ITO, Ward-15(1) (TDS), Hyderabad V. M/s. NVS Creations, Hyderabad

ITA 1355/HYD/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7173 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 1998-1999
• Appeal Filed On: 20-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T DIWAKAR PRASAD
• Keywords: Period of limitation; Time period of passing order
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, A.M. & SMT. ASHA VIJAYARAGHAVAN, J.M. ITA NO. 1355/HYD/2011 ASSESSMENT YEAR 1998-99 THE ITO WARD 15(1), HYDERABAD VS M/S NVS CREATIONS, NO.6 - 3-900/ RAJ BHAVAN ROAD, SOMAJIGUDA, HYDERABAD. (PAN AAHPN 0028N) APPELLANT RESPONDENT APPELLANT BY : SHRI T. DIWAKAR PRASAD RESPONDENT BY : NONE DATE OF HEARING : 3.11.2011 DATE OF PRONOUNCEMENT : ORDER PER ASHA VIJAYARAGHAVAN, JM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER PASSED BY THE CIT(A) II, HYDERABAD DATED 13.5.2011 AND PERTAINS TO THE ASSESSMENT YEAR 1998-99. 2. BRIEF FACTS OF THE CASE THAT THE ASSESSEE WAS A PRODUCER OF MOVIES. DURING THE ASSESSMENT YEAR 1998-99 IT HAS ENTRUSTED THE WORK OF PRODUCING A MOVIE ON ASSESSEES BEHALF TO A PERSON BY NAME SHRI N. GOPI KRISHNA OF CHENNAI FOR A TOTA L CONSIDERATION OF RS.1,47,00,000/- AND DEBITED THE S AME TO P&L ACCOUNT. AS SEEN FROM THE 3CD REPORT, NO TDS WAS DE DUCTED FROM THE ABOVE PAYMENTS TO SRI N. GOPI KRISHNA. ON THIS, RAP HAS RAISED AN OBJECTION STATING THAT NO RECOVERY O F TDS U/S 194C ATTRACT THE PROVISIONS OF SECTION 201(1A) AND 271C OF THE IT ACT. THE ASSESSING OFFICER ISSUED A SHOW CAUSE LETTER DATED ITA NO.1355/HYD/2011 M/S NVS CREATIONS, HYDERABAD 2 29.10.2008 CALLING FOR EXPLANATION WHY DEMAND U/S 2 01(1) AND INTEREST U/S 201(1A) SHOULD NOT BE RAISED. IN REPL Y TO THIS, THE ASSESSEE FILED ITS EXPLANATION STATING THAT THE REC IPIENT HAS OFFERED THIS INCOME TO TAX, THEREFORE THERE IS NO R EVENUE LOSS TO THE DEPARTMENT. IN SUPPORT OF ITS CLAIM THE LEARNE D COUNSEL FOR THE ASSESSEE FILED THE DECISION IN THE FOLLOWING CA SES WHEREIN IT WAS HELD THAT WHERE THE TAX WAS PAID BY THE OTHER P ARTY, THE ASSESSING OFFICER HAD NO JURISDICTION U/S 201 TO DE MAND FURTHER TAX FROM THE ASSESSEE IN RESPECT OF SHORT DEDUCTION OF NON DEDUCTION OF TDS: 1) CIT VS. MP AGRO MORARJI FERTILIZERS LTD. (176 IT R 282) (MP) 2. CIT VS. LIC OF INDIA (166 ITR 191) (MP) 3. ITO VS. AS BABU SAH 86 ITD 283 (MAD. ITAT) 4. MANUK INVESTMENTS P LTD. VS. ITO (55 ITD 429 (CH D. ITAT) THE SAME WAS REAFFIRMED BY SUPREME COURT IN THEIR J UDGEMENT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (293 I TR 226) (SC). 3. ON VERIFICATION OF THE PROFIT AND LOSS ACCOUNT OF GOPI KRISHNA, THE ASSESSING OFFICER FOUND THAT THE RECEI PT OF RS.1,47,00,000/- WAS SHOWN AS ROYALTY. THEREFORE, THE ABOVE EXPENDITURE OF THE ASSESSEE WAS ASSESSED TO TAX AS INCOME OF THE RECIPIENT AND PAID TAXES. AS FAR AS THE TDS IS CON CERNED, THE ASSESSING OFFICER STATED THAT THE SAME AMOUNT CANNO T BE REALISED FROM THE ASSESSEE BY WAY OF DEMAND U/S 201 (1), BUT THE ASSESSEE IS LIABLE TO PAY INTEREST FOR THE DELAY I. E. FOR THE PERIOD FROM THE DATE OF PAYMENT BY THE DEDUCTOR TO THE DAT E OF FILING OF RETURN BY THE DEDUCTEE. AS SUCH, THE ASSESSING OFF ICER TREATED ITA NO.1355/HYD/2011 M/S NVS CREATIONS, HYDERABAD 3 THE ASSESSEE IS IN DEFAULT U/S 201(1A) AND ACCORDIN GLY LEVIED INTEREST U/S 201(1A) AT RS.75,337/-. 4. AGGRIEVED WITH THE ORDER OF THE ASSESSING OFFIC ER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 5. THE ASSESSEES AUTHORISED REPRESENTATIVE REITER ATED THE CONTENTIONS RAISED BEFORE THE ASSESSING OFFICER AND FURTHER STATED AS FOLLOWS: 5.1. IN THE PRESENT CASE THE RECIPIENT OF ROYALTY MR. GOPI KRISHNA HAS ALREADY PAID TAX ON THE TOTAL AMOUNT AN D FILED HIS RETURN OF INCOME, AS SUCH THE ASSESSING OFFICER -15 (1) HAS NOT RAISED THE TAX U/S 201(1) OF THE IT ACT BUT HOWEVER HE HAS LEVIED INTEREST OF RS.75,337/- U/S 201(1A) OF THE IT AND H IS ORDER IS DATED 31.3.2009 AND WHEREAS THE ASSESSMENT IS COMPL ETED ON 2.2.2001 THAT IS AFTER A LAPSE OF 8 YEARS OF TIME T HIS DEMAND IS RAISED, WHICH IS HIGHLY ILLOGICAL AND INCORRECT. 5.2. THE ASSESSING OFFICER IS INCORRECT TO RAISE A DEMAND U/S 201(1A) FOR THE CLOSED MATTER AFTER LAPSE OF MORE T HAN 8 YEARS OF TIME AND THE DEMAND U/S 201(1A) SHOULD BE USUALLY B E RAISED WITHIN 4 YEARS OF TIME AND THIS VIEW WAS TAKEN BY V ARIOUS COURTS OF LAW WHICH ARE CITED BELOW AS THE SECTION 201(1A) IS SILENT REGARDING THE PERIOD WITHIN WHICH THE DEMAND CAN BE RAISED. I) ITO VS. GD GOENKA PUBLIC SCHOOL NO.1 115 ITD 395 (DELHI TRIBUNAL) II) NHK JAPAN BROADCASTING CORPORATION VS. DCIT (20 06) 101 TTJ 0292 (DELHI TRIB.) III) GOVT. OF INDIA CITADEL FINE PHARMACEUTICALS (1 900) 184 ITR 467) (SC) ITA NO.1355/HYD/2011 M/S NVS CREATIONS, HYDERABAD 4 IV) RAYMOND WOLLEN MILLS LTD. VS. ITO (1996) (57 IT D 536) (BOMBAY) V) SHERATON INTERNATIONAL INC. VS. DCIT (2002) 83 I TD 110 (DELHI) VI) SAHARA AIRLINES LTD. VS. DCIT (83 ITD 11) (DELH I) VII) ACIT VS. PEPSI FOODS LTD. (2003) 129 TAXMAN 73 (DELHI TRIBUNAL) VIII) MISTSUBISHI CORPORATION VS. DCIT 85 ITD 414 ( DELHI) IX) CIT VS. NARSEE NAGSEE & CO. (40 ITR 307) (SC) X) UNION OF INDIA VS. BRITISH INDIA CORPORATION LTD . (268 ITD 481) XI) UP STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD . VS. ITO (81 ITR 173) (LUCKNOW TRIBUNAL) XII) CIT VS. DUNLOP RUBBER CO. (INDIA) LTD. (1980) 121 ITR 476 (CAL.) 6. IN VIEW OF THE ABOVE DECISIONS (SUPRA) THE COUR TS HAVE TAKEN A STANDARD DECISION THAT THE SECTION 201 & 20 1(1A) ARE APPLICABLE IF THEY ARE INVOKED WITHIN 4 YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE DEFAULT OCCURRED AND BE YOND THAT PERIOD THE HONBLE COURTS HAVE TAKEN A VIEW THAT TH E PENALTY U/S 201 & INTEREST U/S 201(1A) CANNOT BE LEVIED AND CHA RGED FROM THE DEFAULTER, EVEN THOUGH THE SECTION 201 & 201 (1 A) ARE SILENT REGARDING THE LIMITATION PERIOD. 7. AS SUCH THE HONBLE JURIES OF VARIOUS HIGH COUR TS AND TRIBUNAL HAVE UNIVOCALLY STATED THAT THE PROVISIONS OF SECTION 201 & 201(1A) CANNOT BE INVOKED BEYOND COMPLETION O F 4 YEARS FROM THE END OF THE FINANCIAL YEAR. 8. IN THE LIGHT OF THE VARIOUS DECISIONS CITED ABO VE, WE REQUEST THE CIT(A) II TO CANCEL THE INTEREST OF RS .75,337/- LEVIED U/S 201(1A) OF THE ACT. ITA NO.1355/HYD/2011 M/S NVS CREATIONS, HYDERABAD 5 9. THE CIT(A) OBSERVED THAT VARIOUS CASE LAWS RELI ED ON BY THE ASSESSEE DEAL WITH THE TIME LIMITS FOR THE PROCEEDI NGS U/S 201 OF THE ACT AND THE FACTS OF THOSE CASES WERE DIFFERENT AND THE PERIODS OF LIMITATIONS ARE ALSO VARIED. HOWEVER, T HE CIT(A) HAS POINTED OUT IN THE CASE OF RAYMOND VS. ITO (57 ITD 536) (BOM.) ON WHICH THE ASSESSEE HAS PLACED RELIANCE THE TIME GAP BETWEEN THE END OF THE RELEVANT PREVIOUS YEAR AND LEVY OF I NTEREST U/S 201(1A) RANGE 4 YEARS TO 11 YEARS WHICH WAS HELD TO BE UNREASONABLE AND UN JUSTIFIED. FURTHER, THE CIT(A) HELD THAT: IN THE PRESENT CASE THE PREVIOUS YEAR ENDED ON 31. 3.1998 AND THE SHOW CAUSE LETTER PROPOSING TO LEVY TAX U/S 201 AND INTEREST U/S 201(1A) WAS ISSUED ON 29.10.2008 A ND THE ORDER U/S 201(1A) WAS PASSED ON 31.3.2009. INT EREST U/S 201(1A) IS MANDATORY, BUT THERE WAS INORDINATE DELAY IN INITIATING THE PROCEEDINGS U/S 201 OF THE ACT. IN VIEW OF THE FACT THAT THE SUBSEQUENT AMENDED PROVISIONS WHI CH CAPPED THE TIME LIMIT FOR PROCEEDINGS U/S 201 AT 4 YEARS AND ALSO CONSIDERING THE FACT THAT THE DEDUCTEE HAD PAID ALL THE TAXES ON THE AMOUNT RECEIVED FROM THE ASSES SEE IN TIME, HE HELD THAT LEVY OF PENAL INTEREST AFTER A G AP OF 8 YEARS IS UNREASONABLE AND THEREFORE, THE INTEREST L EVIED U/S 201(1A) AT RS.75,337/- WAS DELETED. 10. AGGRIEVED, BY THE ORDER OF THE CIT(A) THE DEPA RTMENT HAS RAISED THE FOLLOWING GROUNDS: 1. THE CIT(A) HAS ERRED IN LAW AND AS TO THE FACTS OF THE CASE. 2. THE CIT(A) AGREED THAT THE INTEREST U/S 201(1A) IS MANDATORY AND THERE IS NO TIME LIMIT FOR LEVY OF IN TEREST U/S 201(1A) AND THEREFORE THE RELIEF GRANTED IS NOT JUS TIFIED. THE ITA NO.1355/HYD/2011 M/S NVS CREATIONS, HYDERABAD 6 INTEREST CHARGED U/S 201(1A) IS ONLY UPTO THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE. 3. THE TIME LIMIT PRESCRIBED UNDER THE ACT REFERRE D BY CIT(A) IS ONLY W.,E.F. 1.4.2010 AND IN ANY CASE PERTAINS T O PRINCIPLE DEMAND U/S 201(1) AND NOT TO INTEREST U/S 201(1A). 11. WE HAVE GONE THROUGH THE RECORDS. IN THE CASE OF ITO VS. G D GOENKA PUBLIC SCHOOL (115 ITD 395) (DELHI) AND IN THE CASE OF RAYMOND WOLLEN MILLS LTD. VS. ITO (1996) (57 ITD 536) (BOMBAY) IT WAS HELD THAT: ORDINARILY THE ORDER U/S 201 SHOULD BE PASSED WITH IN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR FOR WHICH THE DEFAULT OCCURRED. HOWEVER, WHERE SUCH DEFAULT WAS NOT KNOWN TO THE ASSESSING OFFICER OR THE ASSESSEE DELA YED THE PROCEEDINGS; THERE CAN BE SOME EXTENSION TO THE AFO RESAID LIMIT OF FOUR YEARS. IN THE INSTANT CASE, THE REVE NUE HAD NOT MADE OUT ANY CASE THAT THE DELAY IN PASSING THE ORD ER WAS ON ACCOUNT OF THE ASSESSEE. NO ARGUMENT HAD BEEN ADVANCED REGARDING THE DATE ON WHICH THE ASSESSING OFFICER BECAME AWARE OF THE ALLEGED DEFAULT. THE D ELAY IN PASSING THE ORDER WAS OF SUCH A LONG PERIOD THAT DU E DATE FOR FILING THE RETURN OF INCOME BY THE TEACHERS AND STAFF MEMBERS WOULD HAVE EXPIRED LONG AGO. THEREFORE, A DIRECT ACTION COULD NOT BE TAKEN AGAINST THEM FOR ASSESSIN G PERQUISITES IN THEIR HANDS. FOLLOWING THE ORDERS I N THE CASE OF RAYMOND WOOLLEN MILLS LTD. VS. ITO (1996) (57 IT D 536) (BOM.) AND SAHARA AIRLINES LTD. VS. DCIT (2002) (83 ITD 11) (DELHI), IT WAS TO BE HELD THAT ORDERS U/S 201 (1) AND 201(1A) WERE BARRED BY LIMITATION. 12. FURTHER, RELYING ON THE DECISION IN THE CASE O F HONBLE SUPREME COURT IN THE CASE OF GOVT. OF INDIA VS. CIT ADEL FINE PHARMACEUTICALS AND OTHERS (SC) (184 ITR 467) (SC), WHEREIN IT WAS HELD : ITA NO.1355/HYD/2011 M/S NVS CREATIONS, HYDERABAD 7 SECTION 19(1) R.W.S. 3(3) OF THE MEDICINAL AND TOIL ET PREPARATIONS (EXCISE DUTIES) ACT, 1995 CONFER WIDE POWERS ON THE CENTRAL GOVT. TO MAKE RULES PROVIDE FOR THE ASSESSMENT AND COLLECTIO N OF DUTIES, AND THE MANNER IN WHICH THE DUTY IS TO BE PAID AS WELL AS FOR THE RECOVERY OF DUTY NOT PAID AT ALL. THE CENTRAL GOVT. IN EXCI SE OF ITS POWERS U/S 19 OF THE ACT, HAS FRAMED THE MEDICINAL AND TOILET PREPARATIONS (EXCISE DUTIES) RULES, 1956. THE RULES CONTAINED I N CHAPTER III OF THE RULES, PARTICULARLY RULES 6, 9, 10 AND 11, PROVIDE FOR PAYMENT AND RECOVERY OF DUTY AND ALSO THE TIME AND MANNER OF IT S PAYMENTS. RULE 12 IS DESIGNED TO CONFER RESIDUARY POWER FOR RECOVE RY OF DUTY IF UNPAID ON ACCOUNT OF SHORT LEVY OR DEFICIENCY OR IF , FOR ANY REASON, IT REMAINS UNPAID. IN SUBSTANCE, RULE 12 CONTAINS AN ADDITIONAL SAFEGUARD FOR RECOVERY OF DUTY; IT DOES NOT CREATE ANY ADDITIONAL CHARGE OR LIABILITY ON THE MANUFACTURER FOR THE PAY MENT OF THE DUTY. THE LIABILITY TO PAY TAX IS CREATED BY THE CHARGING SECTION 3 AND RULE 12 CONFERS POWER ON THE AUTHORISED OFFICER TO RECOV ER DUTY IF THE SAME HAS NOT BEEN PAID ON ACCOUNT OF ANY SHORT LEVY OR D EFICIENCY OR FOR ANY OTHER REASON. RULE 12 IS REFERABLE TO SECTION 19(2)(I) OF THE ACT. THE RULE CARRIES OUT THE PURPOSES OF THE ACT AND IT SEEKS TO PROVIDE FOR RECOVERY OF DUTY AS CONTEMPLATED BY SECTION 3(3 ), AND IS, THEREFORE, INTRA VIRUS THE ACT. ALTHOUGH RULE 12 DOES NOT PRESCRIBE ANY PERIOD WITH IN WHICH RECOVERY OF ANY DUTY AS CONTEMPLATED BY THE RULE IS TO BE MADE, THAT BY ITSELF DOES NOT RENDER THE RULE UNREASONABLE OR VIOLATIVE OF ARTICLE 14 OF THE CONSTITUTION. IN THE ABSENCE OF ANY PERI OD OF LIMITATION, IT IS SETTLED THAT EVERY AUTHORITY IS TO EXERCISE THE POW ER WITHIN A REASONABLE PERIOD. WHENEVER A QUESTION REGARDING I NORDINATE DELAY IN THE ISSUANCE OF A NOTICE OF DEMAND IS RAISED, IT WOULD BE OPEN TO THE ASSESSEE TO CONTEND THAT IT IS BAD ON THE GROUN D OF DELAY AND IT WILL BE FOR THE OFFICER CONCERNED TO CONSIDER THE Q UESTION WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE NOTICE OF DEMAND FOR RECOVERY WAS MADE WITHIN A REASONABLE PERIOD. WHAT WOULD BE A REASONABLE PERIOD WOULD DEPEND ON THE FACTS OF EACH CASE, AND NO HARD AND FAST RULE CAN BE LAID DOWN IN THIS REGARD. 2) 2) 2) 2) IN THE CASE OF IN THE CASE OF IN THE CASE OF IN THE CASE OF CHANDRA RANGANATHAN AND CHANDRA RANGANATHAN AND CHANDRA RANGANATHAN AND CHANDRA RANGANATHAN AND OTEHRS VS CIT (326 ITR 51): OTEHRS VS CIT (326 ITR 51): OTEHRS VS CIT (326 ITR 51): OTEHRS VS CIT (326 ITR 51): ITA NO.1355/HYD/2011 M/S NVS CREATIONS, HYDERABAD 8 DURING THE COURSE OF HEARING OF THESE APPEALS, IT W AS BROUGHT TO OUR NOTICE THAT BY THE SUBSEQUENT LETTER DATED 8 MAY, 2 009, ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, IT WAS INDICATED THA T THE MATTER HAD BEEN REVIEWED ON THE BASIS OF THE JUDGEMENT OF THE BOMBAY HIGH COURT DATED JULY, 4 2008, IN THE CIT VS. KOODATHIL KASLLYATAN AMBUJAKSHAN (2009 ) (309 ITR 113) (BOM.) , 2008 219 CTR (BOM.) 80, (2008) 12 DTR 138 AND IT WAS HELD THAT AMOUNTS RECE IVED BY RETIRING EMPLOYEES OF THE RBI WOULD BE ELIGIBLE FOR EXEMPTIO N UNDER THE AFORESAID PROVISIONS OF THE INCOME TAX ACT. ON BEH ALF OF THE UNION OF INDIA AND THE CIT, THE RESPONDENT HEREIN, IT WAS SUBMITTED THAT IN VIEW OF THE SAID CIRCULAR, THE RESPONDENT WOULD ALL OW THE BENEFIT OF DEDUCTION TO THE ASSESSEES U/S 10(10C) OF THE IT A CT 1961, AS FAR AS THE RETIRED EMPLOYEES OF THE RESERVE BANK OF INDIA ARE CONCERNED. HAVING REGARD TO THE ABOVE, THE APPEALS SUCCEEDED A ND ARE ALLOWED. 13. RESPECTFULLY FOLLOWING THE DECISIONS CITED SUP RA, WE ARE OF THE OPINION THAT LEVY OF PENAL INTEREST AFTER A GAP OF 8 YEARS IS UNREASONABLE AND THEREFORE, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE REVENUE APPEAL. ACCORDINGLY, WE D ELETE THE INTEREST LEVIED U/S 201 (1A) AT RS.75,337/-. 14. IN THE RESULT THE REVENUE APPEAL STANDS DISMIS SED. ODER PRONOUNCED IN THE OPEN COURT 14.12.2011 SD/- SD/- (CHANDRA P OOJARI) ( (ASHA VIJAYA RAGHAVAN) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED THE 14.12. 2011 COPY FORWARDED TO: 1. THE ITO WARD 15(1), HYDERABAD 2. M/S NVS CREATIONS, NO.6-3-900/5, RAJ BHAVAN ROAD, SOMAJIGUDA, HYDERABAD 3. THE CIT(A)- II, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/