High Court Of Bombay
Citibank N.A. vs. CIT
Section 195, 201
Asst. Year 1975-76, 1976-77
S.H. Kapadia & J.P. Devadhar, JJ.
IT Ref. No. 44 of 1986
28th November, 2002
Counsel Appeared
S.E. Dastur with J.D. Mistry & B.D. Damodar i/b Kanga & Co., for the Applicant : R.V. Desai with P.S. Jetley i/b T.C. Kaushik, for the Respondent
JUDGMENT
S.H. KAPADIA, J. :
At the behest of the assessee, the Tribunal has referred the following three questions under s. 256 (1) of the IT Act, 1961, to this Court. The three questions are as follows :
“1. Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the burden was on the assessee to prove by cogent and convincing evidence that the recipient had actually paid tax on the income or the income had been held to be non-assessable?
Whether, on the facts and in the circumstances of the case, the Tribunal ought to have held that whatever burden lay on the assessee for not being regarded as an assessee in default under s. 201 had been discharged?
Whether the Tribunal erred in holding that the proceedings initiated under s. 201 of the IT Act, 1961, were not barred by limitation?”
Preface
2. At the outset, it may be mentioned that the Tribunal did not refer to this Court the first two questions. That, the Tribunal referred to this Court only the third question vide IT Ref. No. 44 of 1986. Therefore, the assessee-bank made an application to this Court under s. 256(2) of the Act for issuance of a writ of mandamus to the Tribunal to forward to this Court statement of case on question Nos. 1 and 2 reproduced hereinabove. The said Application No. 413 of 1983 was granted by the Division Bench of this Court as far back as 13th Feb., 1984. Thereafter, the present reference came before the earlier Division Bench of this Court on 1st July, 1998, when the present reference was adjourned to enable the Tribunal to refer the question Nos. 1 and 2 to this Court so that all the three questions could be disposed of together. The present reference once again came before the earlier Division Bench on 13th July, 1999, when once again the present matter was adjourned in order to enable the Tribunal to refer the questions to this Court. Till today, the order passed by the earlier Division Bench has not been complied with. However, both the learned advocates appearing before me stated that we need not wait for the Tribunal to forward the statement of case. That, the matter can be disposed of on the paper book in this IT Ref. No. 44 of 1986. Accordingly, question Nos. 1 and 2 have been framed by the Court and with consent of all sides, the matter is proceeded with. Facts
3. In this case, we are concerned with asst. yrs. 1975-76 and 1976-77. On 9th March, 1978, the Inspecting Asstt. Commissioner (IAC) passed an order against the assessee-bank for non-deduction of tax at source from interest payable to non-residents (hereinafter referred to as recipients). That, the said non-deduction of tax at source was detected during the course of the proceedings for asst. yr. 1975-76. In the circumstances, the IAC treated the assessee-bank as assessee-in-default and also called upon the assessee under s. 156 to pay Rs. 8,31,419 being the tax which the assessee ought to have deducted at the appropriate rates. A similar order was passed on 7th March, 1979, against the assessee-bank for non-deduction of tax at source from interest payable to the recipients, which was detected during the proceedings for the asst. yr. 1976-77. The assessee-bank contended before the IAC that the sums have been included in the income of the recipients and they have been taxed and, therefore, the IAC was not entitled to recover the tax once again from the assessee-bank. The assessee-bank took the plea that failure to deduct the TDS took place on account of genuine mistake. That, each of the recipients have paid tax on the amount received by them and, therefore, it was contended by the assessee that no recovery proceedings would lie because, it will amount to recovery of tax, twice over. The assessee relied upon the letters written by each of the recipients to the assessee-bank by which each of the recipients admitted having paid tax on the amounts received by way of interest from the assesseebank. The IAC rejected the contention of the assessee on the ground that if the assessee’s argument was to be accepted, viz., that the recipients have included the sums in their returns then, it would lead to a situation wherein any assessee can defer deduction and payment of tax and whenever such failures were detected, it can explain away its failure by stating that the concerned sums have suffered tax in somebody’s hands, which would defeat s. 195 of the Act. Being aggrieved, the assessee preferred appeal to the CIT(A). The first appellate authority set aside the order of IAC and directed the assessing authority to verify whether the said sums have been taxed in the hands of the recipients. Accordingly, the first appellate authority cancelled the two orders of IAC.
4. Being aggrieved, the Department carried the matter in appeal to the Tribunal. The Tribunal confirmed the order of CIT(A) with certain modifications. Under the modifications the demand under s. 156 was set aside and the IAC was directed to pass fresh orders, after giving opportunity to the assessee to prove its case viz., that the said sums have been taxed in the hands of the recipients of the interest amounts. The IAC was also directed to verify whether Coca Cola Export Corporation had paid the tax on the interest income by including the same in their estimate of advance payment of tax. The Tribunal directed the IAC to raise the demand once again only after making appropriate enquiries as directed by the Tribunal. Being aggrieved by this order of the Tribunal dt. 10th March,
1980, the matter has come before us by way of reference under s. 256(1) of the Act. Conclusion
5. We do not wish to answer the questions referred to us. As stated above, the demand under s. 156 of the Act raised by the IAC vide two impugned orders dt. 9th March, 1978, and 7th March, 1979, were set aside as far back as 10th March, 1980. The IAC was asked to verify, after giving opportunity to the assessee, the claim made by the assessee viz., that the interest income has been taxed in the hands of the recipients. From 10th March, 1980, till today, no such enquiry has been held. The correctness of the claim of the assessee has not been examined. No opportunity has been given to the assessee as directed by the Tribunal. We are informed that in 1981, the IAC passed an order without hearing the assessee, which has been set aside by the CIT(A). The IAC was directed once again to carry out the directions of the Tribunal dt. 10th March, 1980. Thereafter, no steps have been taken for last more than 20 years. No explanation has been given as to why the IAC did not take appropriate steps. We therefore, return the reference unanswered. Since more than 20 years have elapsed, we cannot permit the Department to raise the demand once again. Consequently, proceedings under s. 256(2) will also not survive. Order Subject to above, the reference is returned unanswered. No order as to costs. Matter is disposed of.
[Citation : 259 ITR 377]
