credit facility of the Globe International. It appears that the appellant in its book described the amount as interest paid to Globe International and the said Globe International also confirmed the same before the Assessing Officer.
We, therefore, find no substance in the contention of Ms. Roy Chowdhury that her client had no obligation to deduct TDS from the amount paid to Globe International in terms of Section 194A of the Act.
On consideration of the entire materials on record we consequently find no merit in this appeal and the same is dismissed by answering the first question formulated by the Division Bench at the time of admission in the affirmative and against the Revenue although we ultimately hold that the order under Section 201 was not barred by limitation. So far as the second question is concerned, we answer the same in the negative and in favour of the Revenue.
In the facts and circumstances, there will be, however, no order as to costs.
(Bhaskar Bhattacharya J.)
I agree.
(Sambuddha Chakrabarti, J.)
Later:
After this order is passed, Mr. Roychowdhury prays for stay of operation of our order.
In view of what have been stated above, we find no reason to stay our order. Prayer is refused.
Xerox certified copy of this judgment be supplied to the parties, if applied for, within a week upon compliance of all other requisite formalities.