Income Tax Appellate Tribunal - Bangalore
M/S Karnataka State Cricket ... vs Assistant Commissioner Of Income Tax ... on 24 September, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH : BANGALORE
BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER
AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER
ITA No.1375/Bang/2018
Assessment year : 2011-12
M/s. Karnataka State Cricket Association, Vs. The Assistant Commissioner of
M. Chinnaswamy Stadium, Income Tax,
Mahatma Gandhi Road, TDS Circle 2(1),
Bangalore - 560 001. Bangalore.
TAN/PAN:
BLRK1 3462B / AAATT 2540E
APPELLANT RESPONDENT
Appellant by : Shri Narendra Sharma, Advocate
Respondent by : Shri C.H. Sundar Rao, CIT(DR-I)(ITAT), Bengaluru.
Date of hearing : 28.08.2018
Date of Pronouncement : 24.09.2018
ORDER
Per N.V. Vasudevan, Judicial Member
ITA No.1375/Bang/2018 is an appeal by the Assessee against the
order dated 22.2.2018 of CIT(Appeals)-13, Bengaluru relating to financial year 2010-11.
2. The Assessee is organization formed for the purpose of promoting cricket in Karnataka State. The Assessee is registered u/s.12A of the Income Tax Act, 1961 (Act). In the course of assessment proceedings of the Assessee for AY 2011-12, the AO noticed that the Assessee had not deducted tax at source on a sum of Rs.5,43,14,267 which comprised of a ITA No. 1375/Bang/2018 Page 2 of 10 sum of Rs.4,90,14,267 on account of expenditure provisions made on 31.3.2011 and another sum of Rs.53,00,000 on Police Bandobast Charges. A sum of Rs.4,90,14,267/- and Rs.53,00,000/- was disallowed u/s.40(a)(ia) of the Act and added to the total income of the Assessee in the order of assessment for AY 2011-12. Based on the addition made in the assessment, notice u/s.201(1) & 201(1A) of the Act was issued to the Assessee by the respondent herein dated 26.2.2015 for FY 2010-11 for treating the Assessee as an Assessee in default for taxes not deducted at source and for charging interest on taxes not deposited into the Government Account on or before the dates, respectively.
3. Sec.201(1) & 201(1A) of the Act reads thus:-
"Consequences of failure to deduct or pay.
201.(1) Where any person, including the principal officer of a company,--
(a) who is required to deduct any sum in accordance with the provisions of this Act; or
(b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax:
Provided 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 sub-section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or ITA No. 1375/Bang/2018 Page 3 of 10 after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200]."
4. The following sub-sections (3) was inserted after sub-section (2) of section 201 by the Finance (No. 2) Act, 2009, w.e.f. 1-4-2010 :-
"(3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of--
(i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed;
(ii) four years from the end of the financial year in which payment is made or credit is given, in any other case :
Provided that such order for a financial year commencing on or before the 1st day of April, 2007 may be passed at any time on or before the 31st day of March, 2011."
5. Sub-Section (3) quoted above was Substituted by the Finance (No.
2) Act, 2014, w.e.f. 1-10-2014, as under :-
"(3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of seven years from the end of the financial year in which payment is made or credit is given."ITA No. 1375/Bang/2018 Page 4 of 10
6. It was the plea of the Assessee in reply to the show cause notice issued by the respondent that it was not liable to deduct tax at source on provision made for expenses and Police Bandobast charges. The stand was rejected by the AO and he treated the Assessee as an Assessee in default and determined tax liability and interest u/s.201(1) & 201(1A) of the Act as follows:-
TDS Total Interest Total
Amount Deductible Demand
u/s u/s 201(1A)
Particulars Section
(Rs.) Sec 201(1) (Rs.) (Rs.)
(Rs.)
Contracts,
Maintenance, 194C 39614744 787479 31850 819329
Advertisement etc
Police Bandobast
194C 5300000 1060000 1245500 2305500
Charges
Payments to the
194J 8342415 834242 56502 890744
Professionals
Total 53257159 2681721 1333852 4015573
Total sum payable by the assessee : Rs. 26,81,721
Add: Interest u/s 201 (1A) : Rs. 13,33,852
Total : Rs. 40,15,543
Less: Paid : Rs. 16,21,721
Balance Payable : Rs. 23,93,852
7. Before CIT(A), the Assessee submitted that it had filed TDS for the relevant FYs as per the details given below:-
ITA No. 1375/Bang/2018 Page 5 of 10 Sl. Quarter TDS Return filing date
No.
1. Quarter-I 09.07.2010
2. Quarter-II 04.01.2011
3. Quarter-III 21.03.2011
4. Quarter-IV 30.06.2011
8. The Assessee submitted that the provisions of Sec.201(3)(i) of the Act as it stood prior to substituted provisions of Sec.201(3) by Finance (No.2) Act, 2014 w.e.f.1-10-2014 would apply to the case of the Assessee and as per the provisions of Sub-Section (3)(i) of Sec.201(1) of the Act as it existed prior to its substitution by the Finance (No.2) Act, 2014 w.e.f. 1.10.2014, any action in the case of an Assessee who has filed a return of TDS u/s.200 of the Act has to be passed within a period of 2 years from the end of the financial year in which the return of TDS u/s.200 was filed. The Assessee pointed out that the time limit for passing an order u/s.201(1) & 201(1A) of the Act for the FYs 08-09 to 10-11 would be 2 years from the end of the relevant FY as per 201(3)(i) of the Act, would expire two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed. The show cause notice issued by the AO dated 26.2.2015 was invalid as the time limit for passing orders for the relevant FYs u/s.201(1) & 201(1A) of the Act had already expired.
9. The CIT(A) however dismissed the plea of the Assessee by holding that the substituted provisions of Sec.201(3) by the Finance (No.2) Act, 2014 w.e.f. 1.10.2014, would apply and therefore the order u/s.201(1) & 201(1A) of the Act is within time. The following were the relevant observations of the CIT(A) in this regard.
ITA No. 1375/Bang/2018 Page 6 of 10"7. LIMITATION (ground 3) The appellant is aggrieved that the Order is barred by limitation and liable to be quashed.
It is seen from the record that the Order has been passed on 11.09.2015. Section 201(3), as it stood at the time of passing of Order is reproduced below:-
(3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of seven years from the end of the financial year in which payment is made or credit is given."
According to the details filed before the Assessing Officer, payments were made in the FY 2011-12. Thus, time for passing the order u/s. 201(1) persists upto 31.03.2019. Accordingly, the Order passed on 11.09.2015 is well within the limitation. This ground is therefore dismissed."
10. Even on merits the CIT(A) rejected the plea of the Assessee that it was not liable to deduct tax at source.
11. Aggrieved by the order of the CIT(A) the Assessee has preferred the present appeal before the Tribunal.
12. We have heard the submissions of the learned counsel for the Assessee and the learned DR on the issue of limitation. The learned counsel for the Assessee reiterated submissions made before the CIT(A) and further placed reliance on decision of Hon'ble Gujarat High Court in the case of Tata Teleservices Vs. Union of India and another 385 ITR 497 (Guj.) wherein on identical facts the proceedings u/s.201(1) & 201(1A) were held to be barred by time on the reasoning that the provisions of Sec.201(3) as Substituted by the Finance (No. 2) Act, 2014, w.e.f. 1-10- ITA No. 1375/Bang/2018 Page 7 of 10 2014 are applicable only prospectively and in respect of Financial years prior to the amendment in the law, the period of limitation will be governed by the provisions of Sec.201(3) prior to the aforesaid substitution. The learned DR reiterated the stand of the revenue that the substituted provisions of the law would apply. He also submitted that provisions of Sec.201(3)(i) of the provisions prior to substitution will not apply as the return of TDS filed by the Assessee was not within time and therefore had to be treated as non est in law.
13. As far as the question, whether section 201(3) as amended by Finance Act (No.2) 2014 would be applicable retrospectively or not, the Hon'ble Gujarat High Court in the case of TATA teleservices Vs. Union of India and Special Civil Application Nos. 1623, 2115 and 4771 of 2015 Judgement dated 16/02/2016, relating to Assessment Year 2008-09 took the view that section 201(3), as amended by Finance Act No.2 of 2014 shall not be applicable retrospectively and therefore, no order under section 201(i) of the Act can be passed for which limitation had already expired prior to amended section 201(3) as amended by Finance Act No.2 of 2014. The facts of the case before the Hon'ble Gujarat High Court was that the petitioner is engaged in the business of providing tele-communication services and selling service products across the country. According to the petitioner, it is governed by Tele-Communication Interconnection Usage Charges Regulation, 2003 issued by TRAI under the TRAI Act, 1997. The petitioner filed its TDS statement regularly for the F.Y. 2007-08 & 2008-09 for respective quarters. The petitioner was served with the summons dated 09/10/2014 requiring personal attendance in connection with proceedings under the Income Tax Act for A.Y. 2008-2009 and 2009-2010 seeking details regarding TDS for F.Y. 2007-2008 and 2008-2009. The petitioner made submissions dated 15/12/2014 and contended that the assessment proceedings sought to be initiated are time barred in view of Section 201(3) ITA No. 1375/Bang/2018 Page 8 of 10 as it stood at the end of the respective FY 2007-2008 and 2008-2009. On a writ petition filed by the Assessee to quash the proceedings as barred by limitation, the Hon'ble Gujarat High Court held that it is clear that earlier section 201(3) as amended by Finance Act, 2012 amended on 28/5/2012 was specifically made applicable retrospectively w.e.f. 1/4/2012, whereby limitation period was substituted from four years to six years for passing orders where TDS Statement had not been filed. However, section 201(3) as amended by Finance Act No. 2 of 2014, as mentioned in the memorandum of the Finance Bill No.2 of 2014 is stated to have effect from 1st October, 2014. Thus, wherever the Parliament / Legislature wanted to make provisions applicable retrospectively, it has been so provided. The Hon'ble Gujarat High Court referred to the case of S.S. Gadgil AIR 1965 SC 720, wherein the Hon'ble Supreme Court had observed and held that in absence of an express provision or clear implication, legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorize the Income Tax Officer to commence proceedings which before the new Act came into force had upon the expiry of the period provided, become barred. The Gujarat High Court also noticed that similar view has been taken by the Hon'ble Supreme Court in the case of J. P. Jani, Income Tax Officer, Circle IV, Ward-G, Ahmedabad and another, versus Induprasad Deveshanker Bhatt, reported in AIR 1969 S.C. 778 and while interpreting section 297(2)(d)(ii) of the Income Tax Act, after considering the earlier decision of the Hon'ble Supreme Court in the case of S. S. Gadgil versus Lal and Co., [1964-53 ITR 231 = AIR 1965 SC
171. Considering the law laid down by the Hon'ble Supreme Court in the aforesaid decisions, the Hon'ble Gujarat High Court held that the facts of the case before it and more particularly considering the fact that while amending section 201 by Finance Act, 2014, it has been specifically mentioned that the same shall be applicable w.e.f. 1/10/2014 and even considering the fact that proceedings for F.Y. 2007-08 and 2008-09 had ITA No. 1375/Bang/2018 Page 9 of 10 become time barred and/or for the aforesaid financial years, limitation under section 201(3)(i) of the Act had already expired on 31/3/2011 and 31/3/2012, respectively, much prior to the amendment in section 201 as amended by Finance Act, 2014 and therefore, as such a right has been accrued in favour of the assessee and considering the fact that wherever legislature wanted to give retrospective effect so specifically provided while amending section 201(3) (ii) of the Act as was amended by Finance Act, 2012 with retrospective effect from 1/4/2010, it is to be held that section 201(3), as amended by Finance Act No.2 of 2014 shall not be applicable retrospectively and therefore, no order under section 201(1) of the Act can be passed for which limitation had already expired prior to amendment to section 201(3) by Finance Act No.2 of 2014.
14. It is not in dispute before us that the proceedings u/s.201(1) of the Act were barred by time prior to amendment to Sec.201(3) by the Finance Act No.2 of 2014. In these circumstances, we are of the view that order passed for FY 2010-11 u/s.201(1) & 201(1A) of the Act were barred by limitation and consequently deserves to be quashed. We find merits in the stand taken by the Assessee and allow the appeal of the Assessee by holding that the order passed u/s.201(1) & 201(1A) is barred by limitation. We therefore allow the appeal by the Assessee.
15. As far as the argument of the learned DR that the return of TDS filed by the Assessee was belated and therefore non est in law and therefore the provisions of Sec.201(3)(i) of the Act prior to substitution w.e.f. 1-10- 2014 will apply, we are of the view that a plain reading of the provisions of Sec.201(3) of the Act as it existed prior to its substitution by the Finance Act, 2014 shows that the said provisions dealt with two type of cases,
(i) a case where the statement referred to in section 200 has been filed; (ii ) in any other case. There was no third category of case where a ITA No. 1375/Bang/2018 Page 10 of 10 statement referred to in Sec.200 is filed belatedly. The argument of the learned DR is therefore devoid of any merit.
16. In the result, the appeal of the Assessee is allowed.
Pronounced in the open court on this 24th day of September, 2018.
Sd/- Sd/-
( A.K. GARODIA) ( N.V. VASUDEVAN)
Accountant Member Judicial Member
Bangalore,
Dated, the 24th September, 2018.
/ Desai Smurthy /
Copy to:
1. The Appellant 2. The Respondent 3. The CIT
4. The CIT(A) 5. The DR, ITAT, Bangalore.
6. Guard file
By order
Senior Private Secretary
ITAT, Bangalore.