Leela Ship Recycling Pvt.Ltd., Bhavnagar V. Dy. Commissioner of Income Tax, Bhavnagar

ITA 2011/AHD/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94719 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 07-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR
• Assessee Lawyers: TUSHAR HEMANI
• Keywords: Period of limitation; Competent authority; Time period of passing order

Judgement Text

I.T.A. NO.: 2011/AHD/2015 ASSESSMENT YEAR:2008-09 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH, AHMEDABAD. [CORAM: PRAMOD KUMAR, AM] I.T.A. NO. 2011/AHD/2015 ASSESSMENT YEAR: 2008-09 LEELA SHIP RECYCLING PVT. LTD., LEELA EFCEE B WINGH, THIRD FLOOR, NR. AKSHARWADI, BHAVNAGAR ....................APPELLANT PAN AAACL 8753G VS. DY. COMMISSIONER OF INCOME-TAX, TDS CIRCLE, AHMEDABAD. . .RESPONDENT APPEARANCES BY: TUSHAR HEMANI.........FOR THE APPELLANT ANIL KUMAR.......... F OR THE RESPONDENT DATE OF CONCLUDING THE HEARING: 15 TH SEPT., 2015 DATE OF PRONOUNCING THE ORDER: 13 TH NOV., 2015 O R D E R PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 28 TH MAY, 2015 PASSED BY THE LD. CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 206(C(1) R.W.S. 206C(6) OF THE INCOME- TAX ACT, 1961 (THE ACT HEREINAFTER), FOR THE ASSESS MENT YEAR 2008-09, ON THE FOLLOWING GROUNDS :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN HOLDING THAT THE IMPUGNED ORDER PASSED U/S 206C OF THE ACT IS WI THIN REASONABLE TIME. IN FACTS AND CIRCUMSTANCES OF THE CASE THE IM PUGNED ORDER PASSED BY AO IS TIME BARRED AND HENCE DESERVES TO B E QUASHED. I.T.A. NO.: 2011/AHD/2015 ASSESSMENT YEAR:2008-09 PAGE 2 OF 5 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN HOLDING THAT STEEL PLATES A ND OTHER MATERIALS GENERATED FROM SHIP RECYCLING PROCESS ARE SCRAP W ITHIN THE MEANING OF DEFINITION OF SCRAP AS PROVIDED U/S 206C OF TH E ACT. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN TREATING THE APPELLANT AS ASSESSEE IN DEFAULT U/S 206C(1) R.W.S. 206C(6), 206C(6A) AND 206C(7) OF THE ACT. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN HOLDING THAT THE APPELLANT WAS LIABLE TO COLLECT TAX AT SOURCE AT THE RATE OF 1% ON SALE OF ALLEGED SCRAP AMOUNTING TO RS.3,30,24,855/- RESULTING INTO DEMAND OF RS.3,74,1 73/- U/S 206C(1) OF THE ACT AND RS.3,14,305/- U/S 206C(7) OF THE ACT. 5. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACTS THAT THE APPELLANT WAS NOT REQUIRED TO COLLEC T TAX AT SOURCE U/S 206C(1) OF THE ACT ON AMOUNT OF RS.3,30,24,855/- AN D THEREFORE, NO DEMAND COULD HAVE BEEN RAISED IN GUISE OF S.206C(1) /(7) OF THE ACT. 6. ALTERNATIVELY AND WITHOUT PREJUDICE, THE PURCHAS ERS HAVE ALREADY PAID TAX ON THEIR RESPECTIVE INCOME AND THEREFORE THE AP PELLANT CANNOT BE TREATED AS ASSESSEE IN DEFAULT AND CONSEQUENTLY NO TAX INCLUDING INTEREST CAN BE RECOVERED FROM THE APPELLANT. 7. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS OF THE CASE IN CONFIRMING ACTION OF LD. AO IN INITIATING PENALTY U/S 271CA OF THE ACT. 8. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDER S WITHOUT PROPERLY APPRECIATING THE FACTS AND THAT THEY FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSION, EXPLANATIONS AND INFORMATION SU BMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEE N CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THE ACTION OF TH E LOWER AUTHORITIES IS CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JU STICE AND THEREFORE DESERVES TO BE QUASHED. 2. THE FUNDAMENTAL QUESTION THAT I MUST DEAL WITH I S WHETHER THE IMPUGNED ORDER WAS PASSED WITHIN REASONABLE TIME. 3. TO ADJUDICATE ON THIS ASPECT OF THE MATTER, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE PERIOD COVERED BY THE IMPUGNED ORDER IS 1 ST APRIL, 2007 TO 31 ST MARCH, 2008, AND THE RELEVANT ASSESSMENT YEAR THUS IS 2008-09. THERE IS NO DISPUTE THAT THE IMPUGNED ORDE R WAS PASSED ON 25 TH MARCH, 2014. ON THESE FACTS, WHEN ASSESSEE CHALLENG ED THE ORDER AS HAVING I.T.A. NO.: 2011/AHD/2015 ASSESSMENT YEAR:2008-09 PAGE 3 OF 5 BEEN PASSED BEYOND THE REASONABLE TIME, LD. CIT(A) REJECTED THIS GRIEVANCE BY HOLDING AS FOLLOWS :- 3.3 THE SUBMISSIONS ARE CONSIDERED. IT IS SEEN THA T ORDER IS PASSED WITHIN A PERIOD OF SIX YEARS AFTER THE CONDUCT OF S URVEY WHICH TOOK PLACE ON 17/09/2013. AFTER THE CONDUCT OF SURVEY THE ORDE R IS PASSED WITHIN PERIOD OF 6 MONTHS WHICH IS MORE THAN REASONABLE TI ME. FURTHER PROVISIONS FOR PASSING ORDERS UNDER SECTION 206C CA N BE READ WITHIN PROVISIONS OF SECTION 201(3) WHERE THE TIME LIMIT F OR PASSING ORDER HAS BEEN LAID DOWN FROM TIME TO TIME AND HAS VARIED FRO M 6 YEARS TO 7 YEARS FROM THE END OF FINANCIAL YEAR WHEN NO STATEM ENT HAS BEEN FILED. THUS THE LEGISLATURE HAS DEFINED A TIME LIMIT WHICH HAS TO BE CONSIDERED NOW REASONABLE TIME LIMIT FOR ALL OTHER PROVISIONS WHERE ORDER UNDER CHAPTER XVII IS PASSED. THE ORDER HAVIN G BEEN ISSUED WELL WITHIN 5 YEARS FROM THE END OF ASSESSMENT YEAR IS H ELD TO BE PASSED WITHIN A REASONABLE TIME AND WELL WITHIN LIMITATION AND SO THE ADDITIONAL GROUND TAKEN BY THE APPELLANT IS HEREBY DISMISSED. 4. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFOR E ME. 5. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE IN THE L IGHT OF THE APPLICABLE LEGAL POSITION. 6. I FIND THAT IT IS NOT IN DISPUTE THAT THE LAW DO ES NOT PRESCRIBE ANY LIMITATION PERIOD FOR PASSING ORDER UNDER SECTION 2 06C(6), (6A) AND (7), WHEN NO LIMITATION PERIOD IS PRESCRIBED, ORDER MUST BE P ASSED WITHIN REASONABLE TIME. AS TO WHAT WOULD CONSTITUTE REASONABLE TIME, I FIND GUIDANCE FROM THE ORDER OF A CO-ORDINATE BENCH, IN THE CASE OF ITO VS . VISHAL FABRICS PVT. LTD. (ITA NO.448/AHD/2007, ORDER DATED 9 TH APRIL, 2010) WHICH HAS OBSERVED AS FOLLOWS :- I.T.A. NO.: 2011/AHD/2015 ASSESSMENT YEAR:2008-09 PAGE 4 OF 5 4. ON CONSIDERATION OF THE ABOVE FACTS AND CONSIDE RING THE FINDINGS OF THE LD. CIT(A) ABOVE, WE ARE OF THE VIEW THAT TH E ISSUE IS NOW SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE BY THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NHK JAPAL BROADCASTING CORPOTATION (SUPRA) IN WHICH IT WAS HELD THAT THE DATE OF KNOWLEDGE WAS NO RELEVANT FOR THE PURPO SE OF EXERCISING JURISDICTION IN SO FAR AS THE PROVISIONS OF THE ACT WERE CONCERNED. TIME LIMIT OF FOUR YEARS PRESCRIBED BY T HE TRIBUNAL CALLED FOR NO INTERFERENCE AND ACTION WAS TO BE INI TIATED BY THE COMPETENT AUTHORITY UNDER THE ACT WHERE NO LIMITATI ON WAS PRESCRIBED WITHIN THE PERIOD OF FOUR YEARS. THE ACC EPTANCE OF LIABILITY BY THE ASSESSEE WOULD NOT BY ITSELF EXTEN D THE PERIOD OF LIMITATION NOR WOULD IT EXTEND THE REASONABLE TIME THAT WAS POSTULATED BY THE SCHEME OF THE ACT. MERELY BECAUSE IT HAD ADMITTED ITS LIABILITY AND AGREED TO PAY TAX VOLUNT ARILY, THE ASSESSEE COULD NOT BE PUT IN A SITUATION WORSE THAN OF IT HAD CONTESTED ITS LIABILITY. 7. AS FOR THE REFERENCE TO THE LIMITATION SET OUT I N SECTION 201(3) NOW, I DONT THINK IT IS REALLY RELEVANT IN THE PRESENT CO NTEXT. WHAT IS MATERIAL IS THAT THERE IS NO TIME LIMIT PRESCRIBED FOR SECTION 206C AND SINCE THERE IS NO SPECIFIC TIME LIMIT UNDER SECTION 206C, A REASONABL E TIME LIMIT IS TO BE CONSIDERED FOR THE PURPOSE OF PASSING ORDER U/S 206 C. 8. THE TIME LIMIT OF OUR YEARS, AS CONSIDERED TO BE REASONABLE BY A HIGHER JUDICIAL FORUM, MUST APPLY IN THIS CONTEXT A S WELL. AS I HOLD SO, I AM ALIVE TO THE FACT THAT BY WAY OF SUBSEQUENT LEGISLA TIVE AMENDMENT, TIME LIMIT FOR PASSING ORDERS UNDER SECTION 201 HAS BEEN PRESC RIBED BY THE STATUTE AND THIS LIMIT IS MORE THAN FOUR YEARS. HOWEVER, SINCE THERE IS NO SPECIFIC TIME LIMIT SET OUT FOR PASSING ORDERS UNDER SECTION 206, THAT ASPECT OF THE MATTER IS NOT MATERIAL FOR ME. I.T.A. NO.: 2011/AHD/2015 ASSESSMENT YEAR:2008-09 PAGE 5 OF 5 9. SUCH A TIME LIMIT IS NOT TO BE CONSIDERED WITH R ESPECT TO DATE OF KNOWLEDGE BUT WITH RESPECT TO THE PERIOD TO WHICH THE LAPSE PERTAINS. IF IT WERE SO, THE LIMITATION PERIOD AS FOR EXAMPLE PRESC RIBED UNDER SECTION 147/148 WOULD BECOME MEANINGLESS ON THE CONCEPT OF KNOWLEDGE IS IMPORTED INTO THE SCHEME OF THE ACT. VIEWED THUS, AND IN THE LIGHT OF HONBLE DELHI HIGH COURTS DECISION IN THE CASE OF NHK JAPAN BROADCAST ING CORPN. [(2008) 305 ITR 137 (DEL)], I HOLD THE IMPUGNED ORDER AS TIME B ARRED. 10. AS I HAVE HELD THE IMPUGNED ORDER TO BE TIME BA RRED, I SEE NO NEED TO ADDRESS MYSELF TO THE MERITS OF THE CASE. 11. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TER MS INDICATED ABOVE. PRONOUNCED TODAY ON 13 TH DAY OF NOVEMBER, 2015. SD/- PRAMOD KU MAR (ACCOUNTANT MEMBER) AHMEDABAD, THE 13 TH DAY OF NOVEMBER, 2015 COPIES TO: (1) THE APPELLANT (2) THE RESPON DENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD