Commissioner Of Income Tax (Tds), Chandigarh v. M/S H.m.t. Ltd

ITA No. 524 of 2009 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 524 of 2009 Date of Decision: 14.7.2011 Commissioner of Income Tax (TDS), Chandigarh ....Appellant. Versus M/s H.M.T. Ltd. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Senior Standing Counsel,for the appellant. Mr. Pankaj Jain and Mr. Rishab Kapoor, Advocates for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of ITA Nos. 524 to 527 of 2009 asaccording to the learned counsel for the parties, common question oflaw and facts are involved therein. For brevity, the facts are being takenfrom ITA No. 524 of 2009. 2.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 5.12.2008 passed by the Income Tax AppellateTribunal, Chandigarh, Bench 'B', Chandigarh (hereinafter referred to as“the Tribunal”) in ITA No. 784/CHD/2006, relating to the assessment year 1995-96, claiming the following substantial questions of law:- “i)Whether, in the facts and circumstances of the case,the ld ITAT has erred in law in allowing the appeal ofthe assessee by holding that four years was thereasonable period to issue show cause under section201 by the Assessing Officer to assessee though nosuch limitation was provided in section 201 of theIncome Tax Act, 1961?the ld ITAT has erred in law in allowing the appeal ofthe assessee by holding that four years was thereasonable period to issue show cause under section201 by the Assessing Officer to assessee though nosuch limitation was provided in section 201 of theIncome Tax Act, 1961? ii)Whether, in the facts and circumstances of the casethe ld. ITAT has erred in law in holding that theAssessing Officer was not empowered to issue showcause u/s 201 after a period of four years in view ofHon'ble Supreme Court order passed in the case ofPadmasundra Rao & others v. State of Tamil Naduand others, 255 ITR 147?”the ld. ITAT has erred in law in holding that theAssessing Officer was not empowered to issue showcause u/s 201 after a period of four years in view ofHon'ble Supreme Court order passed in the case ofPadmasundra Rao & others v. State of Tamil Naduand others, 255 ITR 147?” 2.Put shortly, the facts necessary for adjudication as narrated in the appeal are that the assessee is a Government of IndiaUndertaking. The pay scales of the employees of the assessee wererevised by the Government of India w.e.f. 1.1.1992 and the arrears ofpay were paid to them between the financial years 1994-95 and 1997-98. During the assessment years in question, the assessee had made the following payments of arrears of salary to its employees:- -3- 1997-98 Rs.2,12,06,823/- While making the aforesaid payments, the assessee did not deduct taxat source as required under Section 192 of the Act. Accordingly, theAssessing Officer passed the orders under Sections 201(1) and 201(1A) of the Act on 20.12.2005 for the above mentioned financial yearsafter issuing show cause notice to the assessee. Since the assesseedid not supply the details regarding TDS liability in respect of each ofthe employees, the demand was raised by charging tax on average rateof 20%. Feeling aggrieved, the assessee filed an appeal before theCommissioner of Income Tax (Appeals) [in short “the CIT(A)”] who videorder dated 22.8.2006 dismissed the appeal. On further appeal by theassessee, the Tribunal vide order dated 5.12.2008 allowed the appealholding that the Assessing Officer was not empowered to issue a showcause notice after a period of four years from the end of the financialyear. Hence, the present appeal by the revenue. 3.We have heard learned counsel for the parties. 3.We have heard learned counsel for the parties. 4.The Tribunal had adjudicated the issue against therevenue by holding that the order passed by the Assessing Officerunder Sections 201(1) and 201(1A) of the Act was bad being hit bydelay and laches. 5.Learned counsel for the revenue submitted that there is nospecific provision prescribing any limitation for passing the order underSections 201(1) and 201(1A) of the Act. According to the learnedcounsel, in view of Apex Court judgment in M/s Hindustan Times Ltd.Vs. Union of India and others, AIR 1998 SC 688 where no limitation isprescribed, the rule that power should be exercised within reasonable time is not applicable in the facts of the present case. Reference wasalso made to the judgment of the Kerala High Court in Commissionerof Income-Tax v. Trichur Cooperative Bank Ltd. [2003] 266 ITR 574.It was urged that Section 231 of the Act was omitted from 1.4.1989 andthere is no limitation prescribed for passing an order under Sections 201(1) and 201(1A) of the Act which are in the nature of effecting recoveryof taxes from the assessee in default. 6.On the other hand, learned counsel for the assesseesupported the order passed by the Tribunal and reiterated thesubmissions made before the Tribunal. 7.We find considerable force in the submission of learnedcounsel for the revenue. In M/s Hindustan Times Ltd's case (supra),the employer had defaulted in making payment of provident fundcontributions. Notice was issued by the department under TheEmployees' Provident Funds and Miscellaneous Provisions Act, 1952on 23.2.1971 complaining of delay in remitting the provident fundamount for the various periods from July 1965 to November, 1968.After certain correspondence between the defaulter and thedepartment, order for recovery as damages and administrative chargeswas passed on 7.5.1980. A plea was raised on behalf of the defaulterthat where no period of limitation is prescribed in a statute the same isrequired to be implied under law in order to be just and reasonable.The Hon'ble Supreme Court repelled the said contention holding thatwhere the legislature has not considered appropriate to prescribelimitation, it could not be read in such a provision. The legal positionhas been crystalized in the following terms:- “18.Now the Act does not contain any provisionprescribing a period of limitation for assessment orrecovery of damages. The monies payable into theFund are for the ultimate benefit of the employeesbut there is no provision by which the employeescan directly recover these amounts. The power ofcomputation and recovery are both vested in theRegional Provident Commissioner or other officer asprovided in section 14-B. Recovery is not by way ofsuit, initially, it was provided that the arrears couldbe recovered in the same manner as arrearsofland revenue. But by Act 37/53 section 14-B wasamended providing for a special procedure undersection 8-B to 8-G. By Act 40/73 section 11 wasamended by making the amount a first charge on theassets of the establishment if the arrears ofemployee's contribution were for a period of morethat 6 months. By Act 33/88, the charge wasextended to the employee's share of contribution aswell. 19.In spite of all these amendments, over a periodof more than thirty years, the legislature did not thinkfit to make any provision prescribing a period oflimitation. This in our opinion is significant and it isclear that it is not the legislative intention to prescribeany period of limitation for computing and recovering 19.In spite of all these amendments, over a periodof more than thirty years, the legislature did not thinkfit to make any provision prescribing a period oflimitation. This in our opinion is significant and it isclear that it is not the legislative intention to prescribeany period of limitation for computing and recovering the arrears. As the amounts are due to the TrustFund and the recovery is not be suit, the provisionsof the Indian Limitation Act, 1963 are not attracts. InNityanand M. Joshi vs. Life Insurance Corporation ofIndia [1970 (1) SCR 396], it has been held that theLimitation Act, 1963 has no application to LabourCourts and, in our view,that principle isequally applicable to recovery by the concernedauthority under section 14-B. Further in Bombay GasCo. Ltd. vs. Gopal Bhiva [1964 (3) SCR 709], it hasbeen held that in respect of an application undersection 33(c)(2) of the Industrial Disputes Act,1974, there is no period of limitation. In thatcontext, it was stated that the Courts could not implya period of limitation. It was observed: "It seems that where the legislaturehas made no provision for limitation, itwould not be open to the Court to introduceany such limitation on the grounds offairness or justice" The above decisions have been recentlyaccepted in Mukri Gopalan vs. Cheppilet [1995 (5)SCC 5(at p.20-22)] to which one of us (Majmudar,J.) was a party while dealing with the applicability ofsection 29(2) of the Limitation Act, 1963 to Courtsor Tribunals. We may also point out in this connection that several High Courts have rightlytaken the view that there is no period of limitation forexercise of the power under section 14B of the Act. 20.It is true that a principle has been laid down inState of Gujarat vs. Patil Raghav Natha [1969 (2)SCC 187], while dealing with suo moturevisionaljurisdiction that though there is no period of limitationprescribed for exercise of that power, still such apower must be exercised within reasonable time.The said judgment has been applied in mattersrelating to section 6 to the Land Acquisition Act in alarge number of cases, which were all referred torecently in Ram Chand vs. Union of India [1994 (1)SCC 45]. In our view, this line of cases cannotordinarily apply to monies withheld by a defaulter,who holds them in trust. 21.The reason is that while in the above casesdecided by this Court the exercise of powers by theauthority at a very belated stage was likely to resultin the deprivation of property which rightly andlawfully belonged to the person concerned, theposition under section 14B of the Act of an employeris totally different. The employer who has defaultedin making over the contributions to the Trust Fundhad, on the other hand, the use of monies whichdid not belong to him at all. Such a situation cannot be compared to the above line of cases whichinvolve prolonged suspense in regard to deprivationof property. In fact, in cases under Section 14-B ifthe Regional Provident Commissioner had madecomputations earlier and sent a demand immediatelyafter the e amounts fell due, the defaulter would nothave been able to usethese monies for hisown purposes or for his business. In our opinion, itdoes not lie in the mouth of such a person to saythat by reason of delay in the exercise of powersunder section 14B, he has suffered loss. On theother hand, the defaulter has obviously had thebenefit of the 'boon of delay' which "is so dear todebtors", as pointed out by the Privy Council inNagendranath Dev vs. Suresh Chandra Dev [ILR 60Cal. 1(PC)]. In that case, it was observed thatequitable considerations were out of place in mattersof limitation and the strict grammatical constructionalone was the guide. Sir Dinshaw Mulla stated: "Nor in such a case as this is the judgmentdebtor prejudiced. Be may indeed obtain theboon of delay, which is so dear to debtorsand if he is virtuously inclined there is nothingto prevent his paying what he owes intoCourt." The position of the employer in case of default under section 14-B is no different.” 8.Applying the above noted principles to the facts in hand, itcannot be concluded that the order passed by the Assessing Officerunder Sections 201(1) and 201(1A) of the Act was liable to be annulledon the ground of delay and laches. 9.In view of the above, the substantial questions of law areanswered in favour of the revenue and against the assessee. Theappeals are allowed and the orders are set aside. The matter isremitted to the Tribunal to decide afresh on merits in accordance withlaw. (AJAY KUMAR MITTAL) JUDGE July 14, 2011gbs (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE ITA No. 524 of 2009 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 525 of 2009 Date of Decision: 14.7.2011 Commissioner of Income Tax (TDS), Chandigarh ....Appellant. Versus M/s H.M.T. Ltd. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Senior Standing Counsel,for the appellant. Mr. Pankaj Jain andMr. Rishab Kapoor, Advocate for the respondent. AJAY KUMAR MITTAL, J. For orders, see ITA No. 524 of 2009 (Commissioner of Income Tax (TDS), Chandigarh v. M/s HMT Ltd). (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE ITA No. 524 of 2009 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 526 of 2009 Date of Decision: 14.7.2011 Commissioner of Income Tax (TDS), Chandigarh ....Appellant. Versus M/s H.M.T. Ltd. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Senior Standing Counsel,for the appellant. Mr. Pankaj Jain andMr. Rishab Kapoor, Advocate for the respondent. AJAY KUMAR MITTAL, J. For orders, see ITA No. 524 of 2009 (Commissioner of Income Tax (TDS), Chandigarh v. M/s HMT Ltd). (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 527 of 2009 Date of Decision: 14.7.2011 Commissioner of Income Tax (TDS), Chandigarh Versus M/s H.M.T. Ltd. ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Senior Standing Counsel,for the appellant. Mr. Pankaj Jain and Mr. Rishab Kapoor, Advocate for the respondent. AJAY KUMAR MITTAL, J. For orders, see ITA No. 524 of 2009 (Commissioner of Income Tax (TDS), Chandigarh v. M/s HMT Ltd). (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE