Income Tax Appellate Tribunal - Ahmedabad
Jintan Clinical Thermometer vs Income-Tax Officer on 25 March, 1991
Equivalent citations: [1991]38ITD105(AHD)
ORDER
R.L. Sangani, Judicial Member
1. This appeal by the asscssee relates to asst. year 1976-77.
2. The facts are as follows : The assessce company credited the accounts of M/s. Dipti Industries and M/s. Mehul Industries as follows on the basis of the bills during the financial year 1975 -76 which was the assessee's previous year for asst.year 1976-77:-
Bills of Dipti Industries Bill Nos. Date Amount
1. 30-6-1975 17795-60
2. 30-9-1975 20210-00
3. 31-12-1975 16976-30
4. 31-3-1976 18075-90 73057-80 Bills of M/s. Mehul Industries:
1. 30-6-75 15396-00
2. 30-9-75 17466-60
3. 30-12-75 13431-40
4. 31-3-76 24312-00 70606-00 These two parties had done job works for the assessee company and the payments had been made for those job works. According to the ITO, the assessee should have deducted tax at source at the rate of 2% as required under the provisions of .section 194C of the Income-tax Act, 1961 but the asscssee did not deduct any tax at source. The ITO initiated proceedings for charging interest under Section 201(1A) of the Act for non-deduction of tax at source and for not crediting the same to the account of the Central Govt. The contention of the asscssee before the ITO was that job work was done as per business of the asscsscc-company without any stipulated terms and conditions" and as such Section 194-C was not applicable. This submission was not accepted by the ITO. The ITO found that particular type of jobs had been given to the said two parties and that one of them charged 20 paisc per piece while the other charged 10 paise per piece and that circumstances indicated that there was oral agreement regarding rates. According to the ITO when there was an agreement as to the rates and the amount exceeded Rs. 5,000, the provisions of Section 194C would be applicable. Each bill in the present case has exceeded Rs. 5,000 and as such the assessee was liable to deduct tax at source and pay to the credit of the Central Govt. in accordance with the provisions of Section 194C of the Act but the assessee has failed to do so. The ITO therefore, levied interest of Rs. 1,933 calculated at 12% per annum for period upto 30-6-1981 by order dated 13-7-1981. Against this order levying interest under Section 201(1A) of the Act the assessee filed appeal before the CIT(A). The CIT(A) agreed with the reasons given by the ITO and confirmed the levy of interest. The assessee is now in further appeal before the Tribunal.
3. The submission of the learned counsel for the assessee before us was that those two concerns had done job works for the assessee and that for these jobs works, the assessee has made payments which have been specified in the order of the ITO. It was submitted that there was no express or implied contract with these two concerns and as such provisions of Section 194C were not applicable. This submission cannot be accepted. A contract could be either in writing or oral. The contract could also be either express or implied. Admittedly, job work had been done by these two parties and payments had been made at particular rate. The circumstances would indicate that there was a contract and under that contract the amounts had been paid at particularrates. Consequently, provisions of Section 194C would be attracted. No other arguments regarding applicability of Section 194C has been raised. Consequently, the main argument in the grounds of appeal would fail.
4. In the course of hearing of this appeal, the learned counsel for the assessee raised an additional ground which pertains to limitation. The said ground was that no order for levy of interest could have been passed on 13-7-1981 in view of the provisions regarding limitation under Section 231 of the Act.
5. The learned Departmental Representative opposed the admission of the additional ground. The submission on behalf of the Department was that this ground was not raised either before the ITO or before the CIT(A) and that the same could not be raised for the first time at the time of hearing of the appeal. The objection raised by the Department for admission of the additional ground cannot be sustained. By the additional ground a legal plea on the facts already on record is being raised and that legal plea goes to the root of the matter and as such the same can be allowed to be raised at the stage of arguments before the Tribunal although the. same had not been taken either before the ITO or before the CIT(A).
6. In support of the plea to the effect that the order passed by the ITO was barred by time the learned counsel relied on the decision of Calcutta High Court in CIT v. Dunlop Rubber Co. (India) Ltd. [1980] 121 ITR 476.
7. We find that the said decision is of no assistance. The ratio of said decision is that when a person who is liable to deduct tax at source does not deduct the tax or fails to pay the tax as required by the provisions of the Act, he shall, without prejudice to any other consequences which he may incur, be deemed to bean assessee in default in respect of the tax. Thus, as far as the tax which is deductible by the assessee is concerned, he would be deemed to be the assessee in default with effect from the date on which the default took place. Section 231 of the Act prescribes a period of one year for commencing the proceedings of recovery of the sum payable by the assessee and the said period of one year runs from the last day of the financial year in which the assessee is deemed to be in default. In the present case, it is not known whether the assessee has paid the amount of tax which was required to be deducted by him. Assuming that he had not paid the tax wihich was required to be deducted by him up to the date on which the proceeding for levy of interest under Section 201(1A) was started, the only consequence would be that recovery in accordance with the procedure laid down in the Act would be barred in respect of such tax as was required to be deducted and it was not deducted. However, as laid down in Section 232 of the Act the said amount could be recovered by filing of Civil Suit and limitation for filing Civil Suit was 30 years. Consequently, it cannot be said that the amount had become wholly irrecoverable. In the present appeal, we are concerned with the order of levy of interest under Section 201(1A) of the Act. The submission of the assessee was that provisions of Section 231 would be applicable to interest under Section 201(1A) of the Act. This submission cannot be accepted. The assessee is not deemed to be an assessee in default as far as the interest portion is concerned. Interest is payable by the assessee only after an order under Section 201(1A) is passed. To such an order provisions of Section 231 would not be applicable. We arc supported in this view of the matter by the decision of the Calcutta Bench of the Tribunal in Subarna Plantation & Trading Co. Ltd. v. ITO [1989] 28 ITD 177. The fact that no proceeding under the Act could be taken for recovery of the tax deductible at source in view of expiration of limitation under Section 231 of the Act would not preclude the ITO from levying interest under Section 201(1A) of the Act. This is because the amount in question could be recovered by filing of suit by the Government. In this connection, the recent decision of Calcutta High Court in British Airways v. CIT is instructive. It has been laid down therein that period of limitation laid down by Section 231 is confined to recovery proceedings under the Income-tax Act and that provision does not curtail the power of the Government to file a suit to recover the outstanding amount of tax payable by any other process of law and that outstanding amount of tax can be recovered like any other debt due to the State by filing a suit. The Calcutta High Court relied on the decision of Supreme Court in Raja Jagadish Pratap Sahi v. State of UP [1977] 88 ITR 443 in support of this proposition. The Calcutta High Court also referred to another aspect of the case and that aspect was that liability to pay tax was that of the recipient of the income and that even if the tax was not deducted at source by the assessee the recipient would be liable to pay tax in usual course and that interest that is payable under Section 201(1A) would be only up to the date on which such tax was actually paid and that the interest would stop running when the amount of tax which should have been deducted at source is actually paid cither by the assesses or by the recipient of the amount. The Calcutta High Court held that the fact that lax deductible at source could not be recovered under Section 231 of the Act would not be a bar for levy of interest under Section 201(1A) of the Act. We respectfully follow said decision and reject the additional ground raised by the assessee.
8. The appeal is dismissed.