Income Tax Appellate Tribunal - Lucknow
State Bank Of India,, Kanpur vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH "A", LUCKNOW
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND
SHRI J SUDHAKAR REDDY, ACCOUNTANT MEMBER
ITA Nos.476 & 477/LKW/2012
Assessment Years:1997-98 & 1999-2000
Income-tax Officer (TDS)-II v. Branch Manager
Kanpur State Bank of India
Branch Kakadeo, Kanpur
PAN:AAACS8577K
(Appellant) (Respondent)
ITA Nos.479, 480 & 481/LKW/2012
Assessment Years:1997-98, 1998-99 & 1999-2000
Income-tax Officer (TDS)-II v. Branch Manager
Kanpur State Bank of India
Branch Sisamau, Kanpur
PAN:KNPSO1048F
(Appellant) (Respondent)
ITA Nos.438, 437 & 439/LKW/2012
Assessment Years:1997-98, 1998-99 & 1999-2000
State Bank of India v. Income-tax Officer (TDS)-II
Sarvodaya Nager Branch Kanpur
Kanpur
PAN:KNPSO2047D
(Appellant) (Respondent)
Department by: Shri. Alok Mitra, D.R.
Assessee by: Shri. Pradeep Mehrotra
Date of hearing: 19.03.13
Date of pronouncement: 25.04.13
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ORDER
PER BENCH:
These appeals are preferred by the Revenue as well as the assessees against respective order of the ld. CIT(A) on a common issue with regard to non-deduction of TDS on interest paid by the assessee to its customers.
2. ITA Nos.476, 477, 479, 480 and 481/LKW/2012 are preferred by the Revenue assailing the orders of the ld. CIT(A) raising common grounds, which are as under:-
1. The Ld. CIT (A) has erred on facts and in law in holding that section 194 in not applicable in case of provisioning of amounts to interest on FDRs/time deposits on the basis of Board's circular No.03/2010 dated 02/03/2010 ignoring the fact that the circular is applicable only in the case of Core Banking Solutions whereas the case of the assessee in the relevant assessment year was of Non Core Banking Solutions.
2. The Ld. CIT (A) has erred on facts and in law in holding that section 194 is not applicable in case of provisioning of amounts to interest on FDRs/time deposits on the basis of Hon'ble Income Tax Applicable Tribunal Ahmadabad decision in the case of Bank of Maharastra Vs ITO 38 SOT 432 (Ahmadabad), 2001. Actually the judgment is based on the above circular no.03/2010 dated 02/03/2010. The Ld. CIT (A) has erred in not appreciating the facts that the case of the assessee is different and is of Non Core Banking Solutions.
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3. ITA Nos. 437, 438 & 439/LKW/2012 are preferred by the assessee against the respective order of the ld. CIT(A) on common grounds, which are as under:-
1. That the Learned Commissioner of Income Tax (Appeal) has erred on facts and in law in upholding that the order of the Assessing Officer passed u/s. 201(i)/(201(1A)/206C(7) of the Income Tax Act passed after a Lapse of more than ten years without adjudicating the Ground No.3 raised by the Appellant Before the Learned Commissioner of Income Tax (Appeals);
2. That the Learned Commissioner of Income Tax (Appeal) has erred on facts and in law in holding that the authorized representative of the Appellant agreed for dismissal of Appeal on 24.05.2012 when he appeared to argue the appeal.
3. That the Learned Commissioner of Income Tax (Appeals) has erred in law in confirming the order of the Assessing Officer without appreciating the fact that the Appellant deducted and paid due Taxes on the amount of interest paid to the depositors as and where applicable.
4. That the order of the Learned Commissioner of Income Tax (Appeal) is Arbitrary, Illegal and Bad in Law Liable to be quashed.
4. In all these assessment years, during the course of survey conducted under section 133A of the Income-tax Act, 1961 (hereinafter called in short "the Act"), it was noticed that the assessee is a banking company and is engaged in banking business and the bank has paid/credited interest to its customers, but failed to deduct tax at source on the payment of interest. The Assessing Officer accordingly held the assessee to be in default for non-deduction of TDS and made additions accordingly, against which the :-4-:
assessees preferred appeals and in ITA Nos. 476, 477, 479, 480 and 481/LKW/2012, the ld. CIT(A) has allowed relief to the assessee following the Board's Circular No.3/2010 dated 2.3.2010 and the order of the Ahmedabad Bench of the Tribunal in the case of Bank of Maharashtra vs. ITO, 38 SOT 432 wherein it has been held that interest credited as per notional entry was only provisioning the accounts for the purposes of macro monitoring and it was not actual credit or payment of interest to depositors. Therefore, section 194A is not applicable.
5. In ITA Nos. 437, 438 & 439/LKW/2012, the ld. CIT(A) confirmed the additions made by the Assessing Officer.
6. During the course of hearing before us, the ld. counsel for the assessee has raised a preliminary objection that the assessment orders passed under sections 201(1), 201(1A) and 206C(7) of the Act for assessment years 1997-98, 1998-99 & 1999-2000 are barred by limitation in the light of the order of the Special Bench of the Tribunal in the case of Mahindra and Mahindra Ltd. vs. DCIT [2009] 313 ITR (AT) 263 (Mumbai) [SB], the judgments of the Hon'ble High Court of Delhi in the cases of CIT vs. NHK Japan Broadcasting Corporation [2008] 305 ITR 137 (Delhi) and CIT vs. Hutchison Essar Telecome Ltd. [2010] 323 ITR 230 (Delhi), as the orders have been passed almost after a period of more than 10 years from the end of the assessment year. The ld. counsel for the assessee further contended that on this score only, the orders passed under sections 201(1), 201(1A) and 206C(7) of the Act are to be quashed.
7. Finding force in the contentions of the assessee, we confronted this argument to the ld. D.R. and sought his comments. The ld. D.R., Shri. Alok Mitra has emphatically argued that in the relevant provisions of the Act no time limit is prescribed for initiating the proceedings under sections 201(1), :-5-:
201(1A) and 206C(7) of the Act, therefore, the orders passed by the Assessing Officer cannot be called to be time barred. Moreover, these orders were passed when the Assessing Officer has noted, during the course of survey, that on all the payments of interest TDS were not deducted by the assessee. The ld. D.R. placed reliance upon the decisions of the Hon'ble Punjab and Haryana High Court in the case of CIT(TDS) vs. H.M.T. Ltd. 340 ITR 219 (P&H) and Hon'ble Calcutta High Court in the case of Bhura Exports Ltd. vs. ITO (TDS) [2012] 202 Taxman 88, in which it has been held that there is no time limit for passing the order under section under sections 201(1), 201(1A) and 206C(7) of the Act.
8. Having given a thoughtful consideration to the rival submissions on this preliminary objection and from a carefully perusal of the orders of the lower authorities and the judgments referred to by the parties, we find that undisputedly the orders under sections 201(1), 201(1A) and 206C(7) of the Act were passed almost after 10 years from the end of the assessment year. For the sake of reference, we extract the details of the assessment years and orders as under:-
Sl.No. ITA No. Assessment year Date of passing the order
1. 437/LKW/2012 1978-79 11.02.2011
2. 480/LKW/2012 1998-99 11.02.2011
3. 439/LKW/2012 1999-2000 11.02.2011
4. 479/LKW/2012 1997-98 11.02.2011 :-6-:
5. 476/LKW/2012 1997-98 23.03.2011
6. 477/LKW/2012 1999-2000 23.03.2011
7. 438/LKW/2012 1997-98 11.02.2011
8. 481/LKW/2012 1999-2000 11.02.2011
9. A bare perusal of the dates of the assessment orders demonstrates that they have been passed much beyond the period of 10 years. The Special Bench of the Tribunal in the case of Mahindra and Mahindra Ltd. vs. DCIT [2009] 313 ITR (AT) 263 (Mumbai) [SB] held that no order under section 201(1) or 201(1A) of the Act can be passed where the Revenue has not taken any action against the payee and further the time limit for taking action against the payee under section 147 has also expired.
10. The Hon'ble Delhi High Court in the case of CIT vs. NHK Japan Broadcasting Corporation [2008] 305 ITR 137 (Delhi) held that the date of knowledge was not relevant for the purposes of exercising jurisdiction in so far as the provisions of the Act were concerned. The time limit of four years prescribed by the Tribunal called for no interference and action was to be initiated by the competent authority under the Act where no limitation was prescribed within the period of four years. The acceptance of liability by the assessee would not by itself extend the period of limitation nor would it extend the reasonable time that was postulated by the scheme of the Act.
Merely because it had admitted its liability and agreed to pay tax voluntarily, the assessee could not be put in a situation worse than if it had contested its liability.
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11. The Hon'ble Delhi High Court in the case of CIT vs. Hutchison Essar Telecome Ltd. [2010] 323 ITR 230 (Delhi) held that the proceedings under section 201 / 201(1A) could be initiated only within three years from the end of the assessment year or within four years from the end of the relevant financial year. The proceedings under sections 201/201(1A) were admittedly initiated beyond the period of three years from the end of the relevant assessment year as also beyond the period of four years from the end of the financial year. Consequently, the Tribunal had correctly concluded that the proceedings were beyond time.
1. We have also examined the judgments of the Hon'ble Punjab and Haryana High Court in the case of CIT(TDS) vs. H.M.T. Ltd. 340 ITR 219 (P&H) and Hon'ble Calcutta High Court in the case of Bhura Exports Ltd. vs. ITO (TDS) [2012] 202 Taxman 88 and noticed that in these judgments it has been held that the order passed by the Assessing Officer under section 201(1) and 201(1A) of the Act could not be annulled on the ground of delay and latches.
2. We find that two divergent views have been expressed by the different High Courts on the impugned issue. In the light of the judgment of the Hon'ble Apex Court in the case of CIT vs. Vegetable Products, 88 ITR 192 (SC), the judgment which is in favour of the assessee should be accepted. We, therefore, have no option but to follow the judgment passed by the Hon'ble Delhi High Court and the order of the Special Bench of the Tribunal which are in favour of the assessee. Accordingly we hold that the impugned orders under section 201(1), 201(1A) and 206C(7) of the Act are to be passed within a reasonable time i.e. at least within six years from the end of the assessment year. Since the impugned orders in all the cases are passed after more than 10 years from the end of the :-8-:
assessment year, they are certainly beyond the reasonable time. Therefore, we have no hesitation in holding them to be barred by limitation and accordingly we annul the same. Accordingly the assessee's appeals in ITA Nos. 437, 438 & 439/LKW/2012 stand allowed and the Revenue's appeals in ITA Nos.476, 477, 479, 480 and 481/LKW/2012 stand dismissed.
12. In the result, all the appeals of the Revenue are dismissed whereas the appeals of the assessee are allowed.
Order pronounced in the open court on 25.4.2013.
Sd/- Sd/-
[J SUDHAKAR REDDY] [SUNIL KUMAR YADAV]
ACCOUNTANT MEMBER JUDICIAL MEMBER
DATED:25.4.2013
JJ:1504
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
Assistant Registrar