M/s. Bhura Exports Ltd., Kolkata V. ITO(TDS), Ward - 57(2), Kolkata, Kolkata

ITA 495/KOL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9342 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2011
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 10-03-2010
• Court: TRIBUNAL
• Department Lawyers: PIYUSH KOLHE
• Assessee Lawyers: K L BOTHRA
• Keywords: Principle of natural justice; Period of limitation; Non-deduction of tax; Reasonable cause; Time period of passing order
• Section: 201(1); 27

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH B, KOLKATA () BEFORE . .. . . .. . , , , , , SHRI B.R.MITTAL, JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . , #$ SHRI C.D.RAO, ACCOUNTANT MEMBER % % % % / ITA NO . 495/KOL/2010 &' ()/ ASSESSMENT YEAR : 2002-03 (+, / APPELLANT ) M/S. BHURA EXPORTS LTD., KOLKATA (PAN : AABCB 3389 F) - & - - VERSUS - . (./+,/ RESPONDENT ) I.T.O. (TDS),WARD- 57(2), KOLKATA +, 0 1 #/ FOR THE APPELLANT: SHRI K.L.BOTHRA ./+, 0 1 #/ FOR THE RESPONDENT: SHRI PIYUSH KOLHE, SR.DR #2 / ORDER ( (( ( . .. .!' !'!' !'. .. . ) )) ), , , , #$ PER SHRI C.D.RAO, AM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 04.11.2009 OF THE CIT(A)-XII, KOLKATA PERTAINING TO ASSESSMENT YEAR 2 002-03. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL :- 1. THAT THE LEARNED C.I.T. APPEAL ERRED IN CONFIRM ING THE LEVY OF TAX & INTEREST U/S 201(1)/201(1A) AMOUNTING TO RS.21,64,4 74/- WHEREAS THE ORDER PASSED U/S 201(1)/201(1A) IS BAD IN LAW, BARRED BY LIMITATION, NULL & VOID AND AGAINST THE PRINCIPLE OF NATURAL JUSTICE. 2. THAT NO INTEREST HAS BEEN PAID TO M/S. GLOBE IN TERNATIONAL, AND NO LOAN HAS BEEN TAKEN FROM THE AFORESAID FIRM, SECTION 194A IS NOT APPLICABLE AND NO T.D.S. IS NOT REQUIRED TO BE DEDUCTED AT SOURCE AND WITHOUT PREJUDICE TO ABOVE THE TAX AND INTEREST AS LEVIED IS EXCESSIVE. 3. THAT THE APPELLANT CRAVES LEAVE TO URGE THE ADDI TIONAL GROUNDS OF APPEAL AT THE TIME OF HEARING. 2 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE AO S TATED THAT THE ASSESSEE IS IN DEFAULT U/S 201(1)/201(1A). IN RESPECT OF DEFAULT BY THE AS SESSEE DURING THE FINANCIAL YEAR 2001-02 AND WORKED OUT THAT IS TAXABLE AND THE INTE REST AT RS.12,35,077/- BY OBSERVING AS UNDER :- ORDER U/S.201(1)/201(1A) READ WITH SEC.194A OF THE I.T.ACT, 1961 IT IS SEEN FROM THE RECORD THAT DURING THE F.Y. 01- 02 RELEVANT TO A.Y. 02-03 THE ASSESSEE PAID INTEREST OF RS.60,54,301/- TO M/S. GL OBE INTERNATIONAL. THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE U/S 194 A ON THE PAYMENT OF INTEREST BUT FAILED TO DO SO. A SHOW CAUSE NOTICE WAS ISSUED VIDE THIS OFFICE LE TTER DT.21.11.2007 REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY IT S HOULD NOT BE TREATED AS ASSESSEE IN DEFAULT AND ORDER U/S 201(1)/201(1A) SH OULD NOT BE PASSED. IN REPLY TO SHOW CAUSE NOTICE THE ASSESSEE FURNISH ED A WRITTEN SUBMISSION STATING THAT IT WAS NOT A LOAN AND AS S UCH NO INTEREST HAS BEEN PAID TO M/S. GLOBE INTERNATIONAL. BUT FOR UTILIZING L.C. LIMIT INTEREST HAS BEEN CHARGED BY THE BANK WHICH HAS BEEN PAID BY THE ASSE SSEE. THIS IS NOT THE INTEREST INCOME OF M/S.GLOBE INTERNATIONAL AND IT I S NOT ENTITLED TO CLAIM TDS IF DEDUCTED AT SOURCE. THE BANK LIMIT OF M/S. GLOBE IN TERNATIONAL IS UTILIZED AND INTEREST PAYMENT IS REIMBURSEMENT OF INTEREST PAID TO BANK IN OTHER WORDS THIS IS AN INTEREST PAID TO BANK FOR UTILIZING L.C. LIMIT A ND NO TDS IS DEDUCTIBLE IF INTEREST IS PAID TO THE BANK. IN OTHER WORDS THIS I S NOT THE INTEREST INCOME OF M/S.GLOBE INTERNATIONAL BUT THE INTEREST INCOME OF BANK. DURING THE COURSE OF PROCEEDING THE ASSESSEE FURNI SHED LEDGER ACCOUNTS OF M/S. GLOBE INTERNATIONAL AND STATEMENT OF INTERE ST PAID AND RECEIVED. THE ASSESSEE CLAIMED TO HAVE PAID INTEREST OF RS.49,20, 681/- TO M/S. GLOBE INTERNATIONAL. IN ORDER TO VERIFY THE CORRECTNESS O F FIGURE, THE MATTER WAS REFERRED TO THE ASSESSING OFFICER HAVING JURISDICTI ON OVER THE CASE REGARDING ASSESSMENT. THE AO CONFIRMED THE FIGURE TO BE RS.60 ,54,301/- VIDE ITS LETTER DATED 05.03.2008. THE ASSESSEES CONTENTION IS DULY CONSIDERED BUT I T DEVOID OF ANY MERIT. ASSESSEES CONTENTION OF NON DEDUCTION OF TAX AT SO URCE AGAINST THE PAYMENT OF INTEREST MADE TO M/S.GLOBE INTERNATIONAL DOESNT HO LD GOOD. TDS PROVISION U/S 194A PROVIDES THAT AT THE TIME OF CREDIT OF INTERES T TO THE ACCOUNT OF THE PAYEE, THE PAYER SHOULD DEDUCT TAX AT SOURCE. IN THE INSTA NT CASE THE ASSESSEE PAID INTEREST TO M/S.GLOBE INTERNATIONAL FOR UTILIZING L .C.LIMITS OF M/S.GLOBE INTERNATIONAL AND NOT TO THE BANK. HENCE THE ASSESS EE PAID INTEREST DIRECTLY TO M/S.GLOBE INTERNATIONAL AND IT SHOULD HAVE DEDUCED TAX AT SOURCE AT THE TIME OF CREDIT OF INTEREST TO THE ACCOUNT OF M/S.GLOBE INTE RNATIONAL. IN THIS CASE THE ASSESSEE FAILED TO DISCHARGE ITS DUTY IN DEDUCTING TAX AT SOURCE AGAINST THE PAYMENT OF INTEREST. 3 FOR THE ABOVE DEFAULTS THE DEDUCTER, M/S.BHURA EXP ORTS LTD. IS TREATED AS ASSESSEE IN DEFAULT AND AN ORDER U/S 201(1)/201(1A) IS PASSED LEVYING THE FOLLOWING DEMAND AND CONSEQUENTIAL PENAL PROVISION. TAX DEDUCTIBLE ON THE INTEREST PAYMENT OF RS.6054301/-@ (20% + 2%) = RS.12,35,077/- LESS: TAX DEDUCTED BY ASSESSEE = NIL NON DEDUCTION OF TAX AT SOURCE = RS.12,35,077/- INT.U/S 201(1A) ON RS.12,35,077/- @15% PA FROM APRIL02 TO AUG.03 = RS.2,62,453/- @12% PA FROM SEPT.03 TO FEB.08 = RS.6,66,941/- TOTAL TAX PAYABLE = RS.21,64,471/- THEREFORE, THE DEDUCTOR ASSESSEE IS HEREBY ORDERED TO PAY RS.21,64,471/- INCLUDING INTEREST ON ACCOUNT OF DEMAND U/S 201(1)/ 201(1A) OF THE I.T.ACT, 1961 WITHIN THE TIME LIMIT SPECIFIED IN THE DEMAND NOTICE U/S 156 OF THE I.T.ACT, 1961. 3.1. ON APPEAL THE LD. CIT(A) HAS CONFIRMED THE SAM E BY OBSERVING AS UNDER :- THE APPELLANT SUBMITTED THAT IT ONLY REIMBURSED TO M/S. GLOBE INTERNATIONAL OF THE INTEREST CHARGED BY THE BANK AS L.C. LIMITS USE D AND HENCE TDS PROVISIONS ARE NOT ATTRACTED. THE APPELLANTS SUBMISSION IS NO T TENABLE. IT IS NOTICED THAT THE INTEREST IS CREDITED TO THE ACCOUNT OF M/S. GLOBE I NTERNATIONAL AND NOT TO THE BANK. HENCE THE APPELLANT IS LIABLE TO DEDUCT TAX O N INTEREST PAYMENT AS PER PROVISIONS OF SECTION 1 94A. AS REGARDS THE ARGUMEN T THAT THE INTEREST INCOME IS NOT THE INCOME OF M/S. GLOBE INTERNATIONAL AND INCO ME OF THE BANK, THE NATURE OF RECEIPT IN THE HANDS OF RECIPIENT IS NOT RELEVAN T AS FAR AS THE APPELLANT IS CONCERNED. THE APPELLANT IS BOUND TO ACT AS PER ITS OWN RECORDS. IT IS ALSO TO BE MENTIONED HERE THAT NOMENCLATURE IS NOT IMPORTANT, IT IS THE NATURE OF PAYMENT THAT IS RELEVANT. THE APPELLANT ALSO CONTENDED THAT THE INTEREST PAYM ENT IS ONLY REIMBURSEMENT IN NATURE AND FOR THIS CONTENTION TH E APPELLANT RELIED ON DECISION OF ITAT, PUNE BENCH IN THE CASE OF GOVERNM ENT MILK SCHEME V. ACIT (281 ITR 88). IN THAT CASE IT WAS HELD THAT PA YMENTS MADE ARE NOT IN THE NATURE OF COMMISSION OR BROKERAGE AND HENCE NO TAX REQUIRED TO BE DEDUCTED. IN THE PRESENT CASE THE APPELLANT ITSELF CLEARLY RE CORDED IN BOOKS THAT THE PAYMENTS MADE WERE INTEREST PAYMENTS. THE APPELLANT ALSO REFERRED TO A CASE LAW I.E. TOYO TA MOTO CORPORATION LTD. V. CIT(SUPRA) IN SUPPORT OF THE ARGUMENT THAT THE A.O SHOULD NOT ACCEPT THE INSTRUCTIONS GIVEN BY THE DEPARTMENTS AUDIT. T HE FACTS OF THE CASE ARE DIFFERENT. IN THAT CASE THE ISSUE OF INITIATION OF DROPPING AND PENALTY PROCEEDINGS U/S. 271(1)( C) ARE INVOLVED. IN THE PR ESENT CASE THE ISSUE OF DEFAULT OF TDS AND INVOKING PROVISIONS OF SECTION 201(1)/ 2 01(1A) ARE INVOLVED. THE A.O HAS RIGHTLY INITIATED THE PROCEEDINGS U/S. 201( 1) AND 201(1A) AS THERE WAS DEFAULT ON THE PART OF THE APPELLANT. THE APPELLANT ALSO REFERRED TO CASE OF CIT VS. MUNN ILAL & CO. (SUPRA) IN SUPPORT OF ITS ARGUMENTS THAT THERE EXISTED A REASO NABLE CAUSE FOR NON-DEDUCTION 4 OF TAX AT SOURCE. IN THAT CASE THE ISSUE OF LEVY OF PENALTY U/S. 221 IS INVOLVED AND HENCE THE HIGH COURT EXAMINED THE ISSUE WITH RE FERENCE TO REASONABLE CAUSE. WHERE AS IN THE PRESENT CASE THE ISSUE OF TD S DEFAULT IS INVOLVED. HERE IT IS MANDATORY TO INVOKE THE PROVISIONS OF SECTION 201 (1) AND 201 (1A) FOR TDS DEFAULT. INTEREST LEVIABLE UNDER SECTION 201 (LA) IS MANDATO RY FOR NON-DEDUCTION OF TAX AT SOURCE, WHERE IT IS REQUIRED TO DEDUCTED OR WHERE AFTER DEDUCTION THE DEDUCTED AMOUNT IS NOT DEPOSITED WITH THE GOVERNMEN T. IT DOES NOT ADMIT OF ANY DISCRETION EVEN WHERE SUCH OMISSION OR SUCH SHO RTFALL IN DEDUCTION OR DEPOSIT ARISES FOR BONA FIDE REASONS. IT WAS SO HEL D IN KANOI INDUSTRIES P. LTD. V. ASST. CIT (2003) 261 ITR 488 (CAL) FOLLOWING ITS OWN EARLIER DECISION IN GRINDLAYS BANK LTD. VS CIT (1992) 193 ITR 457 (CAL) AND (1993) 200 ITR 441 (CAL). THE OTHER HIGH COURTS IN THE FOLLOWING C ASES HAVE HELD THE ACTION OF THE ASSESSING OFFICER JUSTIFIED U/S. 201/201(1A) IN CASE OF FAILURE OF DEDUCTION OF TAX AT SOURCE. 1. CIT VS. PREM NATH MOTORS (PVT.) LTD. (2002) 253 ITR 705, 708-09 (DEL). 2. VISWAPRIYA FINANCIAL SERVICES & SECURITIES LTD. VS. CIT (2002) 258 ITR 496, 502(MAD) 3. KANCHANGANGA SEA FOODS LTD. VS. CIT (2004) 265 I TR 644, 648 (AP) THE APPELLANT CITED PENALTY PROVISIONS QUOTING SECT IONS 275 AND TRIED TO EQUATE WITH PROVISIONS OF SECTION 201(1) AND 201(1A ) WITH REFERENCE TO TIME LIMITS FOR PASSING THE ORDER. THE PENALTY PROVISION S ARE INCORPORATED UNDER CHAPTER XXI OF THE L.T. ACT 1961 AND START FROM SEC TION 270 TO SECTION 275. SECTION 275 IS OPERATIVE FOR PENALTY ACTION TAKEN U NDER SECTION 270 TO 273(B). THUS THE CONTENTION OF THE A.R. THAT ACTION UNDER S ECTION 201/201(1A) HAS BECOME BARRED BY LIMITATION BY VIRTUE OF SECTION 27 5 IS REJECTED. SECTION 201 (1)/201(1 A) FALLS UNDER CHAPTER XVII O F IT ACT 1961. THE LIMITATION PERIOD FOR RECOVERY WAS INCORPORATED IN SECTION 231 OF IT ACT 1961 WHICH WAS OMITTED BY FINANCE ACT 1987 WITH EFFECT F ROM 01-04-1989. IN OTHER WORDS THERE IS NO LIMITATION PERIOD FOR TAKING ACTI ON U/S. 201/201(1A). IN FACT THERE IS NO LIMITATION FOR TAKING ACTION UNDER SECT ION 201/201(1A) BUT CERTAIN JUDICIAL DECISIONS ARE IN FAVOUR OF LAYING DOWN TIM E LIMIT FOR INITIATING ACTION U/S. 201/201(1A) AND MOST OF THEM HAVE FIXED TIME L IMIT OF FOUR YEARS VIZ. CIT VS. NHK CORPORATION 305 ITR 137 DELHI, MANGALORE RE FINERY AND PETROCHEMICAL LTD. VS. DEPUTY DIRECTOR OF INCOME TA X 311 ITR (AT) 91 (MUMBAI), RAYMOND WOOLEN MILLS LTD. VS. ITO (1996) 57 LTD 536 (BOM) ETC. THE DECISION TAKEN BY HONBLE ITAT AND HONBLE HIGH COURT IS IN FAVOUR OF PASSING THE ORDER WITHIN FOUR YEARS AS NOTIME0 LIMI T HAS BEEN PRESCRIBED IN THE STATUTE ON CAREFUL READING OF THE ABOVE DECISIONS, IT IS A CLEAR THAT NONE.OF THE DECISIONS HAS TAKEN INTO ACCOUNT THE QUANTUM OF ESC APEMENT OF INCOME OR TAX. THE SAME PARAMETER CANNOT BE LAID DOWN FOR ESCAPEME NT OF TAX OF RS.10000/- AND RS.10,00,000/-. THE INCOME TAX ACT HAS DISTINGU ISHED THE TIME LIMIT FOR INITIATING ACTION WITH REFERENCE TO QUANTUM OF INCO ME ESCAPED. SEC. 148/149 PRESCRIBED THE TIME LIMIT OF FOUR YEARS WHERE INCOM E HAS ESCAPED ASSESSMENT AMOUNTING TO RUPEES LESS THEM 100000/-, WHERE AS TH E TIME LIMIT WILL BE SIX 5 YEARS WHERE ESCAPEMENT OF INCOME IS RS. 1,00,000/- OR MORE. IN THE PRESENT CASE THE TAX AND INTEREST U/S. 201/201(1A) IS RS. 2 1,64,472/-. THE TIME LIMIT FOR INITIATING ACTION FOR THIS AMOUNT OF TAX SHOULD BE MAXIMUM PERIOD AVAILABLE IN STATUE. INCOME TAX ACT PERMITS REOPENING OF ASSESSM ENT FOR 6 YEARS. IN PRESENT CASE THE ORDER IS PASSED WITH IN 5 YEARS. IN MY VIE W THIS IS REASONABLE. CONSIDERING THE ABOVE FACTS ARD LAW POSITION AND QU ANTUM OF TAX AND INTEREST INVOLVED THE ORDER PASSED BY THE A.O U/S. 201/201(1A) IS WITHIN THE MAXIMUM PERIOD OF SIX YEARS AVAILABLE IN THE STATUE . I CONFIRM THE ACTION OF THE A.O AND DISMISS THE APPEAL FILED BY THE ASSESSEE 3.2. AGGRIEVED BY THIS THE ASSESSEE IS IN APPEAL BE FORE US. 4. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L APPEARING ON BEHALF OF THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFOR E THE REVENUE AUTHORITIES AND CONTENDED THAT ORDER PASSED BY THE AO IS BAD IN LAW AND BARRED BY LIMITATION. WITHOUT PREJUDICE TO THE ABOVE HE FURTHER STATED THAT THE T AX INTEREST AS LEVIED BY THE AO IS IN EXCESSIVE. 5. ON THE OTHER HAND THE LD. DR APPEARING ON BEHALF OF THE REVENUE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD KEEPING IN VIEW OF THE FACT THA T THE LD. AR COULD NOT CONTRADICT THE FINDINGS OF THE LD. CIT(A) EXCEPT BY STATING THAT T HE TAX AND THE INTEREST AS LEVIED IS EXCESSIVE. IT IS FURTHER OBSERVED FROM THE ORDER PA SSED BY THE LD. AO THAT AT PARA NO.4 FROM THE LEDGER ACCOUNT FURNISHED BY THE ASSESSEE, THE ASSESSEE CLAIMED TO HAVE PAID INTEREST OF RS.49,20,681/- TO M/S.GLOBE INTERNATION AL. HOWEVER, BASED ON THE INFORMATION OF THE AO OF M/S.GLOBE INTERNATIONAL WH O CONFIRMED THE FIGURE OF RS.60,54,301/- THE AO COMPUTED THE TAX DUE ON RS.60 ,54,301/- AND CONSEQUENTIAL INTEREST AND THE LD. CIT(A) ALSO CONFIRMED THE SAME . 6.1. KEEPING IN VIEW OF THE ABOVE OBSERVATIONS, WE ARE OF THE VIEW THAT THE ASSESSEE IS DEFAULT ONLY ON AMOUNT OF RS.49,20,681/- FOR NON -RECOVERY OF TDS. WE ARE OF THE CONSIDERED OPINION THAT THE ORDERS OF THE REVENUE A UTHORITIES REQUIRE MODIFICATION. THEREFORE, WE DIRECT THE AO TO RE-COMPUTE THE TAX T O BE DEDUCTED ON RS.49,20,681/- U/S 201(1) AND CONSEQUENTIAL INTEREST DUE U/S 201(1 A). WE ORDER ACCORDINGLY. 6 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. ORDER PRONOUNCED IN THE COURT ON 18.02.2011. SD/- SD/- . .. . . .. . , , , , B.R.MITTAL, JUDICIAL MEMBER . .. .!' !'!' !'. .. . , ,, , #$ #$ #$ #$ , C.D.RAO, ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE:18.02.2011. #2 0 .3 4#3(5- COPY OF THE ORDER FORWARDED TO: 1. M/S. BHURA EXPORTS LTD., 2-CLIVE GHAT STREET (3 RD FLOOR), KOLKATA-700001. 2 THE ITO(TDS), WARD-57(2), KOLKATA 3. THE CIT, 4. THE CIT(A)-CENTRAL-XII, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA /3 ./ TRUE COPY, #2&:/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES R.G.(.P.S.)