The DCIT, Circle-3(1), Vijayawada V. M/s AP GENCO, Rayalaeema Thermal Power Porject,

ITA 513/VIZ/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7145 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 25-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Keywords: Period of limitation; Time period of passing order
• Section: 194C; 201(1)

Judgement Text

ITA 513/V/10 AP GENCO VVR NAGAR, KADAPA DIST IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 513 /VIZAG/ 20 10 ASSESSMENT YEAR : 2004 - 05 DCIT CIRCLE - 3(1) VIJAYAWADA VS. M/S. AP GENCO VVR NAGAR, KADAPA DIST. (APPELLANT) (RESPONDENT) TAN NO.HYDR 02587E APPELLANT BY: SHRI R.K. SINGH, DR RESPONDENT BY: SHRI G.V.N. HARI, CA ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) ON VARIOUS GROUNDS WHICH ARE AS UNDER: 1. THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. LD. CIT(A) FAILED TO NOTE THAT THE ASSESSEE DID NOT DISPUTE ITS LIABILITY TO DEDUCT TAX BUT IN FACT DEPOSITED TAX I N INSTALMENTS BETWEEN F.Y. 2004-05 TO F.Y. 2007-08 MUCH BEYOND TH E STATUTORY DUE DATE AND HENCE INTEREST U/S 201(1A) WAS RIGHTLY CHARGED. 3. THE ORDER OF THE CIT(A) IS BAD IN LAW IN VIEW OF NO N-CONSIDERATION OF THREE IMPORTANT SUBMISSIONS MADE BY THE ASSESSIN G OFFICER VIDE REPORT DATED 28.1.2010 AND AS SUCH THE DECISION MAK ING PROCESS ADOPTED BY THE CIT(A) IS VITIATED IN LAW. 4. LD. CIT(A) ERRED IN NOT CONSIDERING THE SUBMISSION MADE BEFORE HIM THAT THE PROVISIONS OF SEC. 201(1A) THEMSELVES PROVIDE THAT THE INTEREST THERE UNDER SHALL BE PAID SUO-MOTU BY THE ASSESSEE BEFORE FURNISHING THE QUARTERLY STATEMENT FOR EACH QUARTER AND FAILED TO APPRECIATE THAT THERE IS NO REQUIREMENT OF ANY ORDE R TO BE ISSUED BY THE ASSESSING OFFICER IN THIS REGARD. 5. LD. CIT(A) FURTHER ERRED IN NOT CONSIDERING THE SUB MISSION MADE BEFORE HIM THAT, INTEREST U/S 201(1A) IS MEANT TO C OMPENSATE FOR DEPRIVING THE GOVT. OF POSSESSION OF MONEY AT THE L EGITIMATE POINT OF TIME AND SUCH INTEREST ACCRUES BY OPERATION OF L AW BUT DOESNT FLOW FROM THE ORDER U/S 201(1A), AND THAT ORDER IS PASSED ONLY TO QUANTIFY SUCH INTEREST AND ABSENCE OF ORDER U/S 201 (1A) WILL NOT RELIEVE THE ASSESSEE OF ITS LIABILITY TO PAY INTERE ST. 6. LD. CIT(A) ALSO ERRED IN NOT CONSIDERING THE SUBMIS SION MADE BEFORE HIM THAT THE PROVISIONS OF SEC. 201(1) WERE AMENDED TO PROVIDE FOR PASSING OF ORDER U/S 201(1) FOR ANY FIN ANCIAL YEAR COMMENCING ON OR BEFORE 1.4.2007, AT ANY TIME ON OR BEFORE 31.3.2011. ITA 513/V/10 AP GENCO VVR NAGAR, KADAPA DIST 2 7. LD. CIT(A) ERRED IN PLACING RELIANCE ON VARIOUS CAS E-LAWS WITHOUT CONSIDERING THE SUBSEQUENT DEVELOPMENT IN LAW VIZ., PROVIDING FOR SUO-MOTU PAYMENT OF INTEREST U/S 201(1A) BY THE ASS ESSEE BEFORE FURNISHING THE QUARTERLY TDS RETURNS. 8. LD. CIT(A) FAILED TO APPRECIATE THAT THE DECISIONS RELIED UPON BY HIM NO LONGER HOLD THE FIELD AFTER AMENDMENT TO THE PROVISIONS OF SECTION 201(1) PROVIDING FOR PASSING OF ORDER U/S 2 01(1) FOR F.YS 2007-08 AND EARLIER YEARS AT ANY TIME ON OR BEFORE 31.3.2011. 9. LD. CIT(A) FAILED TO APPRECIATE THAT INTEREST U/S 2 01(1A) IS AKIN TO INTEREST U/S 220(2) AND THEREFORE CAN BE LEVIED AT ANY TIME. IN OTHER WORDS, THE TIME LIMIT THAT IS NOT THERE FOR L EVYING INTEREST U/S 220(2) CANNOT BE IMPOSED WHILE LEVYING INTEREST U/S 201(1A). 10. THE APPELLANT CRAVES FOR LEAVE TO ADD, DELETE OR MO DIFY ANY OF THE GROUNDS OF APPEAL. 2. THOUGH THE REVENUE HAS RAISED VARIOUS GROUNDS OF APPEAL BUT THE CONTROVERSY RAISED THROUGH THESE GROUNDS IS WHETHER THE ORDER PASSED BY THE A.O. U/S 201(1) AND 201(1A) IS BARRED BY LIMITATION . 3. THE FACTS BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE IS A UNIT OF A.P. POWER GENERATION CORPORATION LTD. THE A.O. OB SERVED THAT ASSESSEE HAS NOT DEDUCTED THE TAX AT SOURCE IN RESPECT OF ADVANC ES OF RS.13,20,45,000/- MADE TO BHEL AS ON 31.3.2004 IN CONNECTION WITH ERE CTION OF STAGE 2 & 3 UNITS. IN RESPONSE TO NOTICE THE ASSESSEE SUBMITTE D THAT TAX WAS DEDUCTED ON THE ENTIRE ADVANCE IN INSTALMENTS IN THE SUBSEQU ENT FINANCIAL YEARS 2004- 05 TO 2007-08 AT THE TIME OF SETTLING THE BILLS. T HE A.O. OBSERVED THAT THE FAILURE ON THE PART OF THE ASSESSEE TO DEDUCT TAX O F RS.28,28,404/- ON THE ADVANCES MADE CONSTITUTED CONTRAVENSION OF PROVISIO NS OF SECTION 194C OF THE ACT AND HELD THAT ASSESSEE WAS LIABLE FOR INTEREST U/S 201(1A) AS THE TAX WAS PAID IN INSTALMENTS ON DIFFERENT DATES IN SUBSEQUEN T YEARS. THE EXPLANATION OF THE ASSESSEE THAT THE PAYMENT WAS TREATED AS AN ADVANCE BUT NOT A PAYMENT MADE FOR EXECUTION OF WORK AND CONSEQUENTLY TAX WAS DEDUCTED ONLY AT THE TIME OF SETTLING THE BILLS WAS REJECTED . THE A.O. HELD THAT AS PER PROVISIONS OF SECTION 194C TAX WAS DEDUCTIBLE ON TH E ADVANCE PAYMENTS ALSO AND DEMAND OF RS.8,93,095/- WAS ACCORDINGLY RAISED. 4. THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE CIT(A) ON VARIOUS GROUNDS BUT THE MAIN GROUND WAS RAISED WITH REGARD TO THE PERIOD OF LIMITATION UNDER WHICH ORDER U/S 201(1A) CAN BE PAS SED. IT WAS ALSO ITA 513/V/10 AP GENCO VVR NAGAR, KADAPA DIST 3 CONTENDED BEFORE THE CIT(A) THAT THE ORDER U/S 201( 1A) WAS PASSED ON 3.3.2009 BY WHICH DATE THE ASSESSEE HAD ALREADY CLE ARED THE ADVANCES BY WAY OF ADJUSTMENT AGAINST SUBSEQUENT BILLS AND DEDU CTED AND PAID THE TAX ON THE ADVANCE. THEREFORE, THERE WAS NO NECESSITY FOR INDEPENDENTLY TREATING THE ASSESSEE AS IN DEFAULT IN RESPECT OF TAX THAT W AS ALREADY DEDUCTED AND PAID BEFORE THE DATE OF THE PASSING THE ORDERS. IT WAS ALSO CONTENDED BEFORE THE CIT(A) THAT THOUGH NO TIME LIMIT WAS STIPULATED U/S 201(1) EITHER WITH REGARD TO THE INITIATION OR COMPLETION OF THE PROCE EDINGS THERE UNDER BUT THIS ORDER CANNOT BE PASSED AFTER THE LAPSE OF A REASONA BLE PERIOD OF 4 YEARS. HE HAS ALSO PLACED A RELIANCE UPON THE VARIOUS JUDGEME NTS. 5. THE CIT(A) RE-EXAMINED THE ISSUE IN THE LIGHT OF VARIOUS JUDGEMENTS AND FINALLY CONCLUDED THAT NO EXTENDED PERIOD CAN B E AVAILED BY THE DEPARTMENT BEYOND THE 4 YEARS PERIOD AS LAID DOWN I N SEVERAL JUDICIAL PRONOUNCEMENTS. HE ACCORDINGLY KNOCKED DOWN THE DE MAND. THE RELEVANT OBSERVATION OF THE CIT(A) IS EXTRACTED HEREUNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE AN D HAVE PERUSED THE JUDICIAL DECISIONS RELIED BY BOTH THE ASSESSING OFFICER AND THE APPELLANT. THERE IS NO DISPUTE OVER THE FACT THAT THE CONTRAVE NTION OF PROVISIONS OF SEC.194C AROSE ON 31.3.2004 DUE TO THE FAILURE ON T HE PART OF THE APPELLANT TO DEDUCT TAX ON THE PAYMENT OF RS.13,20,45,000/- M ADE TO M/S.BHEL. THE APPELLANT HAS PAID THE TAX IN INSTALMENTS IN SUBSEQ UENT FINANCIAL YEARS. THE MAIN ISSUE FOR ADJUDICATION IS WHETHER THE ORDER PA SSED U/S 201(1A) ON 3.3.2009 IS BARRED BY LIMITATION. THE TWO DECISION S RELIED UPON BY THE ASSESSING OFFICER STRENGTHEN THE CONTENTION OF THE ASSESSING OFFICER THAT THERE IS NO SANCTITY TO THE PERIOD OF LIMITATION OF FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE CONTRAVENTION AROSE . ON THE CONTRARY, IN THE CASE OF CIT VS. NHK JAPAN BROADCASTING CORPORATION LTD. IT HAS BEEN HELD THAT ORDERS U/S 201(1) AND 201(1A) ARE BARRED BY LI MITATION AND WILL BE INEFFECTIVE IF PASSED BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR IN WHICH THE DEFAULT IS COMMITTED. THE DECISION WAS BASED ON THE JUDGEMENT OF THE SUPREME COURT IN THE CASE O F STATE OF PUNJAB & ORS VS. BHATINDA DISTRICT CO-OPERATIVE MILK PRODUCERS U NION LTD. (2007) 11 SCC 363, WHEREIN IT WAS HELD THAT EVEN IF NO STATUTORY PERIOD OF LIMITATION IS PROVIDED, THE AUTHORITY VESTED WITH SUCH POWERS MUS T EXERCISE THE SAME WITHIN A REASONABLE PERIOD. IN THE CASE OF AP CIVI L SUPPLIES CORPORATION LTD., HYDERABAD THE HONBLE ITAT, HYDERABAD BENCH HELD TH AT ORDERS U/S 201(1) & 201(1A) MADE AFTER THE EXPIRY OF FOUR YEARS FROM TH E END OF THE FINANCIAL YEAR IN WHICH THE DEFAULT IS COMMITTED ARE BARRED BY LIM ITATION AND THEREFORE ARE BAD IN LAW. SIMILAR VIEW WAS TAKEN BY THE MUMBAI B ENCH IN THE CASE OF MANGALORE REFINERY & CHEMICALS. ITA 513/V/10 AP GENCO VVR NAGAR, KADAPA DIST 4 I AM UNABLE TO ACCEPT THE ARGUMENT OF THE ASSESSIN G OFFICER THAT THE FOUR YEAR PERIOD FOR THE PURPOSE OF LIMITATION SHOU LD BE COUNTED FROM THE DATE OF PAYMENT OF THE LAST INSTALMENT IN THE FINAN CIAL YEAR 2007-08 AS THE LIMITATION PERIOD SHOULD BE RECKONED FROM THE DATE OF DEFAULT, WHICH IS 31.3.2004 FOR THE CONTRAVENTION OF SEC. 194C IN THE INSTANT CASE. IN THE LIGHT OF THE ABOVE, I AM OF THE VIEW THAT NO EXTENDED PER IOD CAN BE AVAILED BY THE DEPARTMENT BEYOND THE FOUR YEAR PERIOD AS LAID DOWN IN SEVERAL JUDICIAL PRONOUNCEMENTS. FURTHER, IT IS A SETTLED LAW THAT WHERE ON AN ISSUE TWO INTERPRETATIONS CAN BE MADE, THE INTERPRETATION WHI CH IS FAVOURABLE TO THE ASSESSEE MUST BE FOLLOWED AS PER THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD. 88 I TR 192 (1973)(SC). ACCORDINGLY, THE ORDER DATED 3.3.2009 RAISING A DEM AND OF RS.8,93,095/- FOR THE FINANCIAL YEAR 2003-04 IS HELD TO BE BAD IN LAW . 6. NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE T HE TRIBUNAL AND PLACED A HEAVY RELIANCE UPON THE ORDER OF THE A.O. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HAS CONTENDED THAT THIS ISSUE HAS BEEN ADJUDICATED BY VARIOUS JUDICIAL FORUMS AT DIFFERENT POINT OF TIMES AND THEY HAVE CATEGORICALLY HELD THAT PERIOD OF LIMITATION T O PASS AN ORDER U/S 201(1) & 201(1A) IS ONLY 4 YEARS FROM THE END OF THE RELEVAN T FINANCIAL YEAR. IN SUPPORT OF THIS CONTENTION, HE INVITED OUR ATTENTIO N TO THE JUDGEMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. HUTCHISON S .R. TELECOM LIMITED 323 ITR 230 AND THE JUDGEMENT OF THE SPECIAL BENCH OF T HE TRIBUNAL IN THE CASE OF MAHINDRA & MAHINDRA LIMITED VS. DCIT 122 TTJ 577. 7. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT UNDIS PUTEDLY, ASSESSEE HAS GIVEN ADVANCES TO M/S. BHEL ON 31.3.2004 IN CONNECTION WI TH ERECTION OF STAGE II & III UNITS. IT WAS EXPLAINED BY THE ASSESSEE THAT T AX WAS DEDUCTED ON THE ENTIRE ADVANCES IN THE INSTALMENTS IN THE SUBSEQUEN T FINANCIAL YEAR 2004-05 AND 2007-08 AT THE TIME OF SETTLING THE BILLS. THE A.O. HAS INITIATED THE ACTION AND PASSED AN ORDER U/S 201(1A) OF THE I.T. ACT ON 31.3.2009. UNDISPUTEDLY, NO TIME LIMIT WAS PROVIDED U/S 201(1) EITHER WITH R EGARD TO THE INITIATION OR COMPLETION OF THE PROCEEDINGS THEREUNDER. BUT IT D OES NOT MEAN THAT LIBERTY IS GIVEN TO THE REVENUE TO PASS AN ORDER U/S 201(1) AT ANY POINT OF TIME. THROUGH VARIOUS JUDGEMENTS DIFFERENT HIGH COURTS AN D DIFFERENT BENCHES OF THE TRIBUNAL HAVE CLARIFIED THAT WHEREVER TIME SCHE DULE IS NOT PRESCRIBED TO PASS A PARTICULAR ORDER THAT ORDER SHOULD BE PASSED WITHIN A REASONABLE TIME. THE REASONABLE TIME WAS CONSIDERED BY DIFFERENT BEN CH OF THE TRIBUNALS AND ITA 513/V/10 AP GENCO VVR NAGAR, KADAPA DIST 5 THE HIGH COURTS IS APPROXIMATELY FOUR YEARS. WE HA VE BEEN CARRIED THROUGH THE RECENT JUDGEMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. HUTCHISON SR TELECOM LTD. (SUPRA) IN WHICH THE ORDER U/S 201( 1A) WAS PASSED BEYOND THE PERIOD OF 3 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AS ALSO BEYOND THE PERIOD OF 4 YEARS FROM THE END OF THE FI NANCIAL YEAR. THE HONBLE HIGH COURT HAS APPROVED THE ORDER OF THE TRIBUNAL I N WHICH THE TRIBUNAL HAS CONSIDERED THE PERIOD FOR LIMITATION AS 4 YEARS FRO M THE END OF THE FINANCIAL YEAR. SINCE THE ORDER WAS PASSED AFTER THE PERIOD OF 4 YEARS FROM THE END OF THE FINANCIAL YEAR THE TRIBUNAL CONCLUDED THAT THE PROCEEDINGS WERE BEYOND TIME. THE ORDER OF THE TRIBUNAL WAS APPROVED BY D ELHI HIGH COURT. BESIDES, IN OTHER JUDGEMENTS REFERRED TO BY THE CIT(A), DIFF ERENT HIGH COURTS AND THE TRIBUNALS HAVE HELD THE TIME PERIOD REASONABLE FOR PASSING AN ORDER IS 4 YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH T HE TAXES WERE REQUIRED TO BE DEDUCTED. IN THE INSTANT CASE, THE TAX WAS REQU IRED TO BE DEDUCTED IN THE FINANCIAL YEAR 2003-04 AS THE PAYMENT WAS MADE ON 3 1.3.2004. THEREFORE, THE ORDER U/S 201/201(1A) COULD BE PASSED WITHIN TH E PERIOD OF 4 YEARS FROM THE END OF THE FINANCIAL YEAR I.E. 31 ST MARCH, 2008. BUT THE IMPUGNED ORDER WAS PASSED ON 31 ST MARCH, 2009. THEREFORE, BEYOND THE PERIOD OF LIM ITATION. IN THE LIGHT OF THESE FACTS, WE FIND NO MERIT IN TH E REVENUES APPEAL AS THE CIT(A) HAS ADJUDICATED THE ISSUE IN DETAIL IN HIS O RDER IN THE LIGHT OF THE RELEVANT PROVISIONS AND VARIOUS JUDGEMENTS RENDERED ON THIS SUBJECT. WE ACCORDINGLY, CONFIRM THE ORDER OF THE CIT(A). 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 10.3.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 10 TH MARCH, 2011 ITA 513/V/10 AP GENCO VVR NAGAR, KADAPA DIST 6 COPY TO 1 DCIT CIRCLE - 3(1) (TDS), VIJAYAWADA 2 M/S. AP GENCO, RAYAL ASEEMA THERMAL POWER PROJECT, VV REDDY NAGAR, KADAPA DIST. 3 THE CI T, VIJAYAWADA 4 THE CIT (A) , VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM