Allahabad H.C : Initiation of proceedings under section 201(1)/201(1A) after a lapse of 10 years in case of assessee company upheld as there was reasonable explanation for delay

High Court Of Allahabad

Mass Awash (P.) Ltd. vs. CIT (International Taxation)

Section : 201, 195

Assessment year : 2006-07

Sudhir Agarwal And Ravindra Nath Mishra, JJ

Misc. Bench No. 1088 Of 2016

July  10, 2017

ORDER

1. This writ petition under Article 226 of Constitution of India has been filed by petitioner-M/s Mass Awash Private Limited (herein after referred to as “Assessee”) assailing following orders/notices:-

A. Notice dated 12.08.2015 issued by Deputy Commissioner of Income Tax (International Taxation) Circle Lucknow (herein after referred to “D.C.I.T.”) under Section 201(1)/201(1A) of Income Tax Act, 1961 (herein-after referred to as “Act, 1961”) for non deduction of T.D.S. on payments made to Smt. Nidhi Raman for Financial Years 2003-04, 2004-05 and 2005-06.

B. Notice dated 11.12.2015 issued by D.C.I.T. under Section 201(1)/201(1A) read with Section 195 of Act, 1961 issued after considering petitioner’s reply dated 30.10.2015 pursuant to earlier notice dated 12.08.2015, holding that proceedings initiated by C.I.T. under Section 201(1)/ 201(1A) is not barred by time. D.C.I.T. required petitioner to show-cause why amount of T.D.S. not deducted, and interest thereon be charged from it.

C. Order dated 30.12.2015 passed under Section 195 read with Section 201(1)/201(1A) of Act, 1961 for Assessment Years 2004-05, 2005-06 and 2006-07 (Financial Years 2003-04, 2004- 05 and 2005-06) declaring that petitioner is in deemed default under Section 201(1)/201(1A) read with Section 195(1) of Act, 1961 for an amount of Rs. 28,17,326/-. Aforesaid amount includes non-deducted T.D.S. of Rs. 12,63,000/-, and, interest of Rs.15,81,326. The order further says that penalty proceedings under Section 271C would be initiated separately.

D. Notice of demand under Section 156 of Act, 1961 dated 30.12.2015 issued by D.C.I.T. for Assessment Years 2004-05, 2005-06 and 2006-07.

2. Facts in brief, giving rise to present dispute, are narrated as under:-

3. Petitioner-assessee is a private limited company registered under Companies Act, 1956. Its registered office earlier was at 1, British India Street, Kolkata-69 but subsequently it was shifted to Oriental House, 3-A, Gokhley Marg, Lucknow and presently it is at Lucknow.

4. Assessee purchased land bearing Khasra No.141 measuring 40601 Sq. Ft. situate at Sheikhpur Kasaila, Pargana, Tehsil and District Lucknow vide sale-deed dated 14.06.2005 from its owners Smt. Shanti Tripathi, Smt. Niti Pandey, Smt. Nishi Pandey, Smt Nidhi Raman and Sri Atul Tripathi for a sale consideration of Rs. 3,04,50,750/-(though for the purpose of Stamp Duty valuation of property was taken as Rs. 4,15,06, 598/-). Details of payments made to the vendors are as under:

1. Rs. 64,50,750/- (Rupees Sixty Four Lacs Fifty Thousands Seven Hundred Fifty) paid through Pay Order No. 010977 Dt. 14.06.2005 drawn on Bank of India, N.K. Road, Lucknow, at the time of execution of deed,

2. Rs. 60,00,000/- (Rupees Sixty Lacs) through Pay Order No. 010976 Dt. 14.06.2005 drawn on Bank of India, , N.K. Road, Lucknow, at the time of execution of deed.

3. Rs. 10,00,000/- (Rupees Ten Lacs) paid through Cheque No. 645031 Dt. 13.06.03 drawn on HDFC Bank Ltd. before execution of deed,

4. Rs. 28,00,000/- (Rupees Twenty Eight Lacs) through Cheque No. 013052 dt. 02.11.04, drawn on Citi Bank, Lucknow, before execution of deed,

5. Rs. 22,00,000/- (Rupees Twenty Two Lacs) paid through Cheque No. 120514 dt. 21.11.04 drawn on Bank of India, Lucknow before execution of deed,

6. Rs. 60,00,000/- (Rupees Sixty Lacs) paid through Pay Order No. 010975 dt. 14.06.2005 drawn on Bank of India, N.K. Road, Lucknow, at the time of execution of deed, and

7. Rs. 60,00,000/- (Rupees Sixty Lacs) paid through Pay Order No. 010974 dt. 14.06.2005 drawn on Bank of India, N.K. Road, Lucknow, at the time of execution of deed.

5. Addresses of Vendors mentioned in sale deed are as under:

1. Smt. Shanti Tripathi wife of late Dr. Surendra Prasad Tripathi, resident of 9/11, Rana Pratap Marg, Sarvodaya Housing Colony, Lucknow.

2. Smt. Niti Pandey wife of Sri Vijay Pandey resident of 2-B, Moti Lal Atal Road, Jaipur.

3. Smt. Nishi Pandey wife of Sri Neeraj Pandey, resident of Type-4, 9 Raj Bhawan Colony, Lucknow (for self and as Attorney for her real sister Smt. Nidhi Raman wife of Sri (Dr.) Rajiv Raman Pandey permanent resident of 76-A, Sohbatia Bagh, Allahabad).

4. Smt. Nidhi Raman wife of Sri (Dr.) Rajiv Raman Pandey, permanent resident of 76-A, Sohbatia Bagh, Allahabad.

5. Sri Atul Tripathi, son of (Late) Dr. Surendra Prasad Tripathi resident of 9/11, Rana Pratap Marg, Sarvodaya Housing Colony, Lucknow

6. Assessee was not aware that any of the sellers was Non- Resident-Indian (herein-after referred to as “N.R.I.”) at the time of execution of sale-deed since neither any one’s address was that of N.R.I. nor this fact was disclosed to Assessee by vendors. For Assessment Year (herein-after referred to as “A.Y.”) 2006-07, Assessee filed return under Section 143 of Act, 1961 disclosing factum of purchase of aforesaid property vide sale-deed dated 14.06.2005. Assessment order was passed by Assessing Authority (herein-after referred to as “A.A.”) in respect of A.Y. 2006-07 on 30.12.2008. Assessment was made after thorough scrutiny inasmuch as Assessee was selected for scrutiny under “CASS” and notice under Section 143(2) was issued and thereafter assessment was finalized.

7. Thus, factum of purchase of land in question vide sale-deed dated 14.06.2005 came to the knowledge of A.A. through return filed by Assessee and in any case when order of assessment was passed on 30.12.2008. It is also said that along-with return for A.Y. 2006-07, Assessee submitted audited balance-sheet as on 31.03.2006 along-with auditor’s report dated 06.07.2006 wherein aforesaid transaction of purchase for a consideration of Rs. 3,04,50,750/- was shown.

8. After almost 10 years from the date of execution of sale-deed dated 14.06.2005, and about 6 and ½ years from the date of assessment order dated 30.12.2008, D.C.I.T. served a notice dated 12.08.2015 upon Assessee under Section 201(1) and 201(1A) of Act, 1961 alleging that it has not deducted T.D.S. on payment of sale consideration to Smt. Nidhi Raman, wife of Dr. Rajiv Raman Pandey in Financial Years (hereinafter referred to as ‘F.Y.’) 2003-04, 2004-05 and 2005-06. The notice was addressed at Assessee’s registered office at Kolkata. It was stated that Smt. Nidhi Raman was an N.R.I. and being 1/5th shareholder in property, purchased by Assessee, as per Section 195 of Act, 1961, Principal Officer of Assessee was responsible for deducting T.D.S. at 10%, which it has failed. Assessee was required to show-cause why it should not be treated as an Assessee, “deemed in default” and proceedings for default by non-deduction of T.D.S. may not be initiated against it for F.Ys. 2003-04, 2004-05 and 2005-06.

9. Since Smt. Nidhi Raman, an N.R.I., was liable to pay capital gain tax as land sold was an urban land, she was supposed to file income tax return for A. Y. 2006-07. However it failed and neither paid tax nor filed return. Notice under Section 148 of Act, 1961 was issued to Smt. Nidhi Raman on 26.07.2008. On 24.12.2009, Assistant Director of Income Tax, (International Taxation), Kanpur (herein after referred to as “A.D.I.T.”) passed assessment order dated 26.12.2009 for A.Y. 2006-07 under Section 144 read with Section 147 of Act, 1961 against Smt. Nidhi Raman. She preferred Appeal before Commissioner of Income Tax (Appeals), Kanpur (herein-after referred to as “C.I.T. (A), Kanpur”). Appellate authority by order dated 16.02.2012 annulled assessment order dated 24.12.2009 on the ground that order under Section 163 treating Smt. Shanti Tripathi, another shareholder in property in question, as represented Assessee, has already been struck down by C.I.T.(A). However C.I.T.(A) Kanpur directed A.D.I.T. under Section 150 of Act, 1961 to exercise its power/jurisdiction to begin fresh proceedings under Section 161/163 of Act, 1961 or to make direct assessment on Smt. Nidhi Raman by arranging to serve notice at her United Kingdom’s address through Central Board of Direct Tax (hereinafter referred to as “C.B.D.T.”). C.I.T.(A) Kanpur also directed A.D.I.T. to explore possibility of recovering tax from purchaser of property since it was liable under Section 195 of Act, 1961 for deduction of TDS from payments made to an N.R.I.

10. Income Tax Department (hereinafter referred to as “Revenue”) felt aggrieved by C.I.T.(A) Kanpur’s order dated 16.02.2012, preferred Appeal i.e. I.T.A. No.330/LKO/2012 before Tribunal who vide order dated 28.06.2013 upheld and confirmed order of C.I.T.(A) Kanpur. Tribunal however said that order shall not prejudice any other remedy, which Revenue may pursue in the matter. This order of Tribunal was received in the Office of C.I.T.-3, (International Taxation), New Delhi on 16.07.2015.

11. In compliance of directions of C.I.T.(A) and Tribunal, D.C.I.T. issued notice on 12.08.2015 to Assessee under Section 201(1)/201(1A) of Act, 1961. Assessee replied aforesaid notice dated 12.08.2015 vide letter dated 30.10.2015, raising broadly following three objections:

i. It was not possible to know that Smt. Nidhi Raman was an NRI as she had given her address as 76A, Sobatiya Bagh, Allahabad, Uttar Pradesh;

ii. The transaction involved is more than 10 years and therefore notice is out of time; and

iii. The company was not aware that any of the parties is NRI as they have given full address in India in transfer-deed. Therefore, Assessee was not in default U/s 201(1)/201(1A) of Act, 1961;

12. D.C.I.T. considered aforesaid reply and passed order dated 30.12.2015 rejecting all the aforesaid objections. It required Assessee to show-cause why it should not be treated an Assessee in deemed default, of payment of non-deducted T.D.S. amount and interest thereof.

13. Assessee did not submit any reply and instead preferred this writ petition, but before it could be taken up, D.C.I.T. passed order dated 30.12.2015 and pursuant thereto issued notice of demand, as detailed above.

14. A preliminary objection has been raised on behalf of respondents that Assessee has a statutory alternative remedy of appeal before C.I.T. (A), Lucknow, under Section 246 of Act, 1961 and therefore it should be relegated to avail aforesaid statutory alternative remedy. In support thereof, Sri Alok Mathur, learned counsel appearing for respondent, placed reliance on CIT v. Chabil Dass Agarwal [2014] 1 SCC 717, Nivedita Sharma v. Cellular Operators Assn. of India [2011] 14 SCC 337, Munshi Ram v. Municipal Committee [1979] 3 SCC 83, CIT v. Vijaybhai N. Chandani [2013] 357 ITR 713/217 Taxman 138/35 taxmann.com 580 (SC), Indo Asahi Glass Co. Ltd. v. ITO [2002] 254 ITR 210/122 Taxman 123 and Ram & Shyam Co. v. State of Haryana [1985] 3 SCC 267. He further urged that neither any period of limitation has been prescribed under statute for passing order under Section 195 nor it can be said that issue of limitation can be ascertained from a bare perusal of facts so as to entertain writ petition at this stage, without relegating parties to avail statutory alternative remedy. It is contended that issue of limitation is a mixed question of fact and law inasmuch as disputed facts are adjudicated in the light of stand taken by both sides. It cannot be said that ex facie here is a case which apparently can be said to be barred by time so as to raise any question of jurisdiction so apparent, as to justify entertaining of writ petition directly without relegating parties to avail statutory alternative remedy.

15. Sri N.K. Seth, learned Senior Counsel, appearing for petitioner has submitted that for the purpose of initiating proceedings under Section 201, limitation will commence from the date of execution of sale-deed dated 14.06.2005 and since notice was issued after almost 10 years, thereafter apparently it is barred by limitation. He argued, where no limitation is prescribed in a statute, competent authority is bound to act within a reasonable time. In case it has acted after a long time, i.e. beyond 3, 4 or 5 years, its action would be patently without jurisdiction. He also placed reliance upon authorities of Supreme Court and various other Courts, which we shall deal while discussing matter on merits.

16. Rival submissions, including preliminary objection, give rise to following questions:-

(1) Whether writ petition deserves to be dismissed on the ground of statutory alternative remedy available to Assessee or facts of the case justify interference by this Court that impugned notice is without jurisdiction and that is one of the exceptions when this Court does not relegate a petitioner to avail alternative remedy;

(2) Whether notice issued by D.C.I.T. under Section 201(1)/201(1A) is patently without jurisdiction and renders all subsequent proceedings also without jurisdiction so as to warrant interference by this Court in the present writ petition or there are disputed questions of facts, which would justify relegation of petitioner to avail statutory alternative remedy;

(3) Whether there is any period of limitation which can be applied in respect of proceedings under Section 201(1)/201(1A) of Act, 1961.

17. We propose to consider all the three questions, together.

18. Evident facts are that there were five co-owners/vendors of land transacted vide sale-deed dated 14.06.2005. Out of them, three had given their addresses of Lucknow, one of Jaipur and one of Allahabad. All other co-owners/vendors executed sale-deed by presenting themselves before Registrar except Smt. Nidhi Raman, who was represented through her Attorney, Smt Nishi Pandey, (sister). Assessee has not placed on record, power of attorney to show what necessitated Smt. Nidhi Raman to execute power of attorney in favour of her sister, for execution of sale-deed while another sister could have come to Lucknow from Jaipur for execution of said document. We find no reason not to draw an inference that being a prudent buyer petitioner must have seen contents of said power of Attorney and was well aware of the reason of execution of same.

19. At which point of time A. A. or Revenue came to know of this fact is an important aspect and also a source or manner in which they could have got information on this aspect. There is no pleading or material in writ petition except that a notice under Section 148 was issued to Smt. Nidhi Raman for A.Y. 2006-2007 on 26.07.2008. However copy of said notice is also not on record.

20. In absence of these relevant facts, contention that Assessee was unaware of one seller being NRI or that Revenue took time barred action, in our view is neither sustainable nor ex-facie can be held in favour of Assessee.

21. Be that as it may, we proceed to examine substantive argument raised by learned counsel for Assessee with regard to limitation. A. A. found that with respect to payment received by Smt. Nidhi Raman, Assessee was liable to deduct T.D.S. at 10 per cent under Section 195 of Act, 1961. We may reproduce relevant Section 195(1) of Act, 1961 as under:

(1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB or section 194LC)] [or section 194LD] or any other sum chargeable under the provisions of this Act (not being income chargeable under the head “Salaries” shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force :

Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode :

Provided further that no such deduction shall be made in respect of any dividends referred to in section 115-O.

Explanation 1: For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called “Interest payable account” or “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.

Explanation 2: For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has-

(i) a residence or place of business or business connection in India; or

(ii) any other presence in any manner whatsoever in India.”

(emphasis added)

22. If T.D.S. is not deducted or deducted but not deposited, consequences are provided in Section 201(1A) and the same read as under:

“(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 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.”

(emphasis added)

23. No period of limitation, we find is prescribed under Section 201 for exercise of power thereunder. Learned counsel for Assessee also could not dispute that there is no other provision, which expressly provides limitation for exercise of power under Section 201. He, however, relied on various judicial precedents holding that a power provided in statute must be exercised within a reasonable time and if no period of time is prescribed for exercise of such power, then it can only be exercised within a reasonable time and not beyond that.

24. The first decision cited and relied very heavily by Sri Seth is State of Gujarat v. Patil Raghav Natha [1969] 2 SCC 187. There, Patil Raghav Natha was a resident of State of Rajkot. At an auction held on September 22, 1938, he acquired agricultural land bearing Survey No. 417, area 12 acres and 12 ganthas. With passage of time, substantial land of Survey No. 417 was acquired by State under Land Acquisition Act, 1894 (herein after referred to Act, 1894) and Patil Raghav Natha was left with only 2 acres and 10 ganthas of agricultural land. On October 20, 1958, he applied for permission to convert this land to non-agricultural use. The application was submitted before Collector under Section 65 of Bombay Land Revenue Code, 1879. Collector initially rejected application. In appeal, Divisional Commissioner remanded the matter to Collector. Thereafter, Collector made inquiry and granted permission for use of land for non-agricultural purpose vide order dated 02.07.1960. In furtherance of the permission granted, Collector also issued a Sanad on 27.07.1960 to petitioner. Sanad was amended on 03.11.1960 and 01.12.1960. Sanad was in Form M-1 and number of conditions were appended to Sanad. One of the conditions of Sanad was that the grant shall be subject to the provisions of Bombay Land Revenue Code. Initially, there was one important condition that land shall be used exclusively for constructing residential houses and this condition was altered on 03.11.1960. When sketch of land was sent to Municipal Committee of Rajkot, it raised an objection before Collector against grant of permission to Patil Raghav Natha. Collector overruled said objection. Municipal Committee then approached Commissioner requesting to exercise power under Section 211 of Bombay Land Revenue Code. Commissioner made inspection of the site and then passed order dated 12.10.1961 cancelling permission granted by Collector earlier. This order of Commissioner was challenged by Patil Raghav Natha and Gujrat High Court set-aside said order. That is how matter came in appeal before Supreme Court. It found that under Section 65, Collector either has to grant or to refuse, permission applied for. If he fails to inform applicant of its decision on the application within a period of three months permission applied shall be deemed to have been granted. Court proceeded to examine under Section 211 of Bombay Land Revenue Code, which confers power of revision upon the State Government and Revenue Officer, not inferior in rank to an Assistant Collector or Deputy Collector to call for record for satisfying itself as to legality or propriety of any decision or order passed and as to the regularity of proceedings of such officer. Court formulated a question “whether Commissioner can revise an order passed under Section 65 by exercising power under Section 211 at any time” and, said “it seems to us plain that this power must be exercised in reasonable time and the length of reasonable time must be determined by the facts of each case and nature of the order, which is being revised. Taking clue from Section 65, which provided for “deemed grant of permission”, if no decision is taken within three months, Court held that it shows that Legislature thinks that matter is so urgent that permission shall be deemed to have been granted. From that angle, when Sections 211 and 65 read together, Commissioner also must exercise his revisional power within few months of order of Collector. Court further explains reason for taking view that after grant of permission for building purpose, the occupant is likely to spend money on starting building operation, at least within six months from the date of permission. To avoid any prejudice, in such contingency, it will be reasonable to find that reasonable time is few months for Commissioner. Court held that since Commissioner passed revisional order after more than a year it was too late. However, for setting-aside order passed by Commissioner, Court also held that it did not give any reason and further that it has gone into the question of title, which it should not.

25. In State of Punjab v. Bhatinda District Co operative Milk Producers Union Ltd. [2007] 11 SCC 363, question came up for consideration was about “reasonable period for reopening an order of assessment” under Punjab General Sales Tax Act, 1948 (herein-after referred to as “Punjab Act,1948”). M/s Bhatinda District Cooperative Milk Producers Union Limited (hereinafter referred to as “Milk Union”), a cooperative society registered under Punjab Cooperative Society Act, and is also a registered “dealer” under Punjab Act, 1948. Milk Union was running milk plants under the control of Punjab State Cooperative Milk Producers Federation Limited, Chandigarh (herein after referred to as “Milk Federation”). Punjab Act, 1948 provided for levy of purchase tax on milk, when purchased for use in manufacture of goods specified in Schedule-C. Tax was leviable when Milk is purchased and used in manufacture of any goods other than tax free goods. For A.Y. ending on 31.03.2000, proceedings were completed relying on return filed by Milk Union on 20.03.2001, under Section 11 (3) of Punjab Act, 1948. A three years limitation was prescribed for completion of assessment, from the last date of filing of return. Section 21 of Punjab Act, 1948 conferred revisional power upon Commissioner if he is satisfied with regard to legality or propriety of any proceedings or order made by an authority subordinate to him. A notice under Section 21 ( 1) was issued to Milk Union alleging illegality, irregularity and improprieties in the order of assessment dated 20.03.2001. Milk Union filed writ petition in Punjab and Haryana High Court challenging aforesaid notice. State raised an objection that writ petition was premature since Milk Union could have taken all points before Revisional authority. High Court held that assessment was made on 20.03.2001 and notice was issued on 04.09.2006 without assigning any reason and justifying exercise of revisional jurisdiction, therefore, it is bad in law. Challenging judgment in Supreme Court, State argued that no limitation was prescribed for exercising revisional power under Section 21(1) of Punjab Act, 1948 and that even otherwise, High Court did not consider various other relevant aspects. Court held that Milk Union was filing quarterly returns showing turnover of sales and purchase of goods. Deposit of tax was also mentioned in the returns. When A.A. passed assessment order dated 28.03.2001, it has taken into consideration books of account and other relevant documents. The limitation for assessment provided in Section 11 (3) is three years, Under Section 11 (6), A.A. can make best assessment, if finds something escaped and for that purpose limitation prescribed is five years. Section 11 (1) also empowers Commissioner to extend three years limitation for passing order of assessment to the maximum of five years. It also provided, where an assessment order is to be reviewed, same should be done within a period of one year. It is in this backdrop, Court said that though under Section 21, no period of limitation was prescribed for exercise of suo motu power of revision, but that does not mean that it can be exercised at any time. In Para 18 and 19 of the judgment, Court said as under:

“18. It is true that if no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period. What, however, shall be the reasonable period would depend upon the nature of the statue, rights and liabilities thereunder and other relevant factors.

19. Revisional jurisdiction, in our opinion, should ordinarily be exercised within a period of three years having regard to the purport in terms of the said Act. In any event, the same should not exceed the period of five years. The view of the High Court, thus, cannot be said to be unreasonable. Reasonable period, keeping in view the discussions made hereinbefore, must be found out from the statutory scheme. As indicated hereinbefore, maximum period of limitation provided for in sub-section (6) of Section 11 of the Act is five years.”

(Emphasis added)

26. Court referred to similar earlier matters in State of Orissa v. Debaki Debi AIR 1964 SC 1413, S.B. Gurbaksh Singh v. Union of India [1976] 2 SCC 181 and CST v. Halari Store [1997] 7 SCC 715 , wherein it has been observed that if no time-limit has been prescribed, a power of suo motu revision should be exercised within a reasonable time and any unreasonable delay may effect its validity. It was also held, that what a reasonable time would be, depends upon facts of each case. Having said so, Court declined to interfere with judgment of High Court observing that Revisional authority did not assign any reason as to why notice was issued after 5 ½ years. On the question of maintainability of writ petition against a notice, Court said, if a question of limitation is raised, it is jurisdictional, and therefore writ petition would be maintainable. It however did not lay-down any fixed period observing that what would be reasonable period is not for our consideration and hence Court did not fix any period for Revisional power and held that the same should be exercised within a reasonable time.

27. Sri Seth has very heavily relied on a Delhi High Court’s judgment in CIT v. Hutchison Essar Telecom Ltd. [2010] 323 ITR 230 (Delhi). It is a short judgment and Court has followed its earlier decision in CIT v. NHK Japan Broadcasting Corpn. [2008] 305 ITR 137/172 Taxman 230 (Delhi) to hold that since no specific period has been prescribed under Section 201 and 201(1A), reasonable time limit has to be adopted for initiating action thereunder and it would be four years from the end of financial year, which had elapsed.

28. In NHK Japan Broadcasting Corpn. (Supra), Assessee was a Government company of foreign country, carrying on business in India. In respect of its employees in India, it paid salary in Indian rupees, and something, called “global salary” to the employees of home country. For the salary paid to employee in India, Assessee deducted TDS, but in respect of “global salary”, TDS was not deducted. On 19.11.1998 a survey was conducted when this fact came to the notice of Revenue. Assessee did not dispute liability of deduction of TDS, in respect of “global salary” and paid tax due thereon along with interest. In December, 1999, A. A. required Assessee to show cause, why it should not be treated as an “Assessee in default”. After Assessee filed reply, A. A. passed order, treating Assessee in default for the purpose of Section 201 of Act, 1961. The aforesaid view was upheld by C.I.T.(A) but reversed by Tribunal. Court found that consequences of treating “Assessee in default” would be to make Assessee liable to pay interest on the tax, if it failed to deduct TDS and also liable to penalty. However, admittedly interest was already paid by Assessee, therefore, only apprehension of Assessee was in regard to penalty under Sections 271C and 221 of Act, 1961. Delhi High Court agreed with Tribunal that initiation of proceedings against Assessee for treating it in default should have been within a reasonable period of time and there must be some time limit within which Revenue must have initiated proceeding of such nature. Court said that in a case where question of completion of proceedings arose, time limit, if not prescribed by Statute, may not be prescribed by Court but when question arose with regard to initiation of proceedings, it is other way round. Thereafter to find out a reasonable period, Court referred to Section 153 and observed, if there is a time for completing assessment, then limit of initiation of proceedings must be the same, if not less. However, since Tribunal has given four years period for initiation of proceedings under Section 201(1) and 201 (1A), High Court agreed with the same and did not disturb its findings. It also held, that the fact when department got knowledge, neither is relevant nor that Assessee paid tax or interest would be relevant. Further Court also took support from Section 191, for the view it had taken, and said as under:

” We may also note that under Section 191 of the Act, the primary liability to pay tax is on the person whose income it is that is the deductee. Of course, a duty is cast upon the deductor, that is the person who is making the payment to the deductee to deduct tax at source but if he fails to do so it does not wash away the liability of the decucteee. It is still the liability of the decuctee to pay the tax. In that sense, the liability of the deductor is a vicarious liability and, therefore, he cannot be put in a situation which would prejudice him to such an extent that the liability would remain hanging on his head for all times to come in the event the Income-tax Department decides not to take any action to recover the tax either by passing an order under section 201 of the Act or through making an assessment of the income of the deductee.”

(Emphasis added)

29. We are informed that Revenue took this matter in Appeal before Supreme Court i.e. S.L.P. No. 24913-24919/2012 (CIT v. NHK Japan Corpn.) decided on 11.08.2014 and it passed following order:

“It is thus clear that the same Bench of the Supreme Court which issued direction on 16th March, 2009 passed the aforesaid order making it emphatically clear that even the issue of limitation had become academic as the assessee could not be declared as assessee in default under Section 192 read with Section 201 of the Act. The fallout of the aforesaid order dated 20th January, 2010 is that the Supreme Court has held that the assessee for the assessment years in question, cannot be treated as assessee in default. The consequence would be to quash the proceeding initiated by the AO treating the assessee to be in default under Section 201(1) and 201 (1A) of the Act.

7. We, thus agree with the Tribunal that the issue had become academic in nature and there was no reason left to decide this issue. This happened because of the subsequent order of the Supreme Court itself. This resulted as a consequence of the orders passed by the Supreme Court, that too, in the case of this very assessee pertaining to the appeals of the assessment years on the same question. We thus find no merit in these appeals which are dismissed on this ground alone.

In view of such observation made by the High Court, we are not inclined to interfere with the impugned order. The special leave petition stands disposed of.”

(emphasis added)

30. Thus question of limitation vis-a-vis Section 201(1) and 201 (1A) has been left open by Supreme Court in N.H.K. Japan Broadcasting Corpn. (supra).

31. In CIT v. U.B. Electronic Instruments Ltd. [2015] 371 ITR 314/232 Taxman 259/57 taxmann.com 356 (T & AP), Telangana and Andhra Pradesh High Court has also taken a view of four years of initiation of proceedings under Section 201(1) and 201 (1A). Therein Assessee submitted returns every year disclosing relevant information. It raised loans from its Associate companies and for some period paid interest. When it started incurring losses, requested creditors to waive interest. Loanees waived interest. Assessee did not make any deduction on TDS on the component of interest for A.Ys. 1989-1990, 1990-1991 and 1991-1992. A.A took a view, since TDS was not deducted or paid hence notice is to be issued. Assessee responds that there was no occasion to deduct TDS. A.A. passed order on 31.03.1999 under Section 201(1A). Not only it demanded tax but also interest. Assessee’s appeals before C.I.T.(A) were dismissed. Tribunal allowed and decided matter in favour of Assessee. High Court observed that there was an obligation on Assessee and also any person including Principal Officer of company to deduct TDS on any amount of payment to another. Failure to effect such deduction and remittance of same to Department exposed them to the obligation, not only for payment of same on demand, but also to pay interest. High Court also agreed with the view taken by Tribunal that proceedings should be initiated under Section 201 within 4 years. It gave reasons as under:

“For various steps that are required to be taken under the Act, Parliament has prescribed the limitation. For example, Section 149 of the Act stipulates a period of four years from the end of the relevant assessment year for the purpose of initiating proceedings under Section 148 of the Act where any income has escaped the assessment. Similarly, the power of suo motu revision can be exercised by a Commissioner against an order of assessment under sub-section (2) of section 263 not beyond the expiry of two years from the end of the financial year in which the order sought to be revised was passed. The examples can be multiplied. If for important and substantial proceedings like those under section 148 of the Act and the suo motu proceedings under section 263 of the Act limitation prescribed is four years and two years, respectively, an ordinary and inconsequential step relating to deduction of tax at source cannot be permitted to be initiated beyond the period so stipulated.

By and large, four years is treated as the period within which any penal action can be initiated against an assessee. Failure to initiate steps within that period would disable the Department to proceed against the assessee. The reason is not difficult to be discerned. With each passing year, the assessee is required to adjust his or her own affairs in such a way that the activity undertaken by it goes on smoothly. In case, liability for the preceding one or two years is fastened, there can be scope for making adjustment thereof in the activities of the subsequent years. However, if fairly long gap intervenes, it becomes difficult for making such adjustments, particularly when the activity is commercial in nature.”

(Emphasis added)

32. High Court also found that Tribunal relied on a Bombay Bench decision of Tribunal in Raymond Woolen Mills Ltd. v. ITO [1996] 57 ITD 536 and this was concurred.

33. In Bhura Exports Ltd. v. ITO (TDS) [2014] 365 ITR 548/202 Taxman 88/13 taxmann.com 162 (Cal.), A.Y. 2002-2003, Assessee filed return and it was completed under Section 143(3), vide order dated 27.03.2006. In April 2006, Income Tax Officer issued a notice to Assessee alleging that it had paid interest on certain loans, but not deducted TDS in A.Y. 2002-2003. Assessee submitted reply whereafter another notice dated 21.11.2007 was issued proposing to initiate proceedings under Section 201(1) and 201(1A) and requiring Assessee to show cause why it should not be treated as an “Assessee in default”. Assessee gave reply whereafter, A.A. passed order dated 07.03.2008, treating Assessee as an “Assessee in default” and demanded tax of Rs.21,64,471/-. Assessee lost before C.I.T.(A). However, C.I.T.(A) while confirming order of A. A. considered question of limitation raised by Assessee and held that time limit for initiating action should be six years. Before Tribunal also, Assessee failed except partial relief of reduction in amount of default. Tribunal, however, did not deal with the question of limitation raised by Assessee. Question of limitation was specifically raised and argued before Calcutta High Court. It formulated a question “whether in absence of any period of limitation for taking action under Section 201 at the relevant point of time which was earlier provided in Section 231, (since repealed) Revenue could be bound by any reasonable period of limitation for taking such action as contended by counsel for Assessee”. Tracing enactment’s history with regard to Section 201 and period of limitation, High Court observed that Section 231, which earlier provided limitation for action under Section 201, was omitted w.e.f. 01.04.1989. Subsequently, sub-section 3 has been inserted w.e.f. 01.04.2010 and period of limitation is now part of Section 201 itself. However, from 01.04.1989 to 31.03.2010 there was no provision containing bar of limitation for action under Section 201 of Act, 1961. Court also held that time period applicable in respect of Section 149, for taking action under Section 147, for giving notice under Section 148, would have no application qua Section 201 since it is not a case of income escaping assessment but a case of inaction of a deductor to deduct tax on interest while making payment of interest in violation of Section 194(A) of Act, 1961. Court therefore proceeded to hold that C.I.T.(A) erred in law in applying time limit, with reference to Section 149 for initiation of action under Section 201. Relevant observations contained in para 11 of the judgment reads as under:-

“11. Even if the person to whom interest was paid without deduction of tax had subsequently paid tax on that income, the deductor cannot escape the liability to pay interest under Section 201(1A) of the Act till the date of payment of taxes by the deductee-Assessee nor can the deductor avoid the liability of penalty under Section 271C of the Act and the said provision is mandatory in nature. It is a different kind of a situation from the one of “income escaping assessment” and of the above reason, the legislature made a separate provision of bar of limitation as prescribed in Section 231of the Act in spite of existence of the provision contained in Section 149 being conscious that the said provision cannot have any application in the matter of taking action under Section 201 and again re-introduced the same period of limitation by way of incorporation of Sub-section (3) of Section 201. Thus, the CIT(A) definitely committed an error of law in applying the time limit prescribed in Section 149 of the Act of the facts of the present case and the Tribunal also committed substantial error of law in not dealing with the said point before maintaining the order under Section 201 with a reduced amount.”

(emphasis added)

34. Calcutta High Court then proceeded to hold, if no period of limitation is prescribed in the statute for taking action thereunder, neither Limitation Act, 1963 (hereinafter referred to as “Act, 1963”) would apply nor any bar of limitation would be imported unless there is a contrary intention expressed in the Statue. In Para 13 of judgment, Court said :

“13. In our opinion, if no. period of limitation is prescribed under a Statute for taking action under it and at the same time, the Limitation Act does not apply to such a Statute, there cannot be any prohibition of the period of limitation for taking action under the said Statute unless there is any contrary intention expressed in the said Statute.”

(Emphasis added)

35. Calcutta High Court relied on the decision of Supreme Court in Uttam Namdeo Mahale v. Vithal Deo AIR 1997 SC 2695 and Ishar Singh v. Financial Commissioner AIR 1984 SC 1719 . It thereafter held that in applying provisions contained under Section 201 of Act, 1961, when previous bar of limitation was lifted by amendment, and there was no period of limitation fixed for exercise of power at the relevant point of time, it would not be justified and legal to invoke limitation in the form of reasonable period. Calcutta High Court also said that Supreme Court in its judgment in Bhatinda District Cooperative Milk Producers Union Ltd. (supra) does not lay-down general proposition particularly in view of non-consideration of larger Bench Judgment in Uttam Namdeo Mahale (supra) and Ishar Singh (supra). It also expressed its disagreement with judgment of Delhi High Court in N.H.K. Japan Broadcasting Corpn.(supra).

36. In DIT (International Taxation) v. Mahindra & Mahindra Ltd. [2014] 365 ITR 560/225 Taxman 306/48 taxmann.com 150 (Bom.), Bombay High Court has taken a view of applying limitation for initiation of proceedings under Section 201 of Act, 1961 and said that it should be one year from the end of financial year in which proceedings are initiated. Assessee therein came out with two Euro issues of the size of US $ 74.75 million and US $ 100 million in November, 1993 and July, 1996. Income Tax authorities required Assessee to furnish details in connection with payments made to various non-resident persons who were connected with bringing out the said Euro issues. A.A. treated certain service being technical services covered under Section 9 (1) (vii), required Assessee to show cause why it should not be treated “Assessee in default” for non deduction of TDS on the payments made for such services and action must be initiated under Section 201 (1) and 201(1A). Assessee replied that the services rendered by Lead Managers were in nature of finance and banking services and not technical and also gave other reasons. A. A. passed order, which was challenged by Assessee but failed before C.I.T.(A). The matter was examined by Special Bench of Tribunal constituted under Section 255 (3) of Act, 1961. Following question was referred for answer by Special Bench:

“Whether, on the facts and in the circumstances and in law, an order under Section 195 read with Section 201 of the Income Tax Act, 1961, is barred by limitation within four years from the end of the relevant financial year in the absence of any expressed provision in the Income Tax Act, 1961?”

37. Tribunal answered the question by applying limitation of one year from the end of financial year in the proceedings under Section 201(1) were initiated and held that limitation of four years from the end of relevant financial year cannot be applied. It gave reasons, in short, as under:

“(ii) Section 195(1) casts a duty on the person responsible for paying or crediting to the account of an non-resident any sum chargeable to tax under this Act for deducting tax at source. On failure to deduct or pay to the Government after deducting, the person responsible is treated as assessee in default under section 201(1).

(iii) ‘Any such person’ referred to in section 201(1) extends not only the person deducting and failing to deposit the tax but also the person failing to deduct the tax at source.

(iv) Where no time limit is prescribed for taking an action under the statute, the action can be taken only within a reasonable time by harmoniously considering the scheme of the Act.

(v) Tax recovery proceedings are initiated only after the passing of order under section 201(1) and that too if the person responsible fails to comply with the notice of demand under section 156.

(vi) The order under section 201(1) is akin to the assessment order. ‘Assessment’ includes ‘reassessment’.

(vii) The time limit for initiating the proceedings under section 201(1) cannot be the same as that for the passing of order under this sub-section. Time for initiation is always prior to the time for completing the proceedings.

(viii) The reasonable time for initiating and completing the proceedings under section 201(1) has to be at par with the time-limit available for initiating and completing the reassessment as the assessment includes reassessment.

(ix) The maximum time limit for initiating the proceedings under section 201(1) or section 201(1A) is the same as prescribed under section 149, i.e. four years or six years from the end of the relevant assessment year, as the case may be, depending upon the amount of income in respect of which the person responsible is sought to be treated as assessee in default.

(x) The maximum time limit for passing the order under section 201(1) or section 201(1A) is the same as prescribed under section 15392) being one year from the end of the financial year in which proceedings under section 201(1) are initiated.

(xi) Any order passed under section 201(1) or section 201(1A) cannot be held as barred by limitation if it is not passed within four years from the end of the relevant financial year.”

(Emphasis added)

38. Bombay High Court considered the matter by formulating two issues:

“(1) Whether the Tribunal was justified in prescribing the time limit for initiation and completion of proceedings under sub sections (1) and (1A) of section 201 of the Income-tax Act, 1961, in the absence of any time limit provided under the said Act?

(2) Whether the Tribunal was justified in prescribing the time limit statutorily provided for initiation and completion of reassessment proceedings under section 147 of the Income Tax Act, 1961, for the purposes of sub-sections (1) and (1A) of section 201 of the said Act?”

39. Bombay High Court referred to the judgment of Supreme Court in . Bhatinda District Cooperative Milk Producers Union Ltd. (supra), Santoshkumar Shivgonda Patil v. Balasaheb Tukaram Shevale [2009] 9 SCC 352, Patil Raghav Natha (supra) and Government of India v. Citadel Fine Pharmaceuticals [1990] 184 ITR 467 (SC). It also considered Delhi High Court judgment in N.H.K. Japan Broadcasting Corpn. (supra) and Hutchison Essar Telecom Ltd. (supra) and held “though section 201 does not prescribe any limitation period for the Assessee being declared as “Assessee in default”, yet, Revenue will have to exercise the powers in that regard within a reasonable time. In such circumstances we are of the view that Tribunal’s order in this case does not suffer from any error of law apparent on the face of record or perversity warranting our interference in appellate jurisdiction.”

40. It also considered Calcutta High Court Judgment in Bhura Exports Ltd (supra), but disagreed therewith.

41. Thus period of limitation has been applied by Bombay High Court, but its commencement and end is different than what was held by Delhi High Court.

42. At this stage, reasons given by Tribunal, which have found favour with Bombay High Court, we may notice here at in brief. The scheme of Section 201 was examined and it was observed that a duty has been cast upon the person responsible to make deduction of tax at source from any payment made on which tax is deductible. Failure to deduct or payment after deduction enables authorities to treat a person as “Assessee in default”. This deduction of TDS is only one mode of recovery. Deductee always remains responsible for payment of tax on the amount, which is paid to him with or without TDS. Though no time limit was prescribed under Section 201, but time is the core of every action under law. If legislature is silent in prescribing a particular time limit, then action should have been taken within a reasonable time. It would not be appropriate to prescribe any particular time limit as it depends upon host of factors, namely, nature of proceedings, character of order etc. Normally there should not be any particular time limit, say two years, five years or ten years, but it depends upon facts and circumstances of the matter. Tribunal also observed that the nature of proceedings under Section 201(1) and type of order thereunder is an order of assessment, and for that purpose, relied on Supreme Court judgment in ITO v. Delhi Development Authority [2001] 252 ITR 772/[2002] 120 Taxman 120 (SC), whereby Delhi High Court’s judgment taking the said view was approved, for the purposes of considering what should be the reasonable time.

43. For Section 201 of Act, 1961, Bombay High Court it was considered that explanation to Section 191 and Section 201(1) shows that persons responsible for deducting or failing to pay tax, deducted at source, is to be deemed an “Assessee in default” only if the payee of income has also failed to pay such tax directly. Where the payee is not liable to pay tax on the amount of income received by him without deduction of tax at source, then person responsible for deduction also cannot be treated “Assessee in default”. Liability of the person responsible is dependent upon the deductee failing or otherwise to pay such tax directly. Thus, action under Section 201(1) is dependent on the outcome of assessment of payee. Time limit for passing order under Section 201(1), thus has to be viewed in the light of fate of the assessment in the hands of the recipients. Logically a person responsible for paying sum chargeable to tax can be treated as “Assessee in default” at any time prior to the assessment of payee. If person responsible is deemed to be an “Assessee in default” after assessment of the payee or the time available for making assessment has expired, then such amount of tax will be incapable of adjustment against tax liability of the payee and would be required to return to such person who has been treated as Assessee in default. Thus both, initiation of proceedings under Section 201(1) as well as completion of such proceedings by passing order, have to be prior to the time limit within which tax can be determined in the hands of payee. It cannot be beyond such period. There may be different situation in the assessment of payee. If payee has included the amount received from payer in his total income but tax has not been paid in full or part, then payer can be treated as “Assessee in default” to the extent of non-payment of tax on the sum paid to him provided the tax is not recovered from the payee. If the payee has furnished return of income without disclosing the sum paid by payer on which tax was deductible then such Tax can be recovered from payer by treating him as “Assessee in default” if the income has not been assessed in the hands of the payee. In another situation where payee has not at all filed his return of income, again person responsible can be treated as “Assessee in default” in respect of tax on the sum paid by him in violation of provisions of the Act. Thus the maximum time limit available for assessment of the payee is the maximum time limit within which payer can be treated as “Assessee in default”. With the expansion of Section 147, also roping in the cases of assessment apart from reassessment, the assessment of payee shall also include assessment made under Section 147. Thus maximum time limit for initiating and completing proceedings under Section 201(1) should be at par with time limit available for initiating and completing reassessment. If said order under Section 201(1) is taken as assessment, and assessment includes reassessment, the reasonable time limit for initiation and completion of action under Section 201(1) would be similar to those available for assessment under Section 147. Thus proceedings under Section 201 can be initiated in the extended period of six years from the end of relevant assessment year, if income by virtue of sum paid without deduction of tax at source by payer chargeable to tax in the hands of the payee is equal to or more than one lakh rupees. If the amount is less than Rs. 1 lakh, then lower period of four years as prescribed under section 149 (1) (a) from the end of the relevant assessment year is available for initiation of proceedings under Section 201(1). From the said logic, completion of proceedings under Section 201(1) i.e. passing of the order under this sub-section, has to be within one year from the end of the financial year in which proceedings under Section 201(1) were initiated. The same time limit for initiation and completion would be applicable for Section 201 (1A). This reasoning and ultimately view taken by Tribunal was upheld by Bombay High Court in Mahindra and Mahindra Limited (supra).

44. In CIT (TDS) v. Bharat Hotels Ltd. [2015] 64 taxmann.com 325/[2016] 384 ITR 77 (Kar.), Assessee M/s Bharat Hotels Limited, had a unit known as M/s Grand Ashok, Bangalore, which was taken over by Assessee from Kumarakrupa Frontier Hotels (Pvt) Limited (for short KKFHPL), on lease for a period of thirty years, commencing from November, 2001. There was an agreement between Assessee (Bharat Hotels Limited) and KKFHPL provides for a license fee of Rs. 4.11 crores per annum, to be paid as a minimum guarantee payment to KKFHPL. Assessee did not deduct TDS as required under Section 194 I of Act, 1961. It was held liable for consequences for failure of deduction of TDS under Section 201 of Act, 1961. The dispute relates to A.Y. 2002-03 (F.Y.2001-02). Assessee filed regular return in prescribed format for Assessment Year in question. Certain other tax deductions made at source were declared, but neither TDS was deducted in regard to payment to KKFHPL nor declared in return. The licence fee for relevant period, amounted to Rs. 1.37 crores; plus 24.90 crores, which was further paid by Assessee as upfront fee to KKFHPL. On both these amounts, Revenue claimed TDS. The assessement of KKFHPL was completed on 28.02.2005. Return of Assessee for A.Y. 2002-03 was also accepted by Revenue, in which payment to KKFHPL was reflected. No question regarding TDS on the amount paid to KKFHPL was ever raised by Revenue. A survey was conducted on 19.09.2007 at the premises of Assessee, when question of non-deduction of TDS during A.Y. 2002-03 was raised. Subsequently notice was issued to Assessee. Assessing Officer passed order dated 28.01.2008 under Section 201(1) and 201(1A) of Act, 1961 and treated “Assessee in default” in respect of non-deduction of TDS of licence fee and upfront fee. Amount of interest payable under sub-section 201(1) and 201(1A) was also quantified. Assessee preferred appeal, which was allowed by CIT(A) on 30.05.2008 holding that order of Assessing Officer was time barred. Subsequently, CIT(A) passed order under Section 154 of Act, 1961 correcting order dated 30.05.2008 and held that order of Assessing Officer was within limitation. Further, CIT(A) also recorded a finding that amount paid by Assessee to KKFHPL was not towards rent and hence provision of Section 194 I was not attracted. It also held that there was no failure to deduct TDS and Section 201 of Act, 1961 was not attracted. Revenue and Assessee both challenged order of CIT(A) in Tribunal. It held that orders under Section 201(1) and 201(1A) were barred by limitation, still decided matter on merits also and held, if Assessee has paid advance tax after considering licence fee then no interest under Section 201(1A) will be chargeable, as Board’s Circular has mentioned that interest under Section 201(1A) is to be charged till the date of payment of tax by deductee-Assessee. Hence, issue of computation of interest under Section 201 and 201(1A) for A.Y. 2002-03 will have to be worked again by Assessing Officer in respect of licence fee. With regard to upfront fee, Tribunal held that Assessee was liable for deduction of TDS, hence, Assessing Officer rightly demanded interest under Section 201 and 201(1A). Before Karnataka High Court two questions of law were framed:

1. Whether the Tribunal was correct in holding that the order passed under Section 201(1) and 201(1A) of the Act dated 28.1.2008 for the assessment year 2002-03 is barred by limitation?

2. Whether the Tribunal was correct in holding that the assessee was liable to pay interest under Section 201(1A) of the Act for not deducting TDS, from the date when the payment was made by the assessee to the Recipient, till the date the tax was deposited by the Recipient.

45. Karnataka High Court relying on judgments in Bhatinda District Co-operative Milk Producers Union Ltd. (supra), Santoshkumar Shivgonda Patil (supra) and Patel Raghav Natha (supra), held as under:

“Thus, we can safely say that the law is well settled that when there is no period of limitation prescribed for taking action under any provision of law, the same should be taken within a reasonable period, which would depend upon the facts of the case and the provisions of the Act under which action has to be taken. This is necessary, also because if any right has accrued in favour of a person or party by passage of time, same cannot be unsettled by a statutory authority at any time or after an indefinite period, as the same would amount to unsettling a settled position, which can only be done within a reasonable period, and not at any time in the future after an unlimited period.”

(Emphasis added)

46. Thereafter, Court followed judgment of Delhi High Court in NHK Japan Broadcasting Corporation (supra) and observed that reasonable period of limitation would be four years from the end of financial year in question for the purpose of passing order under Section 201(1) and 201(1A) of Act, 1961.

47. In Sharda Devi v. State of Bihar [2003] 3 SCC 128, question with regard to limitation cropped up with respect to Section 30 of Land Acquisition Act,1894. For exercising power under Section 18 limitation was prescribed, but not in regard to Section 30. Court said that though no limitation is provided for making Reference under Section 30 of Act, needless to say, there is no period of limitation for exercising of any statutory power, prescribed, yet power can be exercised within a reasonable period; what a reasonable period in a given case, shall depend, on the facts and circumstances of each case.

48. In Mohamad Kavi Mohamad Amin v. Fatmabai Ibrahim [1997] 6 SCC 71 , two sale deeds were executed on 11.12.1972 and 28.12.1972. Name of Mohaamad Kavi Mohamad Amin was mutated in record of rights on 14.02.1973. In September, 1976, Mamlatdar of area concerned, initiated suo motu enquiry under Section 84-C of Bombay Tenancy and Agricultural Lands Act, 1948. He held that sale deeds in question were invalid as appellant- Mohaamad Kavi Mohamad Amin was not an agriculturist belonging to State of Gujarat. Appeal, Revision and Writ Petition all were dismissed and matter came to Supreme Court. It observed that Section 84 does not provide any limitation. Relying on Patil Raghav Natha (supra) and Ramchand v. Union of India [1994] 1 SCC 44 held that where no time-limit is prescribed for exercise of a power under statute it does not mean that it can be exercised at any time; such power has to be exercised within a reasonable time.

49. In Ibrahimpatnam Taluk Vyavasaya Coolie Sangham v. K. Suresh Reddy [2003] 7 SCC 667 , question arose “whether Collector can exercise suo motu power under sub-section (4) of Section 50-B of the Andhra Pradesh (Telangana Area) Tenancy and Agricultural Lands Act, 1950 (hereinafter referred to as “Act 1950″) at any time or such power is to be exercised within a reasonable time.” Several sale deeds were executed and possession of land was also delivered. Applications were filed by parties to sale deed under Section 50-B of Act, 1950 for validation of sales. Tehsildar issued validation certificates on various dates. Appeals were filed challenging validation certificates issued by Tehsildar, but same were dismissed in 1988. Thereafter, Appellate Authority suo motu issued notices under Section 50B(4) to show cause why validation certificate issued in 1974 or earlier be not cancelled. Ultimately, it cancelled validation certificates in 1989. High Court set aside order of Joint Collector cancelling validation certificate on the ground that suo motu power under Section 50B(4) should have been exercised within a reasonable period. Supreme Court held that there was no complaint that the power was exercised in obtaining validation certificates by playing fraud. Under Section 50B(4), though it was said that power could be exercised at any time, but, that would depend on facts and circumstances of each case. In the case of fraud, power can be exercised within a reasonable time from the date of detection or discovery of fraud. While exercising such power, several factors need to be kept in mind such as effect on the rights of the third parties over immovable property due to passage of considerable time, change of hands by subsequent bona fides transfers, the orders attaining finality under provisions of other Acts. Court said that word “at any time” cannot be rigidly read letter by letter. It must be read and construed contextually and reasonably. Any literal interpretation which allowed an exercise of power after decades, if leads to anomalous situation, leading to uncertainty and complications affecting rights of the parties, that too, over immovable properties, it has to be avoided when an order attained finality and certainty, of the rights of parties, in the light of orders passed, must have sanctity. The word “at any time” only means that no specific period such as days, months or years are prescribed reckoning from a particular date that does not mean that “at any time” should be unguided and arbitrary. It must be understood as within a reasonable time depending on the facts and circumstances of each case in the absence of prescribed period of limitation.

50. Sri Seth has also relied on the judgment of Gujrat High Court in Tata Tele-service v. Union of India [2016] 66 taxmann.com 157/238 Taxman 331/385 ITR 497 (Guj.). Therein question was raised whether amendment made by Finance Act, 2012 on 28.05.2012 in Section 201(3) would be retrospective or not? The answer was in negative. In our view, this judgment as such does not help Mr. Seth in this case, since issue raised herein is different.

51. Delhi High Court in Vodafone Essar Mobile Services Ltd. v. Union of India [2016] 67 taxmann.com 124/238 Taxman 625/385 ITR 436 (Delhi) raises a question of validity of action taken by Revenue under Section 201(1) and (1A) for non-deduction of TDS for a period earlier than four years prior to 31.3.2011. In that case, amendments made by Finance Act, 2009 w.e.f. 01.04.2010, inserting Subsections 3 and 4 along with proviso to sub-section (3) was considered. Revenue has not taken recourse to Sub-section 3 and 4 inserted by Finance Act, 2009, hence, for the case in hand, we do not find this judgment of any help to Assessee in any manner.

52. Then a Division Bench judgment of this Court in Narendra Kumar v. Collector, Bulandshahar 2004 Legal Eagle (ALD) 640 , has been relied on, wherein it was held that recovery proceedings initiated after 18 years under U.P. Public Moneys (Recovery of Dues) Act, 1972 is barred by limitation and also by principle of waiver. This decision has already been considered and explained by this Court in M.P. Daga v. Pradeshiya Industrial Investment Corpn.2016 (8) ADJ 386 and we do not find that it also helps Assessee in present case.

53. Two decisions relied by Assessee relates to Tenancy and Land Laws i.e. State of Andhra Pradesh v. T. Yadagiri Reddy [2008] 16 SCC 299 and Sulochana Chandrakant Galande v. Pune Municipal Transport [2010] 8 SCC 467 .

54. T. Yadagiri Reddy (supra) have arisen from the proceedings under Andhra Pradesh (Telangana Area) Tenancy and Agricultural Lands Act, 1950 and here also again the question was with regard to Section 50B (4), which was already considered in K. Suresh Reddy (supra).

55. Court followed and reiterated the same in Sulochana Chandrakant Galande (supra). Dispute has arisen from the proceedings under Urban Land (Ceiling and Regulation) Act, 1976. Here again the question with regard to revisional power and the period within which the same could have been exercised was raised. Since no period was prescribed, Court held that it can be exercised within a reasonable period and not at any time i.e. unlimited. Here, it relies on earlier judgment in Patil Raghav Natha (supra) and Ibrahimpatnam Taluk Vyavasaya Coolie Sangham (supra) In Para-29 of the judgment Court held that “we reach the inescapable conclusion that the revisional powers cannot be used arbitrarily at a belated stage for the reason that the order passed in revision under Section 34 of 1976 Act, is a judicial order. What should be reasonable time, would depend upon the facts and circumstances of each case.”

(Emphasis added)

56. Sri Seth very heavily relied on paras 21, 22, 26 to 31, 41 and 46 of judgment in Pune Municipal Corpn. v. State of Maharashtra [2007] 5 SCC 211. Here also, after relying on judgment in PatelRaghav Natha (supra), Court has observed, where period of limitation is not prescribed concept of reasonable time can be invoked and power must be exercised within such period. In paras-30 and 31 of the judgment, Court said as under:

“30. The law laid down in Patel Raghav Natha has been reiterated by this Court in several cases. We do not intend to burden our judgment with all those cases. We may only state that broad contention of the landowners that when no period of limitation is prescribed, revisional jurisdiction can be exercised at any time cannot but be rejected. If the law prescribes period of limitation, the action must be taken within such period. But where the law does not prescribe limitation, the curt would import the concept of “reasonable time”. We may, however, hasten to add that what is the length of the reasonable time would depend upon the facts and circumstances of each case and no rule of universal application can be laid down.

31. In the facts and circumstances of the case, in our opinion, the revisional authority was duty-bound to take into account the length of delay, intervening circumstances and subsequent events from 1977 to 1955 and to consider whether the powers should have been exercised or not. Since no such exercise has been undertaken, the order suffers from legal infirmity and must be quashed.’

(Emphasis added)

57. The last decision relied on behalf of Assessee by Shri Seth, learned Senior Counsel, is Oracle India (P.) Ltd. v. Dy. CIT [2015] 235 Taxman 227/63 taxmann.com 24 (Delhi). A notice issued under Section 201 was already barred by time. Subsequently when Act, 1961 was amended w.e.f. 01.10.2004 by Finance Act, 2014 and period of limitation under sub-section (3) was extended to seven years, a fresh notice sought to be issued, was set aside by Court, holding that once proceedings have already been held barred by limitation for the purpose of Section 201, subsequent notice was not permissible.

58. Per contra, Sri Mathur, Learned Counsel for Revenue has relied on three Judges judgment in Uttam Namdeo Mahale v. Vithal Deo (supra). A Notice of eviction was issued, which was challenged. It became final since confirmed by Supreme Court in a Special Leave Petition. Thereafter proceeding of execution was initiated. An objection was raised, since more than 12 years had passed, execution could not proceed. High Court held that in Section 21 of Mamlatdar Court Act,1906 there is no period of limitation and relied on an earlier Division Bench judgment in Babaji Khanduji v. Kushaba Ramji (1906) 8 BLR 218. Argument advanced before Supreme Court was that in absence of fixation of rule of limitation, power can be exercised within a reasonable time and reliance was placed on Patil Raghav Natha (supra); Ram Chand (supra) and Mohamad Kavi Mohamad Amin (supra). It was rejected by Court. It was held that order of rejection had already become final. Section 21 Mamlatdar Court Act, 1906 does not prescribe any limit. Court said that “In the absence of any specific limitation provided thereunder, necessary implication is that the general law of limitation provided in Limitation Act (Act 2 of 1963) stands excluded. The Division Bench, therefore, has rightly held that no limitation has been prescribed and it can be executed at any time, especially when law of limitation for the purpose of this appeal is not there. Where there is statutory rule operating in the field, the implied power of exercise of the right within reasonable limitation does not arise. The cited decisions deal with the area and bear no relevance to the facts.”

(Emphasis added)

59. Sri Alok Mathur, learned counsel appearing for Revenue, as we have already said, contended that limitation, if not prescribed in statute, cannot be read therein, particularly, when it cannot be said that some right has been accrued to Assessee and exercise of power under Section 201 will result in unsettling those rights. He said that non-compliance of obligations under Section 195 has its consequences under Section 201 and is not a case of conferring any right upon Assessee, but enables Revenue to be compensated for a wrong which has been committed by Assessee by non-complying requirement of deduction of TDS under Section 195. Hence, it is not a case where this enabling power, if exercised by Revenue, must be denied on the ground of limitation when in the nature of power, Legislature has not provided for the same.

60. One of the earliest authorities relied by Sri Mathur, on behalf of Revenue, is a judgment of three Judges Bench in Munshi Ram (supra). Appellants therein were partners of firm, namely, Bharat Industries, Chheharta. A profession tax was imposed by Chheharta Municipal Committee under Section 61 (1) (b) of Punjab Municipal Act, 1911 by Notification dated May 15th, 1956. Rate of tax initially was Rs. 15/- per annum and levied on all the partners of the firm. By Notification dated July 4th, 1958, rate of tax was increased to Rs. 200/- per annum and each partners were assessed to annual tax of Rs. 200/- by Municipal Committee. Appellant filed suit for injunction on 30 October, 1960, restraining Municipal Committee from realizing profession tax amounting to Rs. 1,200/- vide letter dated May 31, 1960. It was argued that the firm being a legal person, profession tax can be levied on the Firm, and not on individual partners. Suit was dismissed by Trial Court but in appeal judgment of Trial Court was reversed by Additional District Judge and suit decreed. Matter went in appeal and High Court affirmed the judgment of lower appellate Court. A Letters Patent Appeal was filed by Municipal Committee which was allowed and Division Bench held that tax cannot be levied on a firm or factory as it was leviable on individual owners of factory or Firm. This order was challenged in appeal before Apex Court.

61. The aforesaid judgment does not help Revenue on the question of exercise of power under Section 201 and 201(1A). In fact Court has held therein that suit was barred for the reason, when a statute provides a particular remedy in a particular forum, it should be sought and enforced in that particular forum and not by filing a suit as it is implicitly barred. Para 23 of the judgment reads as under:

“It is well-recognized that there a Revenue Statute provides for a person aggrieved by an assessment thereunder, a particular remedy to be sought in a particular forum, in a particular way, it must be sought in a particular form in a particular way it must be sought in that form and in that manner, and all other forums and modes of seeking it are excluded. Construed in the light of this principle, it is clear that Section 84 and 86 of the Municipal Act bar, by inevitable implication, the jurisdiction of the Civil Court where the grievance of the party relates to an assessment or the principle of assessment: under this Act.”

(Emphasis added)

62. In taking above view, Supreme Court relied on its earlier judgment in Firm Seth Radha Kishan (deceased) represented by Hari Kishan v. Administrator Municipal Committee AIR 1963 SC 1547 .

63. Here we are not concerned with jurisdiction of Civil Court barred by express provision or by necessary implication under Section 9 of Code of Civil Procedure. Here petitioner has filed writ petition under Article 226 of Constitution of India. In appropriate cases, this Court may relegate petitioner to avail statutory alternative remedy, but there are several exception to the same and this objection has already been rejected by this Court while entertaining writ petition, after discussing the matter in detail. We do not find any reason to repeat the same.

64. In CIT v. Vijaybhai N. Chandrani [2013] 357 ITR 713/217 Taxman 138/35 taxmann.com 580 (SC), notice under Section 135C was issued and challenged in Gujrat High Court. An objection regarding maintainability of writ petition against notice was raised, but High Court examined matter on merits and allowed writ petition. It quashed notice issued by A.A. Supreme Court said, when notice is issued, Assessee has remedy of addressing his grievance by explaining his stand to A.A. and when alternative remedy is available, Assessee must exhaust the same. Court relied on its earlier judgments in Bellary Steels & Alloys Ltd. v. Dy. CCT [2009] 17 SCC 547.

65. Next authority is Ram & Shyam Co. v. State of Haryana [1985] 3 SCC 267 . This judgment, having gone through very carefully in entirety, we find of no help to Revenue.

66. Then comes other judgments in Chabil Dass Agarwal (supra), Nivedita Sharma (supra) Vijaybhai N. Chandani (supra) and Indo Asahi Glass Co. Ltd. (supra). These decisions have also been cited in support of plea of alternative remedy, but in the present case from the facts and the precedents, we find that the issue raised is purely legal and there exists contrary judgments of various High Courts hence it is a fit case where the matter should be settled by this Court. We do not find any reason to dismiss this petition only on the ground of alternative remedy.

67. Entire discussions made above show that in respect of the matters where passage of time has resulted in accrual of certain rights to a person, such rights cannot be divested by exercising power at any indefinite period of time and in such case, if power is not exercised within reasonable period, it can be held barred and not exercisable. In Sharda Devi (supra), Court said, what a reasonable period in such case would depend on the facts and circumstances of each case. In Bhatinda District Cooperative Milk Producers Union Ltd. (supra), Court said that what a reasonable period would be, it will depend on the nature of statute, rights and liabilities thereunder and other relevant factors. In Debaki Debi (supra), S. B. Gurbaksh Singh (supra) and Halari Store (supra), Court said that a power conferred without any time limit, if not exercised within reasonable time, unreasonable delay in exercise may effect its validity. However, it also held that what would be reasonable time is not to be fixed by Court since delay depends upon facts of each case. Though there are otherwise judgments in Uttam Namdeo Mahale (supra) and Ishar Singh (supra), but for the purpose of the present case, we proceed to hold that if a power is not exercised within a reasonable time, unreasonable delay which is not capable of explanation may affect validity of such power.

68. Then next question would be, whether in exercise of power under Section 201 and 201(1A) of Act, 1961, in the case in hand, can it be said to be an exercise of power with unreasonable delay so as to invalidate such exercise of power.

69. In the present case, payment of consideration of property in dispute was made between June 2003 to June 2005. The address of all co-owners of property were shown as in India i.e. Lucknow, Jaipur and Allahabad, respectively. There was no indication at all that one of the sellers was N.R.I. Sale deed was registered on 14.06.2005. Return of income of A.Y. 2006-07 was filed disclosing factum of purchase of property vide sale deed dated 14.06.2005. Assessment Order was passed on 30.12.2008. In the aforesaid return also, it is not the case of petitioner that there was any indication disclosing to Revenue Authority that one of the sellers was N.R.I. Case of Revenue is that they came to know during the course of processing of return of petitioner for A.Y. 2006-07 that one of co-sellers, Smt. Nidhi Raman, is an N.R.I. and liable to pay capital gain tax as land sold was an urban land, which was also supported by return of income for A.Y. 2006-07. A notice under Section 148 of Act, 1961 was issued to Smt. Nidhi Raman on 26.07.2008 i.e. even before passing assessment order dated 30.12.2008. Thereafter, A.A. passed Assessment Order dated 26.12.2009 under Section 144 read with Section 147 of Act, 1961 for the A.Y. 2006-07 in respect of Smt. Nidhi Raman. She preferred Appeal which was allowed by CIT (A), Kanpur and by order dated 16.02.2012 Assessment Order dated 24.12.2009 was set aside on the ground that in respect of another co-owner Smt. Shanti Tripathi an order issued/passed under Section 163 was already set aside. CIT (A), Kanpur, however, directed Assessing Officer, under Section 150 of Act, 1961, to exercise power of jurisdiction to begin fresh proceedings under Section 161/163 of Act, 1961 or to make direct assessment of Smt. Nidhi Raman by arranging to serve notice at her U.K. address through C.B.D.T. CIT (A), Kanpur also directed Assessing Officer to explore possibility of recovering tax from purchaser of property since deduction at source of tax was liable to be made, in the present case, under Section 195 where payment was received by an N.R.I.

70. Revenue challenged order of CIT (A) dated 16.02.2012 in Appeal before Tribunal, but it also confirmed CIT (A)’s order by dismissing appeal vide order dated 28.06.2013. Tribunal, however, left it open to Revenue to pursue any other remedy. This order of Tribunal was received in the office of C.I.T.-3, New Delhi on 16.07.2015. Thereafter notice was issued to petitioner on 12.08.2015. All these facts show that Revenue first explored possibility of recovering entire tax from the person ultimately liable to pay tax since petitioner was only an “Assessee in default” by not deducting TDS on the payment made to Smt. Nidhi Raman, an N.R.I., but actual liability of payment of tax was on Smt. Nidhi Raman. It is only when the aforesaid probability was explored and failed, Revenue exercised power under Section 201 (1) and 201(1A). It cannot be said that Revenue, in the case in hand, is guilty of undue and unreasonable delay on its own inasmuch as since when factum of Smt. Nidhi Raman, being an N.R.I., came to its notice, it has continuously prosecuted the matter, which has remained pending from one authority to another and after completion of such proceedings against the person, who was liable to pay tax and having failed to realize any amount of tax from her, power has been exercised under Section 201(1) and 201(1A) of Act, 1961.

71. In the entirety of the discussion, we find it difficult to hold that period consumed by Revenue in prosecuting matter against main payee would have resulted in accrual of a right upon Assessee so as to deprive Revenue from proceeding under Section 201(1) and 201(1A), though, admittedly, Assessee-petitioner has committed default by not complying Section 195 by non-deduction of TDS on the amount paid to Smt. Nidhi Raman. Defence of petitioner that it was misrepresented by seller by not disclosing by any of them that she was an N.R.I. would equally be available to Revenue also for explaining delay and also their bonafide is fortified that they make all possible efforts to recover entire amount of tax from person liable to pay tax and as a last resort they have sought to exercise power under Section 201(1) and 201(1A) against Assessee.

72. The view taken by Delhi High Court that period of limitation of four years, as applicable for making Assessment under Section 147, should be made applicable for exercising power under Section 201(1) and 201(1A), we find it difficult to subscribe inasmuch as we do not impose a fixed time and prescribe a period of limitation, which has not been prescribed by Legislature in its wisdom. Such legislative action, by way of judicial precedent, in our view, would not be appropriate exercise of judicial review under Article 226 of Constitution. As we have already discussed above, even Supreme Court says that if time period is not prescribed for exercise of power, a reasonable time would depend upon the facts of each case and cannot be quantified or prescribed like a period of limitation.

73. In Uttam Namdeo Mahale (supra), the judgment delivered by Three Judge Bench, Court has said as under:

“Mr. Bhasme, learned counsel for the appellant, contends that in the absence of fixation of the rule of limitation, the power can be exercised within a reasonable time and in the absence of such prescription of limitation, the power to enforce the order is vitiated by error of law. He places reliance on the decisions in State of Gujarat v. Patil Raghav Natha; Ram Chand v. Union of India and Mohd. Kavi Mohamad Amin v. Fatmabai Ibrahim. We find no force in the contention. It is seen that the order of ejectment against the applicant has become final. Section 21 of the Mamlatdar’s Court Act does not prescribe any limitation within which the order needs to be executed. In the absence of any specific limitation provided thereunder, necessary implication is that the general law of limitation provided in the Limitation Act (Act 2 of 1963) stands excluded. The Division Bench, therefore, has rightly held that no limitation has been prescribed and it can be executed at any time, especially when the law of limitation for the purpose of this appeal is not there. Where there is statutory rule operating in the filed, the implied power of exercise of the right within reasonable limitation does not arise. The cited decisions deal with that area and bear no relevance of the facts.”

(Emphasis added)

74. We also find that Bombay High Court has taken a different view in the matter of prescribing limitation and Calcutta High Court has declined to prescribe any such limitation.

75. In our view, the dictum laid down by Apex Court in the cases referred above is very clear. While exercising power of judicial review in the case like present one, it would be appropriate to consider whether power has been exercised by competent authority within a reasonable period and whether delay is unjust, arbitrary, whimsical or it is for valid reasons. If Court finds that delay in exercise of power is for valid and bonafide reasons, alleged delayed exercise of power cannot be held invalid.

76. We, therefore, find ourselves unable to agree with the submission of learned counsel for petitioner that proceedings initiated by respondents-Revenue Authorities under Section 201(1) and 201(1A) is bad being barred by period of limitation.

77. We answer all the three questions formulated above against petitioner. No other point has been raised/argued.

78. Writ petition, therefore, fails and is dismissed accordingly.

79. Interim order, if any, shall stand vacated.

[Citation : 397 ITR 305]