Sundari Fashions Pvt. Ltd., Surat V. The Income Tax Officer, TDS-3., Surat

ITA 129/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2294 (ITAT-SURAT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 12-01-2015
• Court: TRIBUNAL

Judgement Text

SUNDARI FASHIONS PVT. LTD. VS. ITO, TDS-3, SURAT/I.T.A. NO.129/AHD/2015 A.Y. 2007-08 PAGE 1 OF 9 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./I.T.A NO.129/AHD/2015/SRT /ASSESSMENT YEAR : 2007-08 SUNDARI FASHIONS PVT. LTD., E-1246, MILLENIUM TEXTILE MARKET, RING ROAD, SURAT 395001. PAN: AAGCS 9675 J VS. THE INCOME TAX OFFICER, TDS 3, SURAT. APPELLANT /RESPONDENT /ASSESSEE BY SHRI RASESH SHAH, CA /REVENUE BY SHRI J.K.CHANDNANI, SR.DR. / DATE OF HEARING: 07 - 06 - 2018 /PRONOUNCEMENT ON 18 - 06 - 2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV, [CIT(A)], SURAT, DATED 08.10.2014 FOR THE ASSESSMENT YEAR 2007-08 WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ITO, TDS-3, SURAT, (THE AO) U/S.201(1) R.W.S.201(1A) OF THE INCOME TAX ACT, 1961 DATED 12.03.2013 FOR THE ASSESSMENT YEAR 2007-08. 2. GROUNDS RAISED BY THE ASSESSEE READS AS UNDER : SUNDARI FASHIONS PVT. LTD. VS. ITO, TDS-3, SURAT/I.T.A. NO.129/AHD/2015 A.Y. 2007-08 PAGE 2 OF 9 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED ASSESSING OFFICER HAS ERRED IN PASSING THE ORDER U/S 201(1) AND 201(1A) BEYOND THE TIME LIMIT SPECIFIED U/S 201(3) OF THE I.T.ACT, 1961. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN INITIATING THE ASSESSMENT BEYOND REASONABLE TIME. 3. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN CALCULATION OF INTEREST U/S 201(1A) OF THE I.T. ACT, 1961. 3. SUCCINCTLY FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2007-08, IT WAS NOTICED THAT THE ASSESSEE MADE PAYMENTS OF RS.1,03,30,875/- TOWARDS JOB WORK AND DEDUCTED TDS THEREON OF RS.2,31,626/- U/S194C OF THE ACT DURING JANUARY 2007 AND FEBRUARY 2007 WHICH WAS DEPOSITED ON 04.04.2007 AND 11.04.2007 RESPECTIVELY AND SIMILARLY THE ASSESSEE HAS MADE PAYMENT OF RS.15,325/- TOWARDS COMMISSION PAYMENT U/S.194D ON WHICH TDS WAS DEDUCTED FOR RS.782/- DURING FEBRUARY 2007, BUT SAME WAS DEPOSITED LATE. THEREFORE, THESE PAYMENTS WERE DISALLOWED U/S.40(A)(IA) OF THE ACT IN THE ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT ON 20.11.2009. SINCE, THE ASSESSEE HAS FAILED TO DEPOSIT THE SAME WITHIN THE PRESCRIBED PERIOD TO THE GOVERNMENT ACCOUNT, THEREFORE, THE AO HAD INITIATED PROCEEDINGS U/S.201 AND 201(1A) FOR TREATING THE ASSESSEE IN DEFAULT VIDE NOTICE DATED 22.01.2013. AFTER RECEIPT OF REPLY FROM THE ASSESSEE, THE AO PASSED AN ORDER U/S.201 AND 201(1A) ON 12.03.2013 BY LEVYING INTEREST OF RS.13953/-. SUNDARI FASHIONS PVT. LTD. VS. ITO, TDS-3, SURAT/I.T.A. NO.129/AHD/2015 A.Y. 2007-08 PAGE 3 OF 9 4. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE CIT(A) BEFORE WHOM IT WAS CONTENDED THAT THE ORDER MADE U/S.201(1) PASSED ON 12.03.2013 SHOULD HAVE BEEN PASSED AT MOST BY 31.03.2011 AS PER THE PROVISO TO SECTION 201(3) OF THE ACT. WHEN THE AO HAS INITIATED ACTION U/S.201 BY ISSUING OF SHOW CAUSE NOTICE ON 22.01.2013, THE PROVISO OF SECTION 201(3) WAS ENFORCED. HENCE, THE ORDER PASSED ON 12.03.2013 IS BARRED BY THE LIMITATION, HENCE LIABLE TO BE QUASHED. FURTHER, IT WAS ALTERNATIVELY SUBMITTED THAT THE PROCEEDINGS U/S.201 AND 201(A) REQUIRED TO BE INITIATED WITHIN THE REASONABLE TIME OF 4 YEARS IN THE CASES WHERE PROVISIONS OF LIMITATION ARE NOT PRESCRIBED. THE ASSESSEE RELYING ON THE DECISION OF HON'BLE DELHI COURT IN THE CASE OF CIT VS. NHK JAPAN BROADCASTING CORPORATION [2008] 172 TAXMAN 230 (DEL) SUBMITTED THAT ACTION MUST BE INITIATED BY THE COMPETENT AUTHORITY WITHIN THE PERIOD OF 4 YEARS WHERE THE PERIOD OF LIMITATION IS NO PRESCRIBED U/S.201 OF THE ACT. HOWEVER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) [CIT-A] WAS OF THE VIEW THAT PROVISO TO SECTION 201 AND 201(3) HAVE BEEN INTRODUCED BY FINANCE ACT 2009 WITH EFFECT FROM 01.04.2010, HENCE 201(3) IS APPLICABLE ONLY WHERE THERE IS FAILURE TO DEDUCT THE TAX FROM A PERSON RESIDENT IN INDIA. ADMITTEDLY, THE CASE OF THE ASSESSEE IS NOT ONE WHERE THERE HAS BEEN FAILURE TO DEDUCT THE TAX, BUT ONE WHERE AFTER DEDUCTING THE TAX, HE HAS FAILED TO PAY THE TAX AS REQUIRED UNDER THE PROVISIONS OF THE ACT I.E. WITHIN THE TIME SUNDARI FASHIONS PVT. LTD. VS. ITO, TDS-3, SURAT/I.T.A. NO.129/AHD/2015 A.Y. 2007-08 PAGE 4 OF 9 PRESCRIBED. THEREFORE, EVEN THOUGH THE CASE OF THE ASSESSEE PERTAINS TO ASSESSMENT YEAR 2007-08, PROVISIONS OF SECTION 201(3) LIMITING THE TIME LIMIT PASSING OF ORDER U/S.201(1) FOR FAILURE TO DEDUCT TAX WOULD NOT APPLY IN THIS CASE. AS REGARDS, REASONABLENESS OF TIME WITHIN WHICH PROCEEDINGS U/S.201(1) AND 201(1A) CAN BE INITIATED WILL HAVE TO BE CONSIDERED AS 6 (SIX) YEAR FROM THE END OF THE FINANCIAL YEAR AS IT IS MENTIONED IN THE SECTION 201(3)(II). THE DECISIONS MENTIONED BY THE APPELLANT WOULD NOT OPERATE IN HIS CASE AS WITH EFFECT FROM 01.04.2010 I.E. INTRODUCTION OF SECTION 201(3) A LIMIT HAS BEEN PROVIDED IN THE ACT AND THIS WILL HAVE TO BE CONSIDERED AS REASONABLE LIMIT. IN THE CASE OF APPELLANT PROCEEDINGS WERE INITIATED ON 22.01.2013, THE CASE PERTAINS TO FINANCIAL YEAR 2006-07 AND THEREFORE, PROCEEDINGS HAVE BEEN INITIATED WITHIN 6 (SIX) YEARS FROM THE END OF FINANCIAL YEAR WILL HAVE TO BE CONSIDERED AS WITHIN REASONABLE TIME, THE PROCEEDINGS ARE, THEREFORE HELD TO BE VALID BOTH THE GROUND FAIL. WITH REGARD TO CALCULATION MISTAKE U/S.201(1A) OF INTEREST BY THE AO IS GIVEN IN PAGE 7 OF HIS ORDER, THE CIT(A) OBSERVED THAT THE AO IN HIS CALCULATION TAKEN THE PERIOD FROM FEBRUARY 2007 TO APRIL 2007 AS 4 (FOUR) MONTHS WHEN IT HAS TO BE 3 (THREE) MONTHS WHICHEVER WAY ONE LOOKS AT IT. THE AO IS DIRECTED TO COMPUTE THE INTEREST CHARGEABLE U/S.201(1A) CONSIDERING THE PERIOD FROM FEBRUARY 2007 TO APRIL 2007 IS 3 (THREE) MONTHS AS SUNDARI FASHIONS PVT. LTD. VS. ITO, TDS-3, SURAT/I.T.A. NO.129/AHD/2015 A.Y. 2007-08 PAGE 5 OF 9 AGAINST 4 (FOUR) MONTHS TAKEN BY THE AO. THEREFORE, THIS GROUND WAS PARTLY ALLOWED. 5. BEING AGGRIEVED, THE ASSESSEE HAS FILED APPEAL BEFORE THIS TRIBUNAL. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ORDER PASSED BY THE AO IS TIME BARRED AS THE TIME LIMIT PRESCRIBED UNDER THE PROVISION OF SECTION 201(3) OF THE ACT, THEREFORE, IT REQUIRES TO BE QUASHED. THE LD.COUNSEL, FURTHER SUBMITTED THAT THE I.T.ACT HAS NOT PRESCRIBED ANY LIMITATION PERIOD FOR INITIATION OF ACTION U/S.201 AND 201(1A), BUT COURTS HAVE HELD THAT IT CANNOT BE INITIATED BEYOND REASONABLE TIME. THE HON'BLE DELHI COURT IN THE CASE OF CIT VS. NHJ JAPAN BROADCASTING CORPORATION [2008] 172 TAXMAN 230 (DEL) RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF STATE GOVERNMENT OF PUNJAB VS. BHATINDA DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LIMITED [2007] 9 RC 637 : 11 SCC 363 HELD THAT ACTION MUST BE INITIATED BY THE COMPETENT AUTHORITY WITHIN A PERIOD OF 4 YEARS WHERE THE PERIOD OF LIMITATION IS NOT PRESCRIBED U/S.201 OF THE ACT. SIMILARLY, FOLLOWING THE AFORESAID DECISION OF SUPREME COURT, THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HATCHISON ESSAR TELECOM LTD. [2010] 323 ITR 230 (DEL) HELD THAT PROCEEDINGS U/S.201 / 201(1A) WERE ADMITTEDLY INITIATED BEYOND THE PERIOD OF 3 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS HAS ALSO BEYOND THE PERIOD OF 4 YEARS FROM THE END OF FINANCIAL YEAR. CONSEQUENTLY, THE TRIBUNAL HAS CORRECTLY SUNDARI FASHIONS PVT. LTD. VS. ITO, TDS-3, SURAT/I.T.A. NO.129/AHD/2015 A.Y. 2007-08 PAGE 6 OF 9 CONCLUDED THAT THE PROCEEDINGS WERE BEYOND TIME. THE LD.COUNSEL FURTHER PLACED RELIANCE ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT(TDS) VS. ANAGRAM WELLINGTON ASSETS MANAGEMENT CO. LTD IN TAX APPEAL NO.1426 & 1429 OF 2009 WITH TAX APPEAL NO 2252 OF 2010 DATED 09.08.2016 WHEREIN AFTER CONSIDERING THE DECISION PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT(TDS) VS. H.M.T. LTD. [2012] 340 ITR 219 (P & H), BHURA EXPORTS LTD. VS. ITO [2014] 365 ITR 548 (KOLKATA) WHICH ARE FAVOUR IN THE REVENUE AND THE DECISION IN THE CASE OF CIT VS. NHK JAPAN BROADCASTING CORPORATION [2008] 305 ITR 137 (DEL) WHICH FOLLOWED THE DECISION OF SUPREME COURT IN THE CASE OF STATE GOVERNMENT OF PUNJAB VS. BHATINDA DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LIMITED [2007] 9 RC 637 :11 SCC 363, CIT VS. SATLUJ JAL VIDHYUT NIGAM LIMITED [2012] 27 TAXMANN.COM 186 (HP), DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) VS. MAHINDRA & MAHINDRA LTD. [2014] 48 TAXMANN.COM 150, BOMBAY, CIT(TDS) VS. BHARAT HOTELS LTD. [2015] 64 TAXMANN.COM 325 (KARNATAKA), VODAFONE ESSAR MOBILE SERVICES LTD. VS. UNION OF INDIA [2016] 67 TAXMANN.COM 124 (DELHI) WHICH ARE IN FAVOUR OF THE ASSESSEE HELD THAT WE ARE OF THE VIEW THAT THE PERIOD OF 4 YEARS IS REASONABLE PERIOD AND WE CONCUR WITH THE VIEW TAKEN BY THE DELHI HIGH COURT, IT IS TRUE THAT THE COURT CANNOT LEGISLATE THE ACT, HOWEVER, THE ASSESSING OFFICER ALSO CANNOT BE GIVEN UNFETTERED POWERS, WHICH HE CAN EXERCISE EVEN BEYOND THE REASONABLE SUNDARI FASHIONS PVT. LTD. VS. ITO, TDS-3, SURAT/I.T.A. NO.129/AHD/2015 A.Y. 2007-08 PAGE 7 OF 9 PERIOD OF 4 YEARS. THEREFORE, IN OUR VIEW, PERIOD OF 4 YEARS IS JUST AND PROPER AND THE TRIBUNAL HAS NOT COMMITTED ANY ERROR WHILE PASSING THE IMPUGNED ORDER. THEREFORE, ALL THESE APPEALS ARE DISMISSED. 6. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ORDER PASSED BY THE AO IS BEYOND THE PRESCRIBED PERIOD, HENCE, REQUIRED TO BE QUASHED. 7. ON THE OTHER HAND, THE LD.SENIOR DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE CONSIDERED THE FACTS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE SUBMISSIONS, IT IS CLEAR THAT THERE ARE TWO VIEWS ON OF DIFFERENT HIGH COURTS ARE AVAILABLE WITH REGARD TO THE QUESTION INVOLVED IN THE PRESENT APPEAL. THEREFORE, IT IS APPROPRIATE TO CONSIDER THE PROVISIONS OF SECTION 201(3) OF THE ACT. IN THE PRESENT CASE APPLICABLE TO THE FINANCIAL YEAR 2006-07 RELEVANT TO A.Y.2007-08. THE RELEVANT PORTION OF 201(3) OF PRIOR TO ITS AMENDMENTS THEN APPLICABLE TO THE ASSESSEE FOR THE ASSESSEE ARE AS UNDER :- 4. SUBSTITUTED BY THE FINANCE (NO.2) ACT, 2014 W.E.F. 1-10-2-14, PRIOR TO ITS SUBSTITUTION, SUB-SECTION (3), AS AMENDED BY THE FINANCE ACT, 2012, W.R.E.F. 1-4-2010, READS AS UNDER : (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 SUNDARI FASHIONS PVT. LTD. VS. ITO, TDS-3, SURAT/I.T.A. NO.129/AHD/2015 A.Y. 2007-08 PAGE 8 OF 9 (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 1 ST DAY OF APRIL, 2007 MAY BE PASSED AT ANY TIME ON OR BEFORE THE 21 ST DAY OF MARCH, 2011. FROM THE ABOVE, WE FIND THAT THE PROVISO TO SEC.201(3) IS APPLICABLE TO THE INSTANT ASSESSEE FOR THE ASSESSMENT YEAR 2008-09, AS IT CLEARLY STATES THAT THE TIME LIMIT FOR PASSING THE ORDER U/S 201(3) OF THE ACT FOR A FINANCIAL YEAR COMMENCING ON OR BEFORE 1 ST DAY OF APRIL 2007 MAY BE PASSED AT ANY TIME ON OR BEFORE THE 31 ST MARCH 2011. IN THE PRESENT CASE, THE FINANCIAL YEAR IS BEGINNING W.E.F. 1.4.2007 SO THE TIME LIMIT FOR PASSING THE ORDER U/S 201(3) OF THE ACT BY THE AO IS 31.3.2011. HOWEVER, THE AO HAS PASSED THE ORDERS IN THE PRESENT CASE ON SEVERAL DATES I.E., ON 11.04.2012, 17.3.2012 AND 16.3.2012 RESPECTIVELY WHICH ARE CLEARLY AFTER THE STIPULATED TIME. ACCORDINGLY, WE REVERSE THE ORDERS OF AUTHORITIES BELOW. 9. WE, FURTHER FIND THAT THE LD.CIT(A) HAS CONSIDERED 6 (SIX) YEARS FROM THE END OF FINANCIAL YEAR IS THE TIME OF PASSING THE ORDER U/S.201(1) AND 201(1A) AS PER SECTION 201(3)(II) OF THE ACT AS THE PROVISIONS WERE INTRODUCED BY THE FINANCE ACT 2012 WITH RETROSPECTIVE EFFECT FROM 0.04.2010 AND THE ORDER UNDER CONSIDERATION WAS PASSED ON 12.03.2013. HOWEVER, THIS CONTENTION OF THE CIT(A) IS TRUE WHERE THE FINANCIAL YEAR COMMENCING ON OR AFTER 01.04.2008. SINCE THE FINANCIAL YEAR UNDER CONSIDERATION IS COMMENCING AN YEAR BEFORE THE FIRST DAY OF APRIL 2007, THEREFORE, AS PER PROVISO TO SECTION 201(3), THE ORDER U/S.201 (1A) CAN BE PASSED AT ANY TIME ON OR BEFORE THE 21 ST DAY OF MARCH 2011. SINCE, THE IMPUGNED ORDER HAS BEEN PASSED ON 12.03.2013, THEREFORE, IT IS BEYOND THE TIME PRESCRIBED UNDER PROVISO TO SECTION 201(3) OF THE ACT. MOREOVER, THE TIME LIMIT OF 4 YEARS IS SUNDARI FASHIONS PVT. LTD. VS. ITO, TDS-3, SURAT/I.T.A. NO.129/AHD/2015 A.Y. 2007-08 PAGE 9 OF 9 REASONABLE TIME LIMIT OF AS CONSIDERED BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT(TDS) VS. ANAGRAM WELLINGTON ASSETS MANAGEMENT CO. LTD (SUPRA) WHEREIN IT WAS HELD AS UNDER : WE ARE OF THE VIEW THAT THE PERIOD OF 4 YEARS IS REASONABLE PERIOD AND WE CONCUR WITH THE VIEW TAKEN BY THE DELHI HIGH COURT, IT IS TRUE THAT THE COURT CANNOT LEGISLATE THE ACT, HOWEVER, THE ASSESSING OFFICER ALSO CANNOT BE GIVEN UNFETTERED POWERS, WHICH HE CAN EXERCISE EVEN BEYOND THE REASONABLE PERIOD OF 4 YEARS. THEREFORE, IN OUR VIEW, PERIOD OF 4 YEARS IS JUST AND PROPER AND THE TRIBUNAL HAS NOT COMMITTED ANY ERROR WHILE PASSING THE IMPUGNED ORDER. THEREFORE, ALL THESE APPEALS ARE DISMISSED. 10. THEREFORE, THE ORDER PASSED BY THE AO IS BARRED BY THE LIMITATION, ACCORDINGLY, WE REVERSE THE ORDERS OF THE AUTHORITIES BELOW AND QUASHED THE SAME. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 12. THE ORDER PRONOUNCED IN THE OPEN COURT ON 18-06-2018. SD/- SD/- ( . . ) /(C.M. GARG) ( . . ) /(O.P.MEENA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER / SURAT: / DATED : 18 TH JUN, 2018 / SGR COPY SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT