2015 (8) TMI 913 - AT - Income Tax

Non deduction of TDS u/s.194A on the interest credited/paid by the assessee to the some depositors - time limit for initiating proceedings u/ss. 201(1) and 201(1A) - Held that - Revenue has not brought on record any outstanding demand on the deductee/s, so that time limitation of six years from the end of the relevant assessment year shall obtain, i.e. for the purpose of initiation of recovery proceedings. Further, for all the years, the proceedings were initiated on 15.02.2008, following a survey u/s.133A concluding on 07.02.2008, by extending opportunity to the assessee to explain its case qua non deduction of tax at source, which was in fact followed by similar opportunity on 22.02.2008, 27.02.2008, 03.03.2008 and 07.03.2008 (refer para 1 of the order u/s.201(1) and 201(1A) of the Act dated 31.07.2008 for all the years). These dates fall within a period of six years from the end of the relevant year for all the years under reference. Accordingly, none of the impugned initiations suffers from the legal infirmity of being barred by time. The assessee s case, accordingly, fails for all the years. On the merits of the demand raised, on which no arguments were made and, consequently, not urged or responded to by the other side as well, the matter stands squarely covered by the decision by the co-ordinate Bench in the assessee s case (to which both of us are incidentally a party), confirming the impugned order. It is, however, as afore-stated, open for the assessee to lead evidence before the Assessing Officer (A. O.) as to the satisfaction of the tax demand on the interest income in the hands of the deductee/s, to which extent therefore no recovery can in law be effected. The recovery of interest demand u/s. 201(1A) would again follow the prescription of the tribunal s order, rendered following the decision in the case of Hindustan Coca Cola Beverage (2007 (8) TMI 12 - SUPREME COURT OF INDIA) and CIT vs. ELI Lilly and Company (India) (P.) Ltd. 2009 (3) TMI 33 - SUPREME COURT . We decide accordingly.

Issues Involved:
1. Non-deduction of tax at source (TDS) under Section 194A of the Income Tax Act.
2. Time limit for initiating proceedings under Sections 201(1) and 201(1A) of the Income Tax Act.
3. Determination of tax liability and interest under Sections 201(1) and 201(1A).

Issue-wise Detailed Analysis:

1. Non-deduction of tax at source (TDS) under Section 194A:
The case originated from a survey conducted under Section 133A of the Income Tax Act at the assessee's business premises. It was discovered that the assessee had failed to deduct tax at source on interest credited/paid to depositors for the relevant years as required under Section 194A. Additionally, Form 15H declarations, which preclude TDS, were either not obtained, not filed, or contained deficiencies rendering them unacceptable. Consequently, the Assessing Officer calculated the assessee's liability towards TDS under Section 201(1) and interest for non-deposit under Section 201(1A).

2. Time limit for initiating proceedings under Sections 201(1) and 201(1A):
The CIT(A) held that there is no statutory time limit for levying tax under Section 201(1) or charging interest under Section 201(1A). Imposing a time limit, as done by various tribunals and High Courts, was deemed improper considering the specific obligations cast by the law and the absence of a statutory time limit. The CIT(A) directed that tax demand should not be raised if the assessee furnishes information regarding the filing of returns and payment of taxes by deductees. However, interest under Section 201(1A) should be charged from the due date of TDS payment till the date of tax payment by deductees.

3. Determination of tax liability and interest under Sections 201(1) and 201(1A):
The tribunal reviewed judicial precedents to ascertain the ratio decidendi. The decisions in NHK Japan Broadcasting Corporation Ltd., Hutchison Essar Telecom Ltd., and Sutlej Jal Vidyut Nigam Ltd. endorsed the concept of exercising statutory power within a reasonable period, typically up to four years. Conversely, the decision in H.M.T. Ltd., following Hindustan Times Ltd., held that delay and laches do not annul proceedings where no statutory time limit is provided.

The tribunal concluded that the charge of tax under the Act occurs upon the taxable event, and the tax liability does not abate with time. However, the recovery of TDS must be adjusted against the deductee's tax liability. The tribunal harmonized the two sets of decisions, stating that where tax is determined and outstanding against the deductee, recovery can occur at any time. Where no such demand exists, recovery proceedings must be initiated within six years from the end of the relevant assessment year.

Decision:
The tribunal found no contradiction between the decisions relied upon by the opposing sides. It held that where tax liability against the deductee is determined and outstanding, no time limit applies for recovery. Otherwise, recovery must be initiated within six years from the relevant assessment year. The assessee may show that no tax liability is outstanding against the corresponding income, thereby preventing recovery. The tribunal confirmed the impugned order on merits, allowing the assessee to present evidence regarding the satisfaction of tax demand on the interest income in the hands of the deductees. The recovery of interest under Section 201(1A) would follow the tribunal's order, adhering to the decisions in Hindustan Coca Cola Beverage and CIT vs. ELI Lilly and Company (India) (P.) Ltd.

Conclusion:
The assessee's appeals were disposed of on the above terms, with the order pronounced by listing the result on the Notice Board of the Bench under Rule 34(4) of the Appellate Tribunal Rules, 1963.

← Previous Next →