THE DISTRICT MINING OFFICER,BAREILLY V. INCOME TAX OFFICER (TDS), BAREILLY

ITA 246/LKW/2018

AI Insights

The case involves an appeal by the District Mining Officer against the orders of the CIT(A), Bareilly, which sustained the order of the ITO (TDS) under section 206C (6A) of the Income Tax Act, 1961. The appeal was primarily concerned with the non-collection and deposit of tax at source by various District Magistrates and Mining Officers from royalties received from mining activities. The assessee contested the calculation of tax and the applicability of section 206C(1C), arguing that the District Mining Officers were not required to deduct tax at source as they did not enter into any contract or transfer any right or interest in any mine or quarry. The Tribunal found procedural lapses in the initial assessment and remanded the matter back to the Assessing Officer for a fresh decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705705 (ITAT-LUCKNOW)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2008-2009
• Other Referred Cases: C. Manjunatha Wines vs. CIT, M/s Eid Mohd Nizam Uddin vs. ITA No. 316 and 248/JP/2018, CIT vs. N.H.K. Japan Broadcasting, Vodafone Essar Mobile Services vs. Union of India, Tata Tele Services vs. Union of India, M/s. Mass Awash Pvt Ltd vs CIT (International Taxation)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR RAJWANSHI; ADDL
• Assessee Lawyers: JITENDRA KUMAR YADAV
• Keywords: Additional evidence; Question of law; Period of limitation; Principle of natural justice; TDS; Competent authority; Time period of passing order
• Section: 147; 201(1); 133A

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW ‘B’ BENCH, LUCKNOW BEFORE SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No. 246/LKW/2018 A.Y. 2008-09 The District Mining Officer, DM Compound, Bareilly-243001 vs. The ITO-TDS, Kanpur PAN:LKNDO6749B (Appellant) (Respondent) Assessee by: Sh. Jitendra Kumar Yadav, Advocate Revenue by: Sh. Sunil Kumar Rajwanshi, Addl CIT DR Date of hearing: 09.04.2025 Date of pronouncement: 30.06.2025 O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the orders of the ld. CIT(A), Bareilly dated 28.09.2016 passed under section 250 of the Income Tax Act, 1961 dismissing the appeal of the assessee against the orders passed under section 206C (6A) of the Income Tax Act, 1961. The grounds of appeal are as under:- “1. BECAUSE, on the facts and in the circumstances of the case, the impugned order passed by the Ld. CIT (A), sustaining the order of ITO (TDS) u/s 206C (6A) of the Income Tax Act is unsustainable and bad in law since the instant assessee is not a person for the purpose of section 206C (6C) and hence the instant proceedings are patently illegal and bad in law. 2. BECAUSE, on the facts and in the circumstances of the case, the impugned order passed by the Ld. CIT (A), sustaining the order of ITO (TDS) u/s 206C (6A) of the Income Tax Act is unsustainable and bad in law since the authorities have not considered the proviso contained under sub section (6A) of Section 206C of the Income Tax Act. ITA No.246/LKW/2018 A.Y. 2008-09 The District Mining Officer 2 3. BECAUSE, on the facts and in the circumstances of the case, the impugned order passed by the Ld. CIT (A), sustaining the order of ITO (TDS) u/s 206C (6A) of the Income Tax Act is unsustainable and bad in law since being voilative of principles of natural justice as no Notice have been issued by the Assessing Officer before passing the impugned order. 4. BECAUSE, on the facts and in the circumstances of the case, the impugned order passes by the Ld. CIT (A), is bad in law as the order passed by the Assessing Officer has been issued, ex-party, even prior to the date fixed for hearing. 5. BECAUSE, on the facts and in the circumstances of the case, the impugned order passed by the Ld. CIT (A), sustaining the order of ITO (TDS) u/s 206C (6A) of the Income Tax Act is unsustainable and bad in law since the demand raised is based on wrong calculation made by the Assessing Authority and the same is unsustainable in law. 6. BECAUSE, on the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in refusing to adjudicate upon the grounds of appeal raised by the assessee concerning the instant controversy citing the reason that provisions of Rule 46A were attracted and the same were not satisfied. The provisions of Rule 46A are extraneous to the instant controversy and the Ld. CIT (A) has grossly erred in invoking the said provision. 7. BECAUSE, on the facts and in the circumstances of the case, the impugned order passed by Ld. CIT(A) is unsustainable being non speaking and highly cryptic. 8. BECAUSE, on the facts and in the circumstances of the case, the CIT (A) has passed the order without providing the assessee with a due and proper opportunity of hearing and therefore the impugned order deserves to be set- aside being bad in law. 9. The humble assessee, craves for leave to add/amend any other ground with the prior permission of the Hon'ble Tribunal.” 2. At the very outset, it is observed that the appeal is late by 495 days. The assessee has filed an affidavit that the order of the ld. CIT(A) was received by them on 27.10.2016 and the orders were sent to their counsel for the preparation of the I.T. Appeal to be filed before the Hon’ble ITAT. The prepared appeal memo was sent to the assessee for approval and signatures and was received by one Sh. Ashish on 25.11.2016. However, on the evening of 26.11.2016, Sh. Ashish rushed back to his ITA No.246/LKW/2018 A.Y. 2008-09 The District Mining Officer 3 hometown for attending to a family bereavement and returned back to work only on 5.01.2017. Thereafter, the said staff member failed to put up the matter for the filing of appeal, until his eventual transfer to land ceiling office on 6.07.2017. It was only on 25.11.2017, while going through the office records of Sh. Ashish, that the appeal papers were located and thereafter the matter had to be put up for seeking of authorization and reimbursement of necessary expenses from the appropriate authority. All these contributed to a delay of 495 days and since the delay was caused by circumstances beyond the control of the assessee, it was prayed that the delay may kindly be condoned. We have duly taken note of the circumstances outlined by the assessee in his condonation petition and after consideration of the same, we believe that there are sufficient grounds to condone the delay. Therefore, the appeal is admitted for hearing. 3. The facts of the case are that a survey under section 133A was conducted at the office premises of the Director of the Geology and Mining at Khaniz Bhawan in Lucknow on 4.03.2015. During the said survey, it was discovered that lease or licenses or contracts for mining or quarrying had been granted to persons other than public sector companies by the District Magistrates and Mining Officers and though certain amounts had been received from the lessees, licensees or right holders in the form of royalties and related compensatory amounts, no amount had been collected and deposited by way of tax, as mandated by the provisions of section 206C (1C) of the Income Tax Act, by those District Magistrates and Mining Officers. The ld. AO, therefore, worked out the TCS payable on the total royalty amount received of Rs.1,77,03,099/- at Rs.3,54,062/- and after levying interest of Rs.3,39,899.5/- determined total non / short collection of tax for the F.Y. 2007-08 at Rs.6,93,961.5/- inclusive of interest. The assessee was therefore informed that he was being deemed to be an assessee in default, for the aforesaid amount and accordingly a total demand to this extent was raised. ITA No.246/LKW/2018 A.Y. 2008-09 The District Mining Officer 4 4. Aggrieved with the said order, the assessee went in appeal to the ld. CIT(A), Bareilly. Before the ld. CIT(A), Bareilly, it was alleged that the assessment was bad in law because the ld. ITO had not issued any notice before completing the assessment. It was further argued that the ld. AO was incorrect in calculating TCS payable @ 2% on total royalty amount of Rs.1,77,03,099/-, because TCS was collectable only on royalty received from sand excavation and not from brick-kiln, or amounts deposited from various Government Departments, or from enforcement application fee and other misc. receipts. It was submitted that sand excavation constituted only Rs.18,31,695/- of the total receipts and therefore, TCS could not be determined for any figure over and above that. The assessee drew attention to the provisions of section 206C(1C) of the Act and pointed out, that the District Mining Officers do not enter into any contract or transfer any right or any interest in any mine or quarry. Hence, they were not obliged to deduct tax at source. It was further submitted that excavation was permitted to the brick-kilns only upto 2 meters and as per the Mines Act, 1952 section 3(1), it did not fall within the definition of mining. Accordingly, it was submitted that the exclusion of such digging out of the Mines Act of India, which govern mining and quarrying in India, showed the intention of the legislature to keep the small diggings out of the purview. Thus, small excavations by brick-kilns could not be brought within the purview of section 206C. It was further argued that all the licencees / lessees were assessees of the Income Tax. Therefore, there should not be a double deduction of TCS from the assessee. At no point of time, had it been considered whether the licencees / lessees have filed their returns of income or not, because the assessee was only required to collect TCS in accordance with the above provisions. It was argued that since all the licencees / lessees have paid due taxes, therefore, there should not be further recovery from the assessee. In support of this line of argument, the assessee relied upon the decision of the Hon’ble Karnataka High Court in the case of C. Manjunatha Wines vs. CIT 15 taxman.com 6. The ld. CIT(A) considered these sumissions of the assessee in ITA No.246/LKW/2018 A.Y. 2008-09 The District Mining Officer 5 the context of the orders passed by ITO, TDS. He observed that during the survey at the office premises of Director of Geology and Mining, it had been discovered that lease or licenses had been granted or contracts had otherwise been entered into, or otherwise rights or interest had been transferred, either in whole or in part, in mine or quarry to persons other than a public sector company, for the use of such mine or quarry for the purpose of their business, without the collection of tax at source, by persons responsible as mandated by the provisions of section 206C (1C) of the Income Tax Act. The ld. CIT(A) held, that in the instant case, the assessee had not collected the tax from the buyer and also not made out a case that the buyer had paid the due taxes to the account of the Central Government. He pointed out that the word, “Mining” in general means the extraction of valuable minerals or other geological materials from the earth or from ore body. He also observed that even the process of making brick- kiln began with excavating the sand and thus even that was liable to TCS. Since, the assessee had failed to comply with the requirements of the provisions of section 206C of the Act, there did not appear to be any case to interfere with the orders passed by the ld. AO. The ld. CIT(A) held, that during proceedings, the assessee had tried to segregate the payments into various parts to show that some of it did not come under the head, “Mining”. However, this fact had not been brought to the notice of the ld. AO during TDS proceedings. As such, these were therefore, additional evidences for which no application under Rule 46A had been filed. In view of this, he declined to consider the same and accordingly confirmed the addition by dismissing the appeal. 5. The assessee is aggrieved at this dismissal of the appeal and has accordingly come before us. Sh. Jitendra Kumar Yadav, Advocate representing the assessee pointed out that the issue was covered by the orders of the ITAT Lucknow Bench in earlier ITA Nos. 243 to 246/LKW/2019 for the A.Ys. 2009-10 to 2012-13. The ld. AR pointed out that the Tribunal had held in those cases, that the orders that were passed after a period of four years, were barred by limitation. It was submitted that in the ITA No.246/LKW/2018 A.Y. 2008-09 The District Mining Officer 6 present case also, the assessment by the ld. AO had been completed on 30.03.2015 while the matter pertained to 2008-09. It was submitted that the Tribunal had held that in case of the assessee for the assessment years 2009-10 to 2012-13, that even though the limitation had not been prescribed within section 201, since the provisions of amended section 201(3) as amended w.e.f. 1.10.2014 were not retrospective, the orders passed by the ld. AO in those cases were barred by limitation and it had applied the same logic to the orders passed under section 206C(6A), holding them to be time barred. Ld. AR also argued, that ld. CIT(A) had not given adequate opportunities to the assessee and his order was therefore, vitiated on this count also. 6. On the other hand, ld. Sr. DR pointed out that the survey had been conducted in the month of March, 2015 and the irregularity had been detected only at that time, following which the orders had been passed on 30.03.2015 itself. Therefore, there was no delay on the part of the Department and there was no reason to hold that the order had been passed beyond the date of limitation. Also it was submitted that since the violation was apparent, no interference was called for his orders of ld. CIT(A). 7. We have duly considered the facts and circumstances of the case. We observe that even though the issue of limitation has not formally been raised as an additional ground, it forms the basis of the arguments of the ld. AR. Since, the issue of limitation goes to the very root of the matter, we therefore, propose to treat it as additional ground raised by the assessee and decide this issue before proceeding to consider the remaining issues raised in appeal. 8. We find that the Hon’ble ITAT Lucknow Bench in ITA Nos. 243 to 246/LKW/2019 for the A.Ys. 2009-10 to 2012-13 in the case of the same assessee, has followed the orders of the ITAT Jaipur Bench in the case of M/s Eid Mohd Nizam Uddin in ITA No. 316 and 248/JP/2018 wherein, vide their orders dated 29.08.2018, the Hon’ble Tribunal has held that when a limitation had not been provided for in the ITA No.246/LKW/2018 A.Y. 2008-09 The District Mining Officer 7 statute for a specific purpose, then the limitation provided for the purpose of completing the assessment would be a proper guidance for taking the reasonable time period within which an order has to be passed by the taxing authority. The Hon’ble ITAT had observed in those cases that an identical situation was prevailing in respect of orders passed under section 201(1) (201)(1A) of the Act prior to the amendment vide Finance Act 2009 w.e.f. 1.04.2010, whereby sub section 3 was inserted into section 201 and a limitation had been provided for the passing of the order under section 201(1) and section 201(1A). However, prior to that, the Courts had held that the ld. AO could not be given unfettered powers which could be exercised even beyond a reasonable time because of non-providing of limitation in the statute and hence the Courts had taken a consistent view that a reasonable time period for passing the order under section 201(1)/201(1A) of the Act would be four years. Accordingly, taking cue from such decisions of the Delhi High Court on the issue of section 201(1) and 201(1A) in the cases of CIT vs. N.H.K. Japan Broadcasting (2008) 305 ITR 137, Vodafone Essar Mobile Services vs. Union of India and Tata Tele Services vs. Union of India (order dated 9.03.2016) and other cases, the Hon’ble Jaipur Bench had held that four years was a reasonable period within which the ld. AO could pass the order under section 206C(6) / 206C(7) of the Act. Following the said order, the ITAT Lucknow Bench in the case of the assessee had ruled similarly. 9. However, from a perusal of the Hon’ble High Court orders cited by the Jaipur Bench of the Tribunal, it appears that none of them were with regard to the provisions of Section 206C(1C)/206C(6A) of the Act, but rather they all happened to be with regard to the provisions of Section 201(1) of the Act before the introduction of sub-section (3) of the said section w.e.f 01.04.2010. It also appears that while taking cue from these orders, on the issue of limitation for proceedings u/s 206C(1C)/206C(6A) of the Act, the Hon’ble ‘A’ Bench had omitted to consider the orders of the jurisdictional High Court on the issue of limitation for proceedings u/s 201(1)/201(1A) of the Act. It is observed that in the case of ITA No.246/LKW/2018 A.Y. 2008-09 The District Mining Officer 8 M/s. Mass Awash Pvt Ltd vs CIT (International Taxation) and another Misc. No. 1088 of 2016, the Hon’ble Allahabad High Court, vide its order dated 10.07.2017, had occasion to consider the exact same question of law i.e. whether there is any period of limitation which can be applied in respect of proceedings u/s 201/201(1A) of the Act. After various judgements, the Hon’ble High Court held, “the view taken by Delhi High Court that period of limitation of four years, as applicable for making assessment under section 147, should be made applicable for exercising power under section 201(1) and 201(A), we find it difficult to subscribe inasmuch as we do not impose a fixed time and prescribe a period of limitation, which has not been prescribed by Legislature in its wisdom. Such legislative action, by way of judicial precedent, in our view, would not be appropriate exercise of judicial review under Article 226 of Constitution. As we have already discussed above, even Supreme Court says that if time period is not prescribed for exercise of power, a reasonable time would depend upon the facts of each case and cannot be quantified or prescribed like a period of limitation”. While passing such orders, the Hon’ble High Court placed reliance on the judgment of the Hon’ble Supreme Court in the case of Uttam Namdeo Mahale vs Vithal Deo and others AIR 1992 SC 26 95, wherein a three judge bench of the Hon’ble Supreme Court had held, “Mr Bhasme, learned counsel for the appellant, contends that in the absence of fixation of the rule of limitation, the power can be exercised within a reasonable time and in the absence of such prescription of limitation, the power to enforce the order is vitiated by error of law. He places reliance on the decisions in State of Gujarat vs Patil Raghav Natha; Ram Chand vs Union of India and Mohd. Kavi Mohammad Amin vs Fatmabai Ibrahim. We find no force in the contention. It is seen that the order of ejectment against the applicant has become final. Section 21 of the Mamlatdar’s Court Act does not prescribe any limitation within which the order needs to be executed. In the absence of any specific limitation provided thereunder, necessary implication is that the general law of limitation provided in the Limitation Act (Act 2 of 1963) stands excluded. The Division Bench, therefore, has rightly held that no limitation has been prescribed and it can be executed at any time, especially when the law of limitation for the purpose of this appeal is not there. ITA No.246/LKW/2018 A.Y. 2008-09 The District Mining Officer 9 Where there is statutory rule operating in the field, the implied power of exercise of the right within reasonable limitation does not arise. The cited decisions deal with that area and bear no relevance of the facts.”. The Hon’ble Allahabad High Court also took notice of the judgment of the Hon’ble Bombay High Court in the matter of DIT (International Taxation) vs Mahindra and Mahindra Ltd (2014) 305 ITR 560 (Bom) in which the Hon’ble Bombay High Court had held, “though section 201 does not prescribe any limitation period for the assessee being declared as, “assessee in default”, yet, Revenue will have to exercise the powers in that regard within a reasonable time”, but not adhered to the four year limit prescribed by the Hon’ble Delhi High Court. It also took note of the decision of the Hon’ble Calcutta High Court in the matter of Bhura Exports Ltd vs The ITO (TDS) 365 ITR 548, wherein the Calcutta High Court had observed that the time period applicable in respect of Section 149 of the Act, for taking action u/s 147 of the Act, for the giving notice u/s 148A of the Act, would have no application qua Section 201 of the Act, since it is not a case of income escaping assessment, but the case of inaction of a deductor to deduct tax on interest while making payment of interest, in violation of section194(A) of the Act. The Court therefore held that if no period of limitation was prescribed under statute for taking action under head and at the same time, the Limitation Act does not apply to such statute and there could not be any prohibition of the period of limitation for taking action under the said statute unless there was any contrary intention expressed in the said statute. After considering all these judgements, the Hon’ble Allahabad High Court held that while exercising the power of judicial review, it would be appropriate to consider whether the power had been exercised by the competent authority within a reasonable period and whether the delay was unjust arbitrary, whimsical or it was for valid reason. If the courts were to find that the delay in exercise of power was for valid and bonafide reasons, the alleged delayed exercise of power cannot be held to be invalid and therefore it held that the proceedings initiated by the Revenue authorities u/s 201(1)/201(1A) of the Act could not be held to be barred by limitation. In view of the fact that the said judgment of the jurisdictional High Court is binding upon all Tribunals functioning under its jurisdiction, we are unable to ITA No.246/LKW/2018 A.Y. 2008-09 The District Mining Officer 10 accept the precedents cited of the Jaipur Bench of the ITAT or the ‘A’ Bench, to hold that the proceedings undertaken by the Assessing Officer u/s 206C(6A) of the Act are barred by limitation. Furthermore, we observe that survey under 133A of the Act was conducted at the office premises of the Director of Geology and Mining on 04.03.2015 and it is only then that the Revenue Authorities became aware of the fact of non-collection of tax at source by various District Magistrates and District Mining Officers. Subsequently, the orders were passed on 30.03.2015 i.e. with minimum delay. Therefore, it cannot be said that alleged delay was unjust, arbitrary, whimsical or for invalid reasons. Accordingly, since the action was taken within the reasonable time, following the decision of the Hon’ble Allahabad High Court in M/s. Mass Awash Pvt Ltd vs CIT (International Taxation) and another (supra), the validity of the order passed by AO u/s 206C(6A) of the Act is upheld and the additional ground is accordingly dismissed. 10. However, it is seen from the grounds of appeal that the assessee had raised a number of issues before the Ld. CIT(A), among which is the fact that the Assessing Officer had not issued any notice before completing the assessment; no show cause notice had been issued prior to the judgement; that the royalty received by the Department was not only on account of sand excavation but also on account of brick kiln operation, working for Government Departments, Enforcement Application fees and Other Misc Fees and TCS was only collectable on the royalty from the sand excavation and not from brick kiln or other operations. It was submitted that sand excavation royalty amounted to Rs.18,31,695/- only and therefore the demand raised was based on wrong calculation made by the Assessing Officer, for which reason it was unsustainable in law. We observe that the order is in the form of a show cause notice where the allegation against assessee had been spelled out, but the response of the assessee to the same is not recorded. Considering that the assessee specifically took the plea before the Ld. CIT(A), that the Assessing Officer had passed the order ex parte without giving of any opportunity of hearing to the assessee, we are of the view that it was the duty of the Ld. CIT(A) to consider the submissions of the assessee that ITA No.246/LKW/2018 A.Y. 2008-09 The District Mining Officer 11 the TCS calculation had been made on an amount that was far in excess of the amount on which tax was to be collected. The failure of the Ld. CIT(A) to consider this on the technicality that the assessee had not filed an application under Rule 46A of the Income Tax Rules, 1961 to our mind overlooks the specific ground raised by the assessee that it had not been provided any opportunity before finalization of the order determining the extent of the short collection by the assessee. Therefore, we deem it appropriate to restore the entire matter back to the file of the Assessing Officer, so that the Assessing Officer may consider the submissions and evidences placed by the assessee before the Ld. CIT(A) and thereafter pass a fresh order in accordance with law, after giving due opportunity to the assessee to be heard in this regard. 11. In the result, the appeal of the assessee is partly allowed. Order pronounced on 30.06.2025 in the Open Court. Sd/- Sd/- [SUDHANSHU SRIVASTAVA] [NIKHIL CHOUDHARY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30/06/2025 Sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT DR , ITAT, 4. CIT, 5. The CIT(A) By order Sr. P.S. "