Adani Enterprises Ltd., Ahmedabad V. DCIT TDS Circle, Ahmedabad

ITA 1805/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9031 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 03-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Assessee Lawyers: V R CHOKSHI
• Keywords: Period of limitation; Time period of passing order; TDS; Set aside

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 1805/AHD/2017 ( ASSESSMENT YEAR : 2009-10) ADANI ENTERPRISE LTD. ADANI HOUSE, NR. MITHAKHALI SIX ROAD, NAVARANGPURA, AHMEDABAD 380015 / VS. DCIT TDS CIRCLE A WING, 3 RD FLOOR, PRATYAKSHAKAR BHAVAN, AMBAWADI, AHMEDABAD 3800015 ./ ./ PAN/GIR NO. : AABCA2804L ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI V. R. CHOKSHI, A.R. / RESPONDENT BY : SHRI L. P. JAIN, SR.D.R. DATE OF HEARING 01/07/2019 !'# / DATE OF PRONOUNCEMENT 09/07/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-8, AHMEDABAD (CIT(A) IN SHORT), DATED 0 1.06.2017 ARISING IN THE ASSESSMENT ORDER DATED 18.03.2015 PA SSED BY THE ITA NO. 1805/AHD/17 [ADANI ENTERPRISE LTD. VS. DCIT TDS] A.Y. 2009-10 - 2 - ASSESSING OFFICER (AO) UNDER S. 206C(6A)/206C(7) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2009-10. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED C.I.T.(APPEALS) ERRED IN REJECTING THE RELEVANT GRO UND OF APPEAL RAISED BEFORE HIM BY THE APPELLANT-COMPANY TO THE EFFECT T HAT THE ORDER PASSED BY THE ASSESSING OFFICER DATED 18.3.2015 UNDER SECTION S 206C(6AJ / 206C(7) OF THE I. T. ACT IS BAD IN LAW, BEING TIME BARRED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED C.I.T.(APPEALS) ERRED IN CONFIRMING THE ASSESSING O FFICER'S FINDING THAT THE APPELLANT-COMPANY IS AN 'ASSESSES IN DEFAULT' U/S.2 06C(6A) OF THE I.T. ACT FOR NON-COLLECTION OF TAX AT SOURCE ON SALE OF HEAV Y SCRAP. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED C.I.T.(APPEALS) ERRED IN CONFIRMING THE ASSESSING O FFICER'S ORDER LEVYING INTEREST U/S.206C(7) OF THE I.T. ACT. 3. THE ASSESSEE COMPANY IS INTER ALIA ENGAGED IN TRADING OF SCRAP MATERIAL WHEREIN IT IMPORTS THE SAME AND WITHOUT CH ANGING ANY FORM OR WITHOUT APPLYING ANY PROCESS SELLS THE SAME IN D OMESTIC MARKET. DURING THE FY 2008-09 RELEVANT TO AY 2009-10 IN QUE STION, THE ASSESSEE SOLD SCRAP AMOUNTING TO RS.10,27,26,992/ - TO VARIOUS PARTIES ON WHICH TAX WAS NOT COLLECTED AS SOURCE AS CONTEMPLATED UNDER S.206C(1) OF THE ACT. IN RESPONSE TO THE SHO W CAUSE NOTICE ISSUED FOR FAILURE TO COLLECT TAX AT SOURCE ON SALE OF SCRAP, THE ASSESSEE CONTENDED THAT SECTION 206C OF THE ACT IS INAPPLICABLE IN THE FACTS OF THE CASE AS THE ASSESSEE IS MERELY A TRADE R OF SUCH SCRAP AND THE SCRAP IS NOT GENERATED IN ANY OF THE MANUFACT URING PROCESS CARRIED OUT BY IT. IT WAS CONTENDED BEFORE THE AO THAT THE SECTION 206C OF THE ACT IS APPLICABLE ONLY WHEN THE SCRAP IS GENERATED AND/OR PRODUCED DURING THE COURSE OF MANUFACTURING OR MECHANICAL WORKING OF MATERIALS IN THE HANDS OF THE ASSESSEE. THE ASSESSEE ALSO TOOK STAND THAT THE NOTICE FOR ALLEGED DEFAULT UNDE R S. 206C(1) OF THE ITA NO. 1805/AHD/17 [ADANI ENTERPRISE LTD. VS. DCIT TDS] A.Y. 2009-10 - 3 - ACT HAS BEEN ISSUED ON 04.08.2014 I.E. BEYOND THE R EASONABLE PERIOD OF FOUR YEARS AND HENCE IS TIME BARRED. THE AO HOW EVER DID NOT FIND SUBSTANCE IN EITHER OF THE PLEA AND TREATED THE ASS ESSEE AS IN DEFAULT UNDER S.206C(6A) OF THE ACT IN RESPECT OF FAILURE T O COLLECT TAX. A DEMAND OF RS.1,48,527/- WAS IMPOSED FOR DEFAULT IN RESPECT OF TAX UNDER S.206C(6A) OF THE ACT. INTEREST OF RS.1,71,3 97/- ON SUCH DEFAULT WAS ALSO LEVIED UNDER S.206C(7) OF THE ACT. THE AG GREGATE DEMAND OF RS.3,19,934/- WAS ACCORDINGLY RAISED ON THE ASSESSE E BY THE AO BY PASSING ORDER UNDER S.206C(6A)/206C(7) OF THE ACT O RDER DATED 16.03.2015 FOR AY 2009-10 IN QUESTION. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) WITHOUT ANY SUCCESS. 5. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON THE ISSUE AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE C ONTROVERSY BEFORE US IS WHETHER THE ASSESSEE CAN BE TREATED AS ASSESSEE IN DEFAULT UNDER S.206C(6A) OF THE ACT IN THE FACTS AND CIRCUMSTANCE S NARRATED ABOVE SUB-SECTION (6) OF SECTION 206C FASTENS LIABILITY O N THE SELLER FOR COLLECTION OF TAX FROM BUYER OF GOODS SPECIFIED IN SUB-SECTION (1) TO 206C. SALE OF SCRAP IS ONE OF THE GOODS SO SPECI FIED. THE SELLER MAY BE TREATED AS ASSESSEE IN DEFAULT UNDER SUB-SECTION 6A FOR FAILURE TO DISCHARGE THE OBLIGATIONS FASTENED. SUB-SECTION (7 ) ENJOINS LIABILITY OF INTEREST ON THE AMOUNT OF TAX TO BE COLLECTED. IT IS THE CASE OF THE ASSESSEE THAT SCRAP IMPORTED FROM OTHER COUNTRIES HAVE BEEN SOLD IN THE DOMESTIC MARKET WITHOUT INVOLVING ANY MANUFACTU RE OR MECHANICAL WORKING OF MATERIALS CARRIED OUT BY THE ASSESSEE AN D THUS DO NOT FALL WITHIN THE SWEEP OF EXPLANATION (B) TO SECTION 206C OF THE ACT WHICH ITA NO. 1805/AHD/17 [ADANI ENTERPRISE LTD. VS. DCIT TDS] A.Y. 2009-10 - 4 - DEFINES SCRAP AS WASTE AND SCRAP FROM THE MANUF ACTURE OR MECHANICAL WORKING OF MATERIALS WHICH IS DEFINITELY NOT USABLE AS SUCH. IT IS THUS THE CASE OF THE ASSESSEE THAT THE SCRAP SOLD DO NOT MEET THE PRE-REQUISITE OF THE EXPRESSION SCRAP AS STATUTORILY DEFINED. 7. THE ASSESSEE HAS ALSO OBJECTED TO THE ISSUANCE O F SHOW CAUSE NOTICE FOR ALLEGED DEFAULT UNDER S.206C OF THE ACT AFTER THE END OF FOUR YEARS FROM THE FINANCIAL YEAR IN WHICH THE DEFAULT WAS ALLEGEDLY COMMITTED. IT IS THE CASE OF THE ASSESSEE THAT IN THE ABSENCE OF ANY STATUTORY TIME LIMIT PRESCRIBED FOR PASSING SUCH OR DER UNDER S.206C OF THE ACT, SUCH ORDERS ARE REQUIRED TO BE PASSED WITH IN A REASONABLE PERIOD OF TIME AND THE AO CANNOT BE PERMITTED TO PA SS SUCH ORDER OF ALLEGED DEFAULT IN COMPLIANCE OF TCS PROVISIONS UND ER S.206C OF THE ACT AFTER UNREASONABLE LAPSE OF TIME. IT IS THUS C ONTENDED ON BEHALF OF THE ASSESSEE AND ORDER PASSED UNDER S.206C OF THE A CT IMPOSING TAX AND INTEREST FOR ALLEGED DEFAULT IS VITIATED BY LAP SE OF TIME IN THIS REGARD. IT IS THE CASE OF THE ASSESSEE THAT IT IS AN ESTABLISHED LEGAL POSITION THAT WHEREVER UNDER THE SCHEME OF THE ACT WITH REFERENCE TO SOME OBLIGATIONS, NO TIME LIMIT IS PRESCRIBED FOR P ASSING AN ORDER ESPECIALLY AN ORDER HAVING PENAL CONSEQUENCES, THE ORDER MUST BE PASSED BY THE AUTHORITIES WITHIN A REASONABLE PERIO D OF TIME. IT WAS REITERATED THAT SECTION 206C(6A) OF THE ACT IS SILE NT ON THE TIME LIMIT FOR PASSING THE ORDER FOR DEFAULT COMMITTED UNDER S . 206C OF THE ACT, UNLIKE CORRESPONDING SECTION 201(3) OF THE ACT IN R ESPECT OF TAX DEDUCTION AT SOURCE. THE REFERENCE WAS MADE TO TH E DECISION OF THE CO-ORDINATE BENCH IN RAYMOND WOOLLEN MILLS LTED. VS. ITO 57 ITD 536 (MUM); CIT VS. HUTCHISON ESSAR TELECOM LTD. (2010) 323 ITR 230 (DEL); NHK JAPAN BROADCASTING CORPORATION 305 ITR 1 37 (DEL); STATE BANK OF INDIA VS. ACIT 106 ITD 589 (MUM) FOR THE PROPOSITION THAT A PERIOD OF FOUR YEARS WAS PERCEIVED AS REASONABLE TI ME LIMIT BY SUCH JUDICIAL PRECENDENTS. THUS SUCH ORDER UNDER S. 206 C OF THE ACT CANNOT ITA NO. 1805/AHD/17 [ADANI ENTERPRISE LTD. VS. DCIT TDS] A.Y. 2009-10 - 5 - BE PASSED AFTER THE EXPIRY OF FOUR YEARS FROM THE E ND OF THE RELEVANT FINANCIAL YEAR WHERE DEFAULT HAS BEEN ALLEGEDLY COM MITTED. 8. APART FROM THE PLEA OF ACTION VITIATED BY LAPSE OF TIME, IT IS ALSO THE CASE OF ASSESSEE THAT LIABILITY TO COLLECT TCS UNDER S.206C OF THE ACT CANNOT BE ENFORCED AGAINST THE ASSESSEE ON ACCO UNT OF COLLECTEE HAVING PAID TAXES DUE ON INCOME ARISING FROM SUCH T RANSACTION. 9. WE SHALL DEAL WITH ASPECT OF LIMITATION FIRST AS IT PAVES THE WAY FOR ENABLING THE AO TO PASS STATUTORY ORDER UNDER S .206C OF THE ACT. WE NOTICE THAT NO TIME LIMIT HAS BEEN PRESCRIBED FO R PASSING ORDER UNDER S.206C OF THE ACT. THE CIT(A) HAS ASSUMED TH AT IN THE ABSENCE OF STATUTORY TIME LIMIT PROVIDED, THE PROVISIONS OF SECTION 201(3) OF THE ACT PROVIDING TIME LIMIT FOR DEDUCTION OF TAX A T SOURCE CAN BE PARALLELLY ADOPTED FOR THE PURPOSES OF VIEWING WHAT IS REASONABLE TIME. WE DO NOT SEE MUCH FORCE IN SUCH PRESUMPTION ESPECIALLY IN THE MATTER OF LIMITATION. THE LIMITATION PRESCRIBED UN DER ONE PROVISION OF THE ACT CANNOT BE APPLIED STRAIGHTWAY TO SOME OTHER PROVISIONS OF THE ACT. THE LEGISLATURE, IN ITS WISDOM, INSERTED SUBS ECTION (3) UNDER S. 201 OF THE ACT BY THE FINANCE (NO.2) ACT, 2009 W.E. F. 2001 PROPOSING TIME LIMIT FOR PASSING ORDERS UNDER S.201 OF THE AC T WITH REFERENCE TO TAX DEDUCTION AT SOURCE. HOWEVER, NO SUCH LIMITATI ON PROVISION HAS BEEN ENACTED WITH REGARD TO TAX COLLECTION AT SOURC E AS PROVIDED IN SECTION 206C TILL DATE. UNDER THE CIRCUMSTANCES, WH ERE NO TIME LIMIT HAS BEEN PRESCRIBED BY THE STATUTE FOR PASSING ORDE R IN RESPECT OF DEFAULT IN COLLECTION OF TAX AT SOURCE, A GUIDANCE CAN BE POSSIBLY OBTAINED FROM JUDICIAL PRECEDENTS LAYING DOWN A REA SONABLE TIME LIMIT AS IMPLICIT FOR IMPOSITION OF LEVY OF TAX AT SOURCE . WE NOTICE THAT THE JUDICIAL PRECEDENTS CITED ON BEHALF OF THE ASSESSEE HAVE READ A PERIOD OF FOUR YEARS TO BE REASONABLE TIME LIMIT. NEEDLES S TO SAY, THE LIABILITY OF THE COLLECTOR OF TAX ON BEHALF OF THE GOVERNMENT (ASSESSEE HEREIN) ITA NO. 1805/AHD/17 [ADANI ENTERPRISE LTD. VS. DCIT TDS] A.Y. 2009-10 - 6 - IS A VICARIOUS LIABILITY AND CANNOT BE ALLOWED TO R EMAIN HANGING ON HIS HEAD FOR ALL TIMES TO COME WHERE THE DEPARTMENT DEC IDES NOT TO TAKE ACTION EITHER BY PROCEEDINGS UNDER S.206C OF THE AC T OR BY MAKING ASSESSMENT ON THE DEDUCTEE. THE SHOW CAUSE NOTICE IN THE INSTANT CASE HAS BEEN ISSUED AFTER FIVE YEARS FROM THE END OF TH E RELEVANT FY 2008- 09. THUS, IN THE ABSENCE OF STATUTORY TIME LIMIT P RESCRIBED FOR PASSING ORDER WITH REFERENCE TO COLLECTION OF TAXES, WE FOL LOW THE SUIT AND READ REASONABLE TIME LIMIT TO BE FOUR YEARS FROM THE END OF THE FINANCIAL YEAR FOR PASSING THE ORDER UNDER S.206C IN TUNE WIT H THE JUDICIAL PRECEDENTS IN NHK JAPAN BROADCASTING CORPORATION 305 ITR 137 (DEL) AND CIT VS. HUTCHISON ESSAR TELECOM LTD. (201 0) 323 ITR 230 (DEL). 10. WITH REFERENCE TO OBLIGATIONS TOWARDS TDS PROVI SIONS, THE HONBLE BOMBAY HIGH COURT IN DIT(INV.) VS. MAHINDRA & MAHINDRA LTD. 365 ITR 560 (BOM.) CONCERNING AY 1998-99 RULED THAT LIMITATION PERIOD WOULD APPLY TO TDS ORDERS UNDER S.201/1A OF THE ACT EVEN THOUGH NO TIME LIMIT WAS PRESCRIBED UNDER THE ACT A T THE RELEVANT TIME. THE HONBLE HIGH COURT OBSERVED THAT TIME LIMIT WOU LD BE THREE YEARS FROM THE END OF THE FINANCIAL YEAR WHICH SEEMED TO BE REASONABLE PERIOD AS ACCEPTED UNDER S.153 OF THE ACT, THOUGH F OR COMPLETION OF ASSESSMENT PROCEEDINGS. HOWEVER, A GREATER PERIOD OF FOUR YEARS FOR COMMENCEMENT OR INITIATION OF PROCEEDINGS WAS GIVEN BY THE HONBLE DELHI HIGH COURT IN NHK JAPAN BROADCASTING CORPORATION(SUPRA) AND HUTCHISON ESSAR TELECOM LTD (SUPRA) . IN VIEW OF THE JUDICIAL FIAT AVAILABLE IN THIS REGARD WHICH IS BENEFICIAL TO THE ASSESSEE QUA THE TIME PERIOD PRESCRIBED FOR DEDUCTION OF TAX AT SOUR CE IN SECTION 201(3) OF THE ACT, WE WOULD GIVE PRIMACY TO THE JUDICIAL P RECEDENTS IN THE ABSENCE OF EXPRESS STATUTORY PROVISION TOWARDS TIME LIMIT IN RESPECT OF OBLIGATION ATTACHED TO SECTION 206C OF THE ACT. ITA NO. 1805/AHD/17 [ADANI ENTERPRISE LTD. VS. DCIT TDS] A.Y. 2009-10 - 7 - 11. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A ) AND DIRECT THE AO TO NOT TREAT THE ASSESSEE AS ASSESSEE IN DEFAULT UNDER S.206C OF THE ACT. CONSEQUENTLY, THE LIABILITY IMPOSED TOWARDS T AX AND INTEREST UNDER S.206C OF THE ACT IS QUASHED. 12. IN VIEW OF THE AFORESAID REASONINGS, WE DO NOT CONSIDER IT NECESSARY TO LOOK INTO THE OTHER LINES OF ARGUMENT PROPOUNDED ON BEHALF OF THE ASSESSEE. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 09/07/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 09/07/2019