THE issue before the Bench is - Whether charge relating to TDS would abate with time and tax dues can be construed as not payable if no action for its recovery is initiated. NO is the answer.
Facts of the case
The assessee is an individual. A survey u/s 133A was conducted at the assessee's business premises, wherein it was found that tax at source as required u/s.194A had not been deducted on the interest credited/paid by the assessee to some depositors. Further, Form 15H, i.e., a declaration by the depositor that no tax was payable in respect of the interest allowed, precluding deduction of TDS, had not been obtained from the deductees, nor filed, as required, with the Office of the concerned CIT, much less within the time stipulated there-for. There were in fact several deficiencies therein, rendering them unacceptable, viz. not dated; not verified; date of submission not filled up, etc. The AO, accordingly, worked out the assessee's liability toward TDS u/s. 201(1) and toward interest for the non deposit of the TDS to the credit of the Central Government u/s. 201(1A), reckoning the latter from the day following the expiry of the relevant previous year to July, 2008, vide orders u/s. 201(1) and 201(1A). On appeal, the CIT(A) held that there was no bar in terms of time limit for the levy of tax u/s.201(1) or for the charge of interest u/s.201(1A) under the Act.
Having heard the parties, the Tribunal held that,
++ it is noted that the legal principles in the matter are stated by the Apex Court in Bharat Steel Tubes Ltd., Bhatinda District Co-op. Milk Producer Union Ltd., and Hindustan Times Ltd. A reasonable period shall govern the exercise of the statutory power. What is reasonable would depend on the facts of the case, which has been further clarified as depending upon the nature of the statute, the rights and liabilities there-under, and other relevant factors. The Legislature has however consciously omitted section 231, which specifically provided for a time period for the commencement of recovery proceedings, so that there is a conscious attempt on its part to remove any legal bar as to time, and which therefore has to be respected. The said removal, or the absence of the provision stipulating a time limit for the period of recovery, i.e., the commencement of recovery proceedings under the Act, is, thus, in agreement with the clear and settled principle of law enunciated by the Apex Court per its various decisions referred to in HMT Ltd., including and not limited to Hindustan Times Ltd. Continuing further, again, without doubt, the charge of tax and the crystallization of the tax liability in its respect is upon occurring of the taxable event, and has nothing to do with its subsequent assessment following the prescribed procedure, as explained by the Apex Court in many a decision, viz. CIT vs. Shelly Products. The charge in respect of tax deductible at source is attracted u/s 4(2), upon occurring of the taxable event, i.e., the payment or credit, as the case may be, of any sum specified u/s 194A to 196D. The said charge of tax would, thus, not abate with time, and the tax due (which becomes payable within a defined period of the taxable event), cannot be held as not payable or recoverable by the Central Government, to whose credit the same is to be paid, upon non action by it toward recovery, i.e., for a particular period of time. In other words, the tax liability (qua TDS) shall not get extinguished upon lapse of certain period of time, which may be considered as 'reasonable'. There is no debtor-creditor relationship between the State and the subject qua a tax liability, for the Limitation Act to apply, i.e., in the absence of any provision as to time limit in respect of a particular sum per the Act itself, which, in fact, stands specifically removed. Section 201(1), it may be appreciated, is not a charging section or toward a levy of tax, which is in the instant case per sections 4(2) r/w section 194A, but only qua its recovery;
++ it is also noticed that the TDS liability of the deductor, though recoverable from him and in respect of which he can be, following the due process of law, deemed to be in default, is not to his own account, but is only toward the tax liability of the deductee, and has to be necessarily adjusted against the latter's tax liability. That the same is without prejudice to the charge of tax on his (deductee's) income, who is in any case liable toward the same and obliged therefore to make direct payment in the event of failure to deduct and/or deposit TDS by the payer, is patent from the combined reading of sections 4(1), 190 and 191 of the Act. This introduces a complexity to the matter. The tax, under Article 265 of the Constitution of India, can only be levied or recovered under the authority of law. The tax in the form of TDS, so collected, is that levied (by law) on the deductee. That is, collection of tax could only be of that levied, which, where of TDS, is of another, i.e., the deductee. Collection of tax can even otherwise be neither in vacuum nor independent or de hors that levied, i.e., is rendered without any legal basis in the absence of the latter. The concept of knowledge cannot be either a limiting or a facilitation factor, i.e., of any relevance. The levy of tax under the Act is u/s 4 thereof. The same requires determination of income, which is to be in terms of the relevant provisions of the law, and following the procedure of assessment laid down under Chapter XIV of the Act. The same, per section 139, requires the deductee to furnish the return of income, and vide section 140A to pay self-assessment tax along with, reckoning the same by taking into account all the taxes already paid, including the tax deducted at source. The assessee's return is, though, not binding on the Revenue, which may subject it to verification and assess his income in accordance with the law, following the prescribed procedure. As such, it is only where the determination has, following the said procedure, been already made and, further, found payable, upon considering the payment u/s. 140A, raising notice of demand u/s. 156, which outstands for recovery, that TDS - to that extent, could be collected or recovered by the Revenue from the deductor, i.e., at any time, adjusting the same against the deductees' tax liability. The Revenue is in such a case required to show that some determined tax is payable by the deductee on income assessable for the year, tax at source on which has not been deducted, or after deduction, paid. The interest liability on TDS, which is sought to be collected per section 201(1 A) follows, being compensatory, i.e., is consequential or concomitant;
++ however, where there is no such outstanding demand, i.e., of determined tax liability of the deductee, it is not possible to subscribe to the view that TDS could be collected or recovered at any time, i.e., without any time limitation. This is as the recovery through TDS is only toward the deductee's tax liability, which could be recovered only upon determination following the process of law. The law, per section 149, provides for a time limit for the issue of notice u/s. 148, toward bringing any income that has escaped assessment, to tax. The same, for the years under reference, is set at a maximum of six years from the end of the relevant assessment year. This, then, would become a reasonable period up to which tax recovery proceedings qua TDS could be initiated, i.e., where there is no outstanding tax demand against the deductee for the relevant year. This is as the proceedings in the case of the deductee, against whose tax liability the said TDS would stand to be adjusted, could in law be initiated only up to that time limit. Two, as afore-discussed, i.e., the tax deduction in the case of the deductor and the tax liability in the case of the deductee, are not independent of each other and, in fact, go hand in hand. Tax collection/recovery could only be of that levied/leviable. However, it is open for the deductor to exhibit that, notwithstanding the non-deduction of tax at source on the income chargeable to tax for the year, the same can yet not be recovered in view of the tax on the relevant income having been paid or otherwise recovered by the Revenue. That is, though the orders u/s. 201(1) and 201(1A) would in such a case, i.e., initiation of proceedings in its respect within six years from the relevant A.Y, is valid, actual recovery shall abate on the satisfaction of the tax liability on the corresponding income. In sum, order u/s. 201(1) is not toward levy of any tax, but only toward its recovery, with the interest u/s. 201(1A) being, as is well settled, compensatory. In our view, therefore, where the tax stands determined and is outstanding against the deductee, i.e., against whose tax liability the tax deductible is to be adjusted, the same is only a recovery of the tax levied and no time limit, in view of the conscious omission of any time limit being prescribed in its respect by the Act, would obtain. Where not so, the recovery would be subject to it being initiated within a reasonable period which, in our view, is a period up to which the tax could be assessed in the hands of the deductee - the tax deductible being only on his behalf and against his tax liability. The same, accordingly, is fixed at six years from the end of the relevant assessment year, i.e., up to which time assessment proceedings could under law be initiated against the impugned income. The assessee is though, at any rate, entitled to show that no tax liability against the corresponding income is outstanding, so that the tax could not be recovered;
++ in the facts of the present case, the Revenue has not brought on record any outstanding demand on the deductee/s, so that time limitation of six years from the end of the relevant A.Y shall obtain, i.e., for the purpose of initiation of recovery proceedings. Further, for all the years, the proceedings were initiated on 15.02.2008, following a survey u/s.133A concluding on 07.02.2008, by extending opportunity to the assessee to explain its case qua non deduction of tax at source, which was in fact followed by similar opportunity on 22.02.2008, 27.02.2008, 03.03.2008 and 07.03.2008. These dates fall within a period of six years from the end of the relevant year for all the years under reference. Accordingly, none of the impugned initiations suffers from the legal infirmity of being barred by time. The assessee's case, accordingly, fails for all the years.