Tribunal omission to consider the case laws – Whether Tribunal can recalled it’s order ?

Short Overview:

While passing order by the Tribunal under section 254 non-considerations of case laws referred by assessee was a mistake apparent from law under section 254(2) and as such, order of Tribunal was to be recalled.

Assessee’s contention was that it had placed reliance on various decisions (which were also referred to in the MA) and that the Tribunal had omitted to consider the same appear to be correct because there was no reference or discussion about the same in the order.

It is held that, There was a mistake apparent from record and needs rectification by dealing with the case law relied upon by the assessee. Since considerable time had passed after hearing of the appeals, both the parties should be given sufficient opportunity of hearing. Therefore, it was fit and proper to recall the order of the Tribunal in ITA No. 546/Hyd/2017, dated 29-11-2017 for rehearing of the parties on the decisions relied upon by the assessee.

Decision: In assessee’s favour.

Followed: Subodh Chandra S Patel, reported in 138 taxmann 185 (Gu.) and Pyramid Plastics in M.A. No. 147/Ahd/2012, dt. 5-10-2012.

IN THE ITAT, HYDERABAD BENCH

P. MADHAVI DEVI, J.M. & S. RIFAUR RAHMAN, A.M.

Ushodaya Enterprises (P) Ltd. v. Addl. CIT

M.A. Nos. 49 and 37/Hyd/2018 (Arising out of ITA Nos. 546 and 547/Hyd/2017 (29-11-2017)

18 April, 2019

Assessee by: V. Siva Kumar

Revenue by: A.G.V. Prasad, Departmental Representative

P. Madhavi Devi, J.M.

These two miscellaneous applications are filed by the assessee seeking rectification of alleged mistakes which are allegedly apparent from record from the order of the Tribunal dated 29-11-2017 in the above two appeals. The appeal in ITA No. 546/Hyd/2017 was against the order under section 201(1) and 201(1A) of the Act, while the Appeal in ITA No. 547/Hyd/2017 was against the levy of penalty under section 271C of the Act. Both the appeals were heard together and were disposed of vide common and consolidated Order, dt. 29-11-2017. The assessee has filed the above two M.As alleging that there are certain mistakes apparent from record which need rectification.

M.A. No. 49/Hyd/2018

2. The contentions of the assessee in this M.A. are as follows :–

“Application under section 254 (2) of Income Tax Act, 1961 :–

1.1 This application is filed by the applicant company under section 254(2) of the Income Tax Act, 1961 seeking rectification of certain mistakes apparent from the record that have crept into the order of the Hon’ble Income Tax Appellate Tribunal in its order in ITA No. 546/Hyd/2017, dt. 29-11-2017.

2.1 Aggrieved by the decision of the Commissioner (Appeals), the applicant filed appeal before the Hon’ble I.T.A.T. Five grounds of appeal were raised by the applicant in the appeal. Ground No. 2 to 4 raised by the applicant read as under :–

“2. Commissioner (Appeals)-8 grossly erred in holding that the contention of the Appellant that the time limit of 4 years for completion of proceedings under section 201(1) and 201(1A) of the Act is required to be counted from the date of occurrence of default is not based on interpretation of statute. Commissioner (Appeals)-8 ought to have seen that no time limit was provided in the Act for completion of proceedings under section 201(1) & 201(1A) at the relevant time when the alleged default had occurred. It is only later that a provision was introduced in section 201 providing time limit for completion of proceedings under section 201(1) & 201(1A) and even such period had expired in Appellant’s case by the time proceedings were initiated under section 201(1) & 201(1A). Hence Commissioner (Appeals)-8 is not justified in holding that interest levied under section 201(1A) is within the time limit.

3. Commissioner (Appeals)-8 is not justified in holding that the Appellant is not prevented by a reasonable cause in complying with the provisions of section 194J(d) in not deducting tax from non-compete fee.

Commissioner (Appeals)-8 ought to have seen that the recipient of non-compete fee did not have taxable income even after considering non-compete fee as income and therefore Appellant was requested by the recipient of Non-compete fee not to deduct tax from non-compete fee which is a reasonable cause. Hence Commissioner (Appeals)-8 is not justified in holding that the Appellant did not prove that there was reasonable cause for not deducting tax at source in respect of non-compete fee.

4. Commissioner (Appeals)-8 ought to have seen that interest under section 201 (1A) is leviable for the period from 7-2-2008 (date on which tax was deductible on non-compete fee) to 30-9-2008 (date of furnishing return of income). In fact the return of income of Sri Ramoji Rao (HUF) was e-filed on 3009-2008 itself and it is only a hard copy of return that was filed before the assessing officer on 1310-2008. Hence Commissioner (Appeals)8 is not justified in holding that interest is leviable upto 13-10-2008. Further the Commissioner (Appeals)-8 ought to have seen that due date for deducting tax from non-compete fee credited on 30-01- 2008 is 07-2-2008. Hence Appellant submits that Commissioner (Appeals)-8 is not justified in holding that interest is leviable for the period 30-1-2008 to 13-102008. Further Appellant submits that such direction amounts to enhancement of interest leviable under section 201(1A) without giving notice to the Appellant and is therefore not justified.”

2.2 In paragaraphs 6 and 7 of its order, Hon’ble Appellate Tribunal recorded its decision on ground No. 2. A reading of paragraph 6 shows that Hon’ble Appellate Tribunal dealt with the issue of time limit for initiation of proceedings under section 201(1) of the Act. The under mentioned sentence which forms the first sentence in paragraph 6 of the Appellate Tribunal’s order makes this clear.

“As regards ground of Appeal No. 2, we find that it is on the question of time limit for initiation of proceedings under section 201(1) of the Act.”

2.3 In fact the entire decision on ground No. 2(vide paragraphs 6 and 7 of the order) does not even contain a reference to section 201(1A) whereas ground No. 2 raised by the applicant challenges the decision of the Commissioner (Appeals) that the order levying interest under section 201(1A) is within the time limit. The last sentence in ground No. 2, which reads as under, makes this very clear.

“Hence Commissioner (Appeals)-8 is not justified in holding that interest levied under section 201(1A) is within the time limit.”

2.4 The applicant submits that a mistake apparent from record has crept into the order of the Hon’ble Appellate Tribunal, in that, the Hon’ble Appellate Tribunal has not adjudicated upon the specific ground taken by the applicant as above.

2.5 Paragraph 8 of the Hon’ble Appellate Tribunal’s order dealt with the issue of chargeability of interest under section 201(1A). The gist of the finding is that the provisions of the provisions of Sub-section (3) of section 201(1) will not apply to charging of interest under section 201(1A) of the Act, that though TDS may not be recoverable from the assessee, still the assessee is not absolved from the liability to interest under section 201(1A) in the light of the finding of the Hon’ble Supreme Court in the case of Hindustan Coca Cola Bevereges Ltd.

2.6 Paragraph 9 of the Hon’ble Appellate Tribunal’s order dealt with the issue of existence of reasonable cause which is raised in ground No. 3. Ground No. 4 rasies the issue of the period for which interest under section 201(1A) is to be charged which has been disposed off as not pressed(please see last sentence in paragraph 8).

2.7 It may kindly be seen from the narration in the preceding paragraphs that the issue raised by the applicant in ground No. 2 viz., that Commissioner (Appeals)-8 is not justified in holding that interest levied under section 201(1A) is within the time limit has not been disposed off by the Hon’ble Appellate Tribunal.

OMISSION TO CONSIDER THE RATIO OF DECIDED CASES CITED BY THE APPLICANT :–

3.1 In support of the contention that the learned Commissioner (Appeals) erred holding that the order charging interest under section 201(1A) is within time limit, the applicant pleaded that where there is no time limit stipulated in the statute, proceeding should be initiated within reasonable time and that in the case of the applicant, initiation of proceedings was done after a lapse of about 6 and % years and that in the light of the ratio of decided cases relied on by the applicant, the proceedings ought not to have been upheld by the learned Commissioner (Appeals).

3.2 The Applicant relied upon the decision of Hon’ble Delhi High Court in the case of CIT v. Goyal M.G Gases (I.T.A No: 335/2011 dated 23-2-2011) (Paper book pages 4 to 11) in which the appeal filed by Dept. was dismissed. In this case the CIT, in his order under section 263, directed assessing officer to compute interest on mercantile basis and also directed that consequential order be passed within 3 months.

Assessee challenged Commissioner’s order before Hon’ble ITAT. ITAT, noticing that about 4 years had passed after the date of 263 order and that the assessing officer did not pass consequential order, dismissed the assessee’s appeal as infructuous in the sense that in any case the assessing officer was incompetent pass the consequential order after such inordinate delay.

Though the assessee’s appeal was dismissed, the revenue apprehended that ITAT’s order may prevent the assessing officer from passing the consequential order and hence filed appeal before the High Court. The Hon’ble Delhi High Court, inter alia, held (in page 5 of its order) that it was of the view that where no period of limitation is prescribed, then, in any event, a reasonable period of limitation ought to be adopted and in the light of the time allowed by Commissioner, three years and eight months was certainly much beyond the reasonable period that could be allowed to the assessing officer to pass the order. In paragraph 4 of the order on page 5, the Hon’ble High Court held that even if there is no period of limitation prescribed under section 153(3)(ii) of the Act, the assessing officer was required to pass the order within reasonable period and non-specification of period of limitation would not mean that assessing officer can wait for indefinite period. This is a case where the principle that action should be taken within reasonable period has been reiterated and about 3 years and eight months has been held as beyond reasonable period.

3.3 The Applicant also relied upon the decision of Hon’ble High Court of Andhra Pradesh in the case of CIT v. UB Electronic Instruments Ltd., (2015) 371 ITR 314 (T&AP) : 2015 TaxPub(DT) 926 (AP-HC) (Paper book pages 15 to 18) in which it was held that by and large four years is treated as the period within which any penal action can be initiated against the assessee. Failure to initiate steps within that period would disable the Department to proceed against the assessee. In the case before the High Court the assessment years were 1989- 90, 1990-91 and 1991-92. It was nearly seven years thereafter that a notice was issued. On the basis of its reasoning, the Hon’ble High Court held that the I.T.A.T. was justified in roping in the theory of reasonable period for passing orders under section 201(1A) of the Act and also that inspite of continuous breach and default, the finding of the Hon’ble I.T.A.T. that levy of interest under section 201(1A) cannot be said to be within reasonable time is legal and valid. This decision of jurisdictional High Court directly applies to the applicant’s case and is binding on the Hon’ble Appellate Tribunal.

3.5 The Applicant also relied upon the decision of Hon’ble High Court of Delhi in the case of CIT v. C.J International Hotels (P) Ltd., (2015) 372 ITR 684 (Del) : 2015 TaxPub(DT) 1860 (Del-HC) (paper book pages 46 to SO), The years involved in this case were assessment years 1999-00 to 200102. In this case, the Department contended, (vide paragraph 3 of the judgment) that had the parliament intended, it would have engrafted a specific period for initiation of proceedings and in the absence of any such limitation, no limitation can be imputed. In rebuttal the assessee’s counsel submitted (vide paragraph 4) that two division benches of the Delhi High Court consistently ruled and concluded the issue, in CIT v. NHK Japan Broadcasting Corpn., (2008) 305 ITR 137 (Del) : 2008 TaxPub(DT) 1931 (Del-HC) and CIT v. Hutchinson Esssar Telecom Ltd., (2010) 323 ITR 230 (Delhi) : 2010 TaxPub(DT) 1822 (Del-HC), by holding that where no limitation was prescribed, four years was the foundational requisite for initiation of proceedings under section 201. In paragraph 6 of the judgment, the Court, following earlier judgments, (supra) held that the power to treat the assessee as in default was too drastic and the assessing officer has to act within 4 years. The Court also referred to another decision in the case of State of Punjab v. Bhatinda Dist Co-Op Milk Producers Union Ltd., (2007) 9 RC 637 ((2007) 11 SCC 363 Se) and held in paragraph 6, (sub para 17 and 18) that where no period of limitation is prescribed, statutory authority must exercise jurisdiction within reasonable period, say 3 or 5 years.

3.6 The Applicant also relied upon the decision of Hon’ble High court of Delhi in the case of CIT v. NHK Japan Broadcasting Corpn (2008) 305 ITR 137 (Del) : 2008 TaxPub(DT) 1931 (Del-HC) (Paper book pages 51 to 54) In the said case, the High Court held that where no limitation is prescribed, as in section 201, action must be initiated by the competent authority under the Act within a period of four years. The Court also held that date of knowledge is not relevant for purposes of exercising jurisdiction in so far the provisions of the Act are concerned and also that acceptance of liability by assessee would not, by itself, extend period of limitation nor would it extend reasonable time.

3.7 The applicant also cited the decision of Hon’ble Supreme Court in the case of State of Punjab & Ors. v. Bhatinda District. Coop. Milk Producers Union Ltd. 11 SCC 363 SC (Paper book pages 55 to 59) wherein Hon’ble Supreme court held ‘it is trite 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 statute, rights and liabilities thereunder and other relevant factors”. In the said case, issue of notice after a period of five years was considered not valid.

3.8 The thrust of the submissions of the applicant before the Hon’ble I.T.A.T. was that the initiation of proceedings was beyond reasonable period in the light of the various judicial pronouncements relied on by the applicant before the Hon’ble I.T.A.T. and in the light of the same, the order under section 201(1A) needs to be quashed.

3.9 The applicant humbly submits that the Hon’ble ITAT omitted to deal with the submissions of the applicant and adjudicate upon the ground raised by the applicant in this regard. The applicant submits that this constitutes mistake apparent from record. The applicant prays that the Hon’ble ITAT may kindly recall the order and rectify the mistake apparent from record”.

3. Having regard to the rival contentions and the material on record, we find that it is a fact that in Ground No. 2 in ITA No. 546/Hyd/2017, the assessee had raised the issue of time limit of 4 years for completion of proceedings under section 201(1) and 201(1A) of the Act. This Tribunal has dealt with this ground in Paras 6 to 8 of its order. However, the mistakes that have crept in the order are that (i) at the end of Para 6, it is erroneously held that ground of Appeal No. 2 is allowed; and (ii) Para 8 erroneously starts with “Ground No. 3”. Therefore, we deem it fit to rectify the same as under :–

The last seven words of Para 6 are deleted and it shall end with “barred by limitation”.

The first sentence of Para 8 shall be read as “Further, assessee’s grievance is against charging of interest under section 201(1A) of the Act”.

4. The next grievance of the assessee in this M.A is that the Tribunal has not specifically adjudicated on the ground taken by the assessee that interest levied under section 201(1A) is also not within time limit and that the Tribunal has omitted to consider the ratio of decided cases cited by the assessee.

5. We have perused the order of the Tribunal and find that in Para 8 of the order, the Tribunal has considered the applicability of sub-section (3) of section 201(1) also to 201(1A) and has clearly held that sub section (3) refers only to an order under section 201(1) and that the TDS cannot be recovered from the assessee. Obviously, sub-section (3) refers to time limit for deeming a person to be “an assessee in default” for failure to deduct the whole or any part of the tax from a resident in India.

Thus, though there is no elaborate discussion about the same, the Tribunal has considered and given a finding on the same. The assessee’s contention that it had placed reliance on various decisions (which are also referred to in the MA) and that the Tribunal has omitted to consider the same appear to be correct because there is no reference or discussion about the same in the order. But does that make the order erroneous?. The learned Counsel for the assessee has relied upon the decision of the Hon’ble Gujarat High Court in the case of Subodh Chandra S Patel, reported in 138 taxmann 185 (Gu.) High Court in which it was held that non-consideration of jurisdictional High Court or Apex Court would always constitute a mistake apparent from record and the Tribunal in exercise of powers under section 254(2) can rectify it. The other decision relied upon by the learned Counsel for the assessee is the decision of the Coordinate Bench of the Tribunal at Ahmedabad in the case of Pyramid Plastics in M.A. No. 147/Ahd/2012, dt. 5-10-2012 wherein it was held that not considering the case law cited by the appellant is a mistake apparent from record and had recalled its earlier order and re-fixed it for fresh hearing.

6. The learned Departmental Representative, however, submitted that there was no mistake apparent from record which was rectifiable under section 254(2) of the Act.

7. Having regard to the rival contentions and the material on record, respectfully following the above decisions, we agree that there is a mistake apparent from record and needs rectification by dealing with the case law relied upon by the assessee. Since considerable time has passed after hearing of the appeals, we are of the opinion that both the parties should be given sufficient opportunity of hearing. Therefore, we deem it fit and proper to recall the order of the Tribunal in ITA No. 546/Hyd/2017 dated 29-11-2017 for rehearing of the parties on the decisions relied upon by the learned Counsel for the assessee. The appeals are thus directed to be fixed for hearing in due course after notice to the parties.

8. In the result, M.A. No. 49/Hyd/2018 is allowed.

M.A. No. 37/Hyd/2018

9. For the sake of clarity and ready reference, the contents of the application in M.A. No. 37/Hyd/2018 are as under :–

“Application under section 254 (2) of Income Tax Act, 1961 :–

1.1 This application is filed by the applicant company under section 254(2) of the Income Tax Act, 1961 seeking rectification of certain mistakes apparent from the record that have crept into the order of the Hon’ble Income Tax Appellate Tribunal in its order in ITA No. 547/Hyd/2017, dt. 29-11-2017.

2.1 Aggrieved by the decision of the Commissioner (Appeals), the applicant filed appeal before the Hon’ble I.T.A.T. Grounds of appeal raised by the applicant before the Hon’ble I.T.A.T. are enclosed hereto as annexure IIA” for ready reference.

2.2 During the Course of hearing the Appeal, the applicant filed concise grounds of Appeal which are enclosed hereto as annexure IIB” for ready reference.

2.3 The Applicant also filed an additional ground of Appeal on 6-9-2017 which is reproduced here under.

“1. The learned Commissioner (Appeals) erred in holding that the Addl. C.I.T(TDS) is correct in law in assuming jurisdiction and levying penalty under section 271C of the Act in the light of his clear finding that the assessee has not been treated as defaulter for the purpose of section 201(1) of the Act.”

2.4 In support of ground No. 2 (ground Nos. 2(a) and 2(b) in concise grounds) the applicant relied upon decisions of various judicial authorities, copies of which have been filed before the Hon’ble I.T.A.T. in the form of paper books.

3.1 Hon’ble I.T.A.T. recorded its findings and decision in paragraph 13 in its order which is reproduced here under :–

“Having regard to the rival contentions and the material on record/we find that the requirement to make the payment and the genuineness of the payment of non-compete fee by the assessee to Shri Ramoji Rao (HUF) has been adjudicated by the Tribunal in the assessee’s own case for assessment year 2008-09 and the contention of the assessee that the non-compete fee is the business expenditure of the assessee has been upheld. The assessee has always contended that it is its business expenditure and therefore/it was required to deduct tax at source under section 194J of the Act. For failure to deduct tax inspite of being liable to do so/the penalty under section 271C is clearly leviable.

Though the learned counsel for the assessee has placed reliance on various case law/we find that these cases are distinguishable on facts. In view of the same/we do not see any reason to interfere with the penalty order confirmed by the Commissioner (Appeals)

4.1 The applicant submits that mistakes as mentioned hereunder have crept into the order of the Hon’ble Tribunal.

MISTAKE AS TO FOUNDATIONAL FACTS :–

4.2 Hon’ble Tribunal mentioned (in paragraph 13 of the order) : “the requirement to make payment and genuineness of the payment of non-compete fee by the assessee to Shri Ramoji Rao (HUF) has been adjudicated by the Tribunal in the assessee’s own case or assessment year 2008-09 and the contention of assessee that the non-compete fee is the business expenditure of the assessee has been upheld.

4.3 The applicant submits that the Hon’ble Tribunal remitted the matter of genuineness and necessity to pay the non-compete fee to the file of the assessing officer, vide paragraph 28 of its order in I.T.A. No. 26/HYD/2011 dt. 22-10-2014. The under mentioned extract from the said order of the Hon’ble Tribunal is relevant in this connection.

“therefore considering the totality of the facts and circumstances we are of the view that as the impact of acquisition of 39% of equity shares by M/S. Equator Trading Enterprises (P) Ltd. has not at all been examined by the Aa at the time of assessment proceeding or by the learned Commissioner (Appeals) while disposing of assessee’s appeal and further as the additional evidences produced before us were not examined either by the Aa or by Commissioner (Appeals), which certainly have a crucial bearing on the issue as to whether the payment of non-compete fee is genuine and necessary, we are inclined to remit the matter back to the file of A. 0 for deciding afresh. Only after the issue relating to genuineness of non-compete fee paid and necessity to pay such fee is resolved, Aa will decide the allowability of depreciation claimed on such non-compete fee by keeping in view the statutory provision as well as the ratio laid down in the decisions referred to hereinabove and any other decision brought to his notice”.

4.4 As is clear from the extract quoted above the issue of genuineness of the for assessment year 2008-09 non-compete fee paid and necessity to pay such fee was not upheld by the Hon’ble Tribunal but remitted back to the assessing officer The applicant submits that the finding of the Hon’ble Appellate Tribunal quoted in paragraph 4.2 above constitutes a mistake apparent from record. The applicant prays that the Hon’ble I.T.A.T. may kindly rectify the mistake apparent from its order.

OMISSION TO CONSIDER THE RATIO OF DECIDED CASES CITED BY THE APPLICANT :–

5.1 The Hon’ble Tribunal recorded (in paragraph 13) “though the learned Counsel for the assessee has placed reliance on various case law, we find that these cases are distinguishable on facts.” In this connection the applicant submits as under :–

5.2 In ground No. 2 of the grounds of appeal (Ground Nos. 2(a) and 2(b) of concise grounds of appeal) the applicant contested the decision of Commissioner (Appeals) who held that the penalty imposed is within the time limit. The applicant contested the finding and pleaded that where there is no time limit stipulated in the statute, proceeding should be initiated within reasonable time and that in the case of the applicant, initiation of proceedings was done after a lapse of more than 6 and % years and that in the light of the ratio of decided cases relied on by the applicant, the proceedings initiated under section 271C ought not to have been upheld by the learned Commissioner (Appeals).

5.3 The Applicant relied upon the decision of Hon’ble Delhi High Court in the case of CIT v. Goyal M,G Gases (I,T,A No: 335/2011, dt. 23-2-2011) (Paper book pages 4 to 11) in which the appeal filed by Dept. was dismissed. In this case the CI.T, in his order under section 263, directed assessing officer to compute interest on mercantile basis and also directed that consequential order be passed within 3 months. Assessee challenged Commissioner’s order before Hon’ble ITAT. ITAT, noticing that about 4 years had passed after the date of 263 order and that the assessing officer did not pass consequential order, dismissed the assessee’s appeal as infructuous in the sense that in any case the assessing officer was incompetent pass the consequential order after such inordinate delay. Though the assessee’s appeal was dismissed, the revenue apprehended that ITAT’s order may prevent the assessing officer from passing the consequential order and hence filed appeal before the High Court. The Hon’ble Delhi High Court, inter alia, held (in page 5 of its order) that it was of the view that where no period of limitation is prescribed, then, in any event, a reasonable period of limitation ought to be adopted and in the light of the time allowed by Commissioner, three years and eight months was certainly much beyond the reasonable period that could be allowed to the assessing officer to pass the order. In paragraph 4 of the order on page 5, the Hon’ble High Court held that even if there is no period of limitation prescribed under section 153(3)(ii) of the Act, the assessing officer was required to pass the order within reasonable period and non-specification of period of limitation would not mean that assessing officer can wait for indefinite period. This is a case where the principle that action should be taken within reasonable period has been reiterated and about 3 years and eight months has been held as beyond reasonable period.

5.4 The Applicant also relied upon the decision of Hon’ble High Court of Andhra Pradesh in the case of CIT v. UB Electronic Instruments Ltd., (2015) 371 ITR 314 (T&AP) : 2015 TaxPub(DT) 926 (AP-HC) AP (Paper book pages 15 to 18) in which it was held that by and large four years is treated as the period within which any penal action can be initiated against the assessee. Failure to initiate steps within that period would disable the Department to proceed against the assessee. In the case before the High Court the assessment years were 1989-90, 1990-91 and 1991-92. It was nearly seven years thereafter that a notice was issued. On the basis of its reasoning, the Hon’ble High Court held that the I.T.A.T. was justified in roping in the theory of reasonable period for passing orders under section 201(1A) of the Act and also that inspite of continuous breach and default, the finding of the Hon’ble I.T.AT that levy of interest under section 201(1A) cannot be said to be within reasonable time is legal and valid.

5.5 Applicant also relied upon the decision of Hon’ble I.T.AT, “A” Bench Hyderabad in the case of ACIT v. Good Health Plan Ltd., (ITA. No. 155/Hyd/2013, dt. 22-1-2014. (Paper book pages 19 to 34) In this case the assessee pleaded that since the assessee was not treated as in default under section 201(1), there was no scope for levy of penalty under section 271C Assessee pleaded that penalty was only consequential in nature and when there is no amount in default, the possibility of imposing penalty will automatically be ruled out. Hon’ble I.T.A.T. recorded that AD has not treated the assessee as in default/section 201(1) and when the assessing officer himself treated the assessee as not in default in respect of amount of TDS to be deducted, then there cannot be any scope for levying any penalty under section 271C The Hon’ble I.T.A.T. also recorded that the recipient has paid the tax on the income received. Being so, the provisions of section 271C cannot be applied to the assessee’s case. Hon’ble I.T.A.T. confirmed deletion of the penalty.

5.6 Applicant also relied upon the decision of the Hon’ble I.T.A.T. “A” bench Mumbai, in the case of A.CIT v. American School of Bombay Education Trust (IT.A Nos. 6349 to 6351/Mum/2009 and C.O NOS.141 to 143/Mum/2010, dt. 31-1-2011). (Paper book pages 39 to 43) In this case, the Hon’ble I.T.A.T, “A” Bench, Mumbai was adjudicating upon orders passed by Commissioner (Appeals) deleting penalty imposed under section 271C of the Act. In the said case, orders under section 201(1) & 201(1A) were passed by DCIT (TDS).

Thereafter penalty under section 271C was levied. When the penalty appeal came up before the Commissioner (Appeals), assessee contended that the I.T.A.T. held that the initiation of proceedings under section 201(1) & 201(1A) in the instant years was beyond the period of six years and hence barred by limitation. Considering the fact that the I.T.A.T. has quashed the orders under section 201(1) & 201(1A), the Commissioner (Appeals) ordered deletion of penalty under section 271C of the Act.

Against such order of Commissioner (Appeals), revenue came up in appeal before the I.T.A.T. Hon’ble LT.AT held that where the order under section 201(1) and 201(1A) is set aside on account of limitation, the effect is that the assessee is not deemed to be in default in respect of any failure to deduct or pay tax at source and in such circumstances, the question of penalty under section 271C cannot arise. Since the Commissioner (Appeals) has ordered for cancellation of penalty on the basis of order of the I.T.A.T, the Hon’ble I.T.A.T. refrained from considering the submissions by both sides on merits and the order of the Commissioner (Appeals) was upheld and the appeals of revenue were dismissed.

5.7 The Applicant also relied upon the decision of Hon’ble High Court of Delhi in the case of CIT v. C.J International Hotels (P) Ltd., (2015) 372 ITR 684 (Del) : 2015 TaxPub(DT) 1860 (Del-HC) (paper book pages 46 to 50), The years involved in this case were assessment years 1999-00 to 2001-02. In this case, the Department contended, (vide paragraph 3 of the judgment) that had the parliament intended, it would have engrafted a specific period for initiation of proceedings and in the absence of any such limitation, no limitation can be imputed. In rebuttal the assessee’s counsel submitted (vide paragraph 4) that two division benches of the Delhi High Court consistently ruled and concluded the issue, in CIT v. NHK Japan Broadcasting Corpn., (2008) 305 ITR 137 (Del) : 2008 TaxPub(DT) 1931 (Del-HC) DEL and CIT v. Hutchinson Esssar Telecom Ltd., (2010) 323 ITR 230 (Delhi) : 2010 TaxPub(DT) 1822 (Del-HC), by holding that where no limitation was prescribed, four years was the foundational requisite for initiation of proceedings under section 201. In paragraph 6 of the judgment, the Court, following earlier judgments, (supra) held that the power to treat the assessee as in default was too drastic and the assessing officer has to act within 4 years.

The Court also referred to another decision in the case of State of Punjab v. Bhatinda Dist Co-Op Milk Producers Union Ltd., (2007) 9 RC 637 ((2007) 11 SCC 363 SC) and held in paragraph 6, (sub para 17 and 18) that where no period of limitation is prescribed, statutory authority must exercise jurisdiction within reasonable period, say 3 or 5 years.

5.8 The Applicant also relied upon the decision of Hon’ble High court of Delhi in the case of CIT v. NHK Japan Broadcasting Corpn (2008) 305 ITR 137 (Del) : 2008 TaxPub(DT) 1931 (Del-HC) (Paper book pages 51 to 54) In the said case, the High Court held that where no limitation is prescribed, as in section 201, action must be initiated by the competent authority under the Act within a period of four years. The Court also held that date of knowledge is not relevant for purposes of exercising jurisdiction in so far the provisions of the Act are concerned and also that acceptance of liability by assessee would not, by itself, extend period of limitation nor would it extend reasonable time.

5.9. The applicant also cited the decision of Hon’ble Supreme Court in the case of State of Punjab & others v. Bhatinda Distt. Coop. Milk Producers Union Ltd. 11 SCC 363 SC (Paper book pages 55 to 59) wherein Hon’ble Supreme court held ‘it is trite 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 statute, rights and liabilities thereunder and other relevant factors”. In the said case, issue of notice after a period of five years was considered not valid.

5.10 The applicant also relied on the decision of the Hon’ble Supreme Court in the case of CIT v. Jai Laxmi Rice Mills, Ambala City (2015) 379 ITR 521 (SC) : 2015 TaxPub(DT) 5251 (SC). (Paper book pages 60 to 62) In the said case, the Hon’ble Supreme Court held that where no satisfaction was recorded for initiation of penalty proceedings, under section 271E of the Act, impugned penalty order passed under the said section deserved to be quashed.

5.11 The thrust of the submissions of the applicant before the Hon’ble ITAT was that the initiation of proceedings under section 271C was beyond reasonable period in the light of the various judicial pronouncements relied on by the applicant before the Hon’ble ITAT and in the light of the same, the order under section 271C needs to be quashed. The applicant humbly submits that the finding of the Hon’ble ITAT that the said cases are distinguishable on facts, without stating how they are distinguishable, constitutes mistake apparent from record. The applicant prays that the Hon’ble ITA.T may kindly recall the order and rectify the mistake apparent from record.

6.1 The applicant raised an additional ground which reads as under :–

1. The learned Commissioner (Appeal) erred in holding that the Addl. CIT(TDS) is correct in law in assuming jurisdiction and levying penalty under section 271C of the Act in the light of his clear finding that the assessee has not been treated as defaulter for the purpose of section 201(1) of the Act.

6.2 The applicant, relying on the decision of the Hon’ble ITAT, “A” Bench, Hyderabad in the case of ACIT v. Good Health Plan Ltd., (ITA 155/HYD/2013) pleaded that since the DCIT, Circle 2(1), Hyderabad held in his order that the assessee is not in default in respect of any amount by way of TDS in respect of the non-compete fee, the applicant is not liable to be penalized under section 271C of the Act. The applicant also relied upon the decision of the Hon’ble ITAT “A” bench Mumbai, in the case of A.CIT v. American School of Bombay Education Trust_(I.T.A Nos. 6349 to 6351/Mum/2009 and C.O. Nos. 141 to 143/Mum/2010, dt. 31-1-2011). (Paper book pages 39 to 43) In this case, the Hon’ble I.T.A.T, “A” Bench, Mumbai was adjudicating upon orders passed by Commissioner (Appeals) deleting penalty imposed under section 271C of the Act. In the said case, orders under section 201(1) & 201(1A) were passed by DCIT (TDS). Thereafter penalty under section 271C was levied. When the penalty appeal came up before the Commissioner (Appeals), assessee contended that the I.T.A.T. held that the initiation of proceedings under section 201(1) & 201(1A) in the instant years was beyond the period of six years and hence barred by limitation. Considering the fact that the I.T.A.T. has quashed the orders under section 201(1) & 201(1A), the Commissioner (Appeals) ordered deletion of penalty under section 271C of the Act. Against such order of Commissioner (Appeals), revenue came up in appeal before the I.T.A.T. Hon’ble I.T.A.T. held that where the order under section 201(1) and 201(1A) is set aside on account of limitation, the effect is that the assessee is not deemed to be in default in respect of any failure to deduct or pay tax at source and in such circumstances, the question of penalty under section 271C cannot arise. Since the Commissioner (Appeals) has ordered for cancellation of penalty on the basis of order of the I.T.A.T, the Hon’ble I.T.A.T. refrained from considering the submissions by both sides on merits and the order of the Commissioner (Appeals) was upheld and the appeals of revenue were dismissed.

6.3 It is also submitted that the Hon’ble ITAT in the combined Order, dt. 29-11-2017 in ITA. No. 546/Hyd/2017 in the assessee’s own case held that the order under section 201(1) & 201(1A) passed by the D.C.I.T, (T05) is barred by limitation. Consequently, the ratio of the decision of the Hon’ble I.T.A.T. in the case of Good Health Plan Ltd., (supra) and American School of Bombay Education Trust (supra) squarely applies to the facts of the applicant’s case. The applicant humbly submits that the finding of the Hon’ble I.T.A.T. that the relied upon by applicant’s counsel are distinguishable on facts, constitutes mistake apparent from record. The applicant prays that the Hon’ble I.T.A.T. may kindly recall the order and rectify the mistake apparent from record.

Hyderabad

18-4-2018″

10. The learned Counsel for the assessee reiterated the submissions made in the application, while the learned Departmental Representative submitted that there was no mistake apparent from record from the order of the Tribunal which needs any rectification. He further submitted that the non-consideration, if any, of the arguments of the assessee is not a mistake apparent from record

11. Having regard to the rival contentions and the material on record, we find that the first alleged mistake pointed out by the assessee is the finding of the Tribunal in Para 13 of its order. We have gone through the relevant paragraphs of the orders of the ITAT in ITA No. 26/Hyd/2011, dt. 22-10-2014 in the assessee’s own case for the assessment year 2008-09, wherein the issue of payment of non-compete fee was considered. We find that the assessee had claimed it to be an intangible asset and depreciation thereon or to allow it as deferred revenue expenditure and the assessing officer had rejected the assessee’s claim mainly on the ground that genuineness of the payment is not proved and that non-compete fee is not an intangible asset and therefore, depreciation thereon is not allowable. It was in these circumstances that the Tribunal had remitted the issue to the file of the assessing officer for deciding afresh and also to decide the allowability of depreciation claimed on such non-compete fee. However, in the order of the Tribunal against the penalty under section 271C for the assessment year 2008-09, it has been held that the contention of the assessee that the non-compete fee is the business expenditure of the assessee, has been upheld. This finding is thus an erroneous recording of facts and therefore, there is a mistake apparent from record. Therefore, we deem it necessary to modify Para 13 as under :–

“13….. (HUF)…………has been directed to be verified by the Tribunal in the assessee’s own case for assessment year 2008-09 in the quantum appeal and the contention of the assessee to allow depreciation on non-compete fee or alternatively to allow it as deferred revenue expenditure has not been accepted. The liability of the assessee to deduct tax at source would arise irrespective of the nature of the payment as it clearly attracts the provision of section 194J of the Act. However, unless the genuineness of the payment is decided, it cannot be said that it is taxable in the hands of the recipient and only if it is taxable, do the TDS provisions get attracted”.

12. As far as the second alleged mistake pointed out by the assessee is concerned, we find that the assessing officer initiated the penalty proceedings after a lapse of more than 6 ½ years and therefore, it is the case of the assessee that it is barred by limitation of a reasonable period. The appellant has relied upon various case law in support of this contention. In all these cases, the Courts have held that where there is no limitation period prescribed under the Act, the assessing officer was required to initiate/pass the order within a reasonable period and non-specification for period of limitation would not mean that the assessing officer can wait for indefinite period. According to the assessee, 4 years is a reasonable period.

13. Another contention raised by the assessee is that the assessee was not treated as “an assessee in default” under section 201(1) of the Act and therefore, there was no scope for levy of penalty under section 271C of the Act. The Tribunal, after considering the arguments of the assessee, has held that the facts of the cases relied upon by the assessee are distinguishable in facts from the facts of the case of the assessee. According to the learned Counsel for the assessee, the Tribunal ought to have gone through the decisions relied upon by the assessee and due to non-consideration or non-MA discussion about the case law submitted by the assessee, there is a mistake apparent from record. The decisions relied upon by the assessee are the same as in ITA No. 49/Hyd/2018 and for considering them, we have set aside the order in the appeal. Since the facts and circumstances in this appeal are also similar, we set aside the order in ITA No. 547/Hyd/2017 and direct the registry to re-fix the appeal for hearing along with ITA No. 546/Hyd/2017 accordingly for fresh hearing.

14. In the result, Miscellaneous Applications filed by the assessee are allowed.