TMI Blog2014 (7) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... moniously considering the scheme of the Act - Tax recovery proceedings are initiated only after the passing of order u/s 201(1) and that too if the person responsible fails to comply with notice of demand u/s 156. The decision in COMMISSIONER OF INCOME-TAX Versus NHK JAPAN BROADCASTING CORPORATION [2008 (4) TMI 182 - DELHI HIGH COURT] - though Section 201 does not prescribe any limitation period for the Assessee being declared as an Assessee in Default yet the Revenue will have to exercise the powers in that regard within a reasonable time - the Tribunal's order does not suffer from any error of law apparent on the face of record or perversity warranting our interference in appellate jurisdiction – thus, no substantial question of law arises for consideration – Decided against Revenue. - Income Tax Appeal No. 3489 of 2009 - - - Dated:- 3-7-2014 - S. C. Dharmadhikari And B. P. Colabawalla,JJ. For the Appellant : Mr. Suresh Kumar For the Respondent : Mr. J. D. Mistry, Senior Advocate a/w Mr. Nishant Thakkar i/by Mint Conferes, JUDGMENT (Per S. C. Dharmadhikari, J.): 1 This Appeal under Section 260A of the Income Tax Act, 1961 challenges the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on payable to the lead managers. It provides that management and underwriting commission was to be paid at 1.5% of the issue price and selling commission at 2% of the issue price. Such commission was to be retained by the lead managers from the issue price of GDRs. Besides that the Assessee also agreed to bear and pay all expenses incidental to the performance of its obligations including the fees and expenses of its legal advisers and accountants, expenses in connection with the issue of the Deposited Shares, the cost of listing the GDRs and the Deposited Shares and the cost of any advertising agreed to by the Assessee in connection with the offer of GDRs. The Assessee further agreed to reimburse to the lead manager for its out of pocket expenses and disbursement incurred by it subject to the limit of US $ 1,75,000. 3 The second issue of US $ 100,000,000 was of 5% Convertible Notes due on July 9, 2001 convertible into GDRs. For this issue, the Subscription Agreement was entered into by the Assessee with Goldman Sachs (Asia) L.L.C.. These Notes were to be in the denomination of US $ 1000 each convertible, at the option of the holder thereof, into GDRs each representing one ordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement with the foreign lead managers was a Subscription Agreement and hence it should be treated as an agreement for subscription. (b) payment to foreign lead managers was on account of subscription and hence it could not be considered as a consideration for rendering of any technical and consultancy services. (c) the subscription/ underwriting of any capital issue cannot take the colour of technical and consultancy services. Moreover since the lead managers were connected in the business of subscription/ underwriting of the capital issues, the services rendered by them could not be considered as professional services. (d) the services rendered by the lead managers were in the nature of financial/ banking services and were not technical services. (e) even if these could be considered as involving the technical services, experience, skill, it were not made available to the Assessee . The judgment of the Honourable Supreme Court in the case of CBDT and others v/s Oberoi Hotels (India) Pvt. Ltd. [(1998) 231 ITR 148 (SC)] was claimed as not relevant to the facts of its case. The other judgment referred to by the Assessing Officer in its notice in the case of GVK Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or pay to the Government after deducting, the person responsible is treated as Assessee in default u/s 201(1). (iii) Any such person referred to in section 201(1) extends not only the person deducting and failing to deposit the tax but also the person failing to deduct the tax at source. (iv) Where no time limit is prescribed for taking an action under the statute, the action can be taken only within a reasonable time by harmoniously considering the scheme of the Act. (v) Tax recovery proceedings are initiated only after the passing of order u/s 201(1) and that too if the person responsible fails to comply with notice of demand u/s 156. (vi) The order u/s 201(1) is akin to the assessment order. Assessment includes reassessment . (vii) The time limit for initiating the proceedings u/s 201(1) cannot be the same as that for the passing of order under this subsection. Time for initiation is always prior to the time for completing the proceedings. (viii) The reasonable time for initiating and completing the proceedings u/s 201(1) has to be at par with the time limit available for initiating and completing the reassessment as the assessment includes reassessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve fixed the time limit. Consequently, the Appeal deserves to be admitted. 12 On the other hand, Mr.J.D.Mistry, learned Senior Counsel appearing for the Assessee, submits that this Appeal has nothing in common to one which has been filed by the Assessee, namely, Income Tax Appeal No.1968/2009. He submits that the argument, that there should not be any limitation or restriction on exercise of powers, is an extreme one. The Assessee's Appeal is in relation to the finding on the point of time. The Tribunal has held that six years would be reasonable time within which the power can be exercised whereas the Assessee submits that it should not be six years, but shorter. Such an issue or question cannot be equated with the controversy raised by the Revenue, namely, that there should be no period of limitation at all. 13 Even otherwise, according to Mr.Mistry, the Tribunal has applied a settled principle of law. That has been applied in series of judgments of the Honourable Supreme Court and other High Courts. That principle is that when a statute is silent on the period or time for invoking any provision or exercising any power, then, what is required to be read in it is the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Income Tax Appeal No.246/2004 in case of Raymond Limited or the pending Appeal of the Assessee before us. 17 In relation to the argument that was canvassed before us by Mr.Suresh Kumar we find that the Tribunal may have rendered several findings, but if the finding on the point of limitation can be sustained and the Appeal could be disposed of only on that ground, then, on merits we would not be required to go into the correctness of the findings rendered by the Tribunal. In other words, if we are satisfied with the conclusions of the Tribunal on the point of limitation, then, all the contentions of both sides on merits can be kept open for being decided in an appropriate case. We clarify accordingly. 18 In paragraph 12.1 of the order the Tribunal considered the question as to whether the order under Section 195 r/w Section 201 of the Income Tax Act, 1961 is barred by limitation within four years from the end of the relevant financial year in the absence of any express provision in the Income Tax Act, 1961. The Tribunal held that the Authority must have firstly jurisdiction and on that assumption an inquiry can be held on the point of limitation. In the present case th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme of section 201(1) it is found that a duty has been cast upon the person responsible to make deduction of tax at source from any payment made on which tax is deductible. The failure to deduct or payment after deduction enables the authorities to treat him as assessee in default. This deduction of tax at source is only one mode of recovery. The deductee always remains responsible for the payment of tax on the amount which is paid to him with or without deduction of tax at source. Hence we do not find any match between the facts of the case of Hindustan Times Limited (supra) and others on similar lines, relied upon by the learned D.R. visavis the facts under consideration. On the contrary so many authorities have been cited on behalf of the Assessee, some of which have been referred to above in which it has been categorically held that the statutory power should be exercised within a reasonable time even if no time limit is prescribed. The same opinion has been expressed by the Hon'ble Supreme Court in the case of Mohamad Kavi Mahamad Amin Vs. Fatmabai Ibrahim [(1997) 6 SCC 71]. In view of the foregoing discussion we are of the considered opinion that there is no merit in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at source. On going through the Explanation to section 191 in juxtaposition to section 201(1) it is divulged that the person responsible for deducting or failing to pay tax deducted at source is to be deemed to be an Assessee in default only if the payee of income has also failed to pay such tax directly. From the detailed discussion under the succeeding main head, we will also notice that where the payee is not liable to pay tax on the amount of income received by him without deduction of tax at source, then also the person responsible cannot be treated as assessee in default. To sum up the liability of the person responsible is dependent upon the deductee failing or otherwise to pay such tax directly. Thus the action u/s 201(1) is dependent on the outcome of the assessment of the payee and the time limit for passing order u/s 201(1) has to be viewed in the light of the fate of the assessment in the hands of the recipient. Logically the person responsible for paying sum chargeable to tax can be treated as assessee in default at any time prior to the assessment of the payee or the time available for the making of the assessment of the payee. If the persons responsible is deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime limit for completion of assessment u/s 143 or 144 has been prescribed u/s 153(1) as two years from the end of the assessment year in which the income was first assessable. The time limit for notice of assessment or reassessment u/s 147 has been prescribed u/s 149. This section, in turn, provides that no notice u/s 147 shall be issued for the relevant assessment year if four years have elapsed from the end of the relevant assessment year unless the case falls under clause (b). Clause (b) further states that no notice u/s 147 shall be issued if four years but not more than six years have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupee or more for that year. The present twofold time limit for issuing notice u/s 149 has clear cut demarcation of its applicability in one situation or the other. Where the income chargeable to tax which has escaped assessment, by reason or underassessment or no assessment, amounts to or is likely to amount to one lakh rupees or more for that year then the extended period of six years is available but if the amount of such income is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, namely, reasonable time. 26 Mr. Mistry, learned Senior Counsel has placed before us the compilation of judgments essentially of the Honourable Supreme Court and which are followed by some of the High Courts. In the case of State of Gujarat v/s Patel Raghav Natha and others reported in AIR 1969 SC 1297 the Honourable Supreme Court held as under: 11. The question arises whether the Commissioner can revise an order made under Section 65 at any time. It is true that there is no period of limitation prescribed under Section 211, but it seems to us plain that this power must be exercised in reasonable time and the length of the reasonable time must be determined by the facts of the case and the nature of the order which is being revised. 27 In the case of the State of Punjab and others v/s Bhatinda District Cooperative Milk Producers' Union limited reported in (2007) 11 SCC 363, the Honourable Supreme Court followed this principle and applied it to even tax law. The Honourable Supreme Court in the context of revisional powers conferred by the Punjab General Sales Tax Act, 1948 enabling reopening of the assessment, followed the principle aforequoted and held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nda District Coop. Milk Producers Union Ltd. [2007] 11 SCC 363 : [2007] 9 RC 637 to contend that if no period of limitation is prescribed, a statutory authority must exercise its jurisdiction within a reasonable period. What should be the reasonable period depends upon the nature of the statute, rights and liabilities thereunder and other relevant factors. Relying upon this decision, it is submitted by learned Counsel for the assessee that since Section 201 of the Act does not prescribe any period of limitation for initiating or for completing proceedings in declaring the assessee as an assessee in default, exercise of jurisdiction should commence insofar as the statutory authority is concerned within a reasonable period of time. We are unable to agree with learned Counsel for the Revenue inasmuch as the decision relied upon by him deals with reasonable time for completing the assessment or for completing the task on hand. In Bharat Steel Tubes Ltd. [1988] 70 STC 122 (SC) the question that arose before the Court (and which has been stated on page 130 of the report) is whether an order of assessment under Section 11(3) of the Punjab General Sales Tax Act, 1948 or Section 28(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f decisions, some of which have been mentioned in the order which is under challenge before us, taken the view that four years would be a reasonable period of time for initiating action, in a case where no limitation is prescribed. The rationale for this seems to be quite clearif there is a timelimit for completing the assessment, then the timelimit for initiating the proceedings must be the same, if not less. Nevertheless, the Tribunal has given a greater period for commencement or initiation of proceedings. 32 Mr.Suresh Kumar submitted before us that the Delhi High Court judgment does not take note of the principle that when there is no limitation prescribed by the statute, the Court cannot read into the provision any time limit or restriction. In that regard he relied upon the judgment of the Honourable Supreme Court in the case of Ajaib Singh v/s Sirhind Cooperative Marketing Cum Processing Service Society Limited and another reported in (1999) 6 SCC 82. The issue before the Honourable Supreme Court in that case was whether there is any period of limitation prescribed for initiation of proceedings under Section 33C( 2) of the Industrial Disputes Act, 1947. In that regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed:] [Provided further that] no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax.] [(1A) Without prejudice to the provisions of subsection (1), if any such person, principal officer or company as is referred to in that subsection does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest, (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Honourable Delhi High Court, with respect, rightly concluded that though Section 201 does not prescribe any limitation period for the Assessee being declared as an Assessee in Default yet the Revenue will have to exercise the powers in that regard within a reasonable time. In such circumstances we are of the view that the Tribunal's order in this case does not suffer from any error of law apparent on the face of record or perversity warranting our interference in appellate jurisdiction. 36 We are also shown the judgment of the Calcutta High Court in the case of Bhura Exports Ltd. v/s Income Tax Officer (TDS), Ward 57(2) in G.A. No.1319 and ITAT No.118 and IT Appeal No.116/2011 and IT 1163/2011 decided on 30.08.2011. With respect and for the reasons indicated by us above we cannot agree with the view taken by the Division Bench of the Calcutta High Court. That decision overlooks the fundamental principles noted above. They need not be reiterated here. 37 However, we clarify that our order shall not have any impact on the Appeal which has been filed by the Assessee in this Court and which is stated to be pending. Our judgment and order shall not be construed as expression ..... X X X X Extracts X X X X X X X X Extracts X X X X
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