Commissioner of Income Tax vs Trichur Co-op. Bank Ltd.

All these appeals are filed by the Commissioner of Income Tax, Kochi against two separate orders of the Income Tax Appellate Tribunal, Cochin Bench in I.T.A. Nos. 312,313, & 314/Coch/95 in respect of the assessment years 1986-87,1987-88 & 1988-89 in connection with orders passed by the assessing officer u/s 201(1) of the Income Tax Act, 1961 (hereinafter referred to as ''the Act'') and in I.T.A. Nos. 233, 234 & 235/Coch./95 in respect of assessment years 1986-87, 1987-88 & 1988-89 in connection with the orders passed by the assessing officer levying interest u/s 201(1A) of the Act. I.T.A. Nos. 27, 42 & 50 of 2000 are the appeals filed against the order of the Tribunal on the question arising u/s 201(1) of the Act and I.T.A. Nos. 38, 41 & 43 of 2000 are filed against the order of the Tribunal on the question of imposition of interest u/s 201(1A) of the Act.

The brief facts necessary for consideration of these appeals are as follows: The respondent-assessee is a co-operative bank at Trichur. During the previous year relevant to the assessment years 1986-87 to 1988-89 the respondent-assessee had paid bonus to its employees purporting to be by way of advance payments in view of certain dispute regarding the bonus consequent on revision of pay of the employees. The assessee did not deduct the tax due from the employees in respect of these payments as provided u/s 192 of the Act. The assessing officer took the view that the assessee had paid bonus which form part of the salary and therefore there was statutory obligation cast on the assessee to deduct tax from such payment. Accordingly after notice to the assessee, orders were passed u/s 201 of the Act declaring the assessee-in-default. Similarly another set of orders were passed making the assessee liable to pay interest on the defaulted tax. Being aggrieved by both sets of orders the assessee filed appeals before the Commissioner (Appeals). The first appellate authority found that the assessee had defaulted in deducting the tax due on the payment of bonus paid to its employees by virtue of the provisions of section 201(1) of the Act. The first appellate authority also found that in view of the said default the assessee has become liable to pay interest on the defaulted amount by virtue of the provisions of section 201(1A) of the Act. However, the first appellate authority held that since the recovery of the defaulted tax has become barred under the provisions of section 231 of the Act the recovery of interest on such defaulted amount was barred under the said provision. Being aggrieved by the order of the first appellate authority both the assessee and the department filed appeals before the Appellate Tribunal. The Tribunal also found that the findings of the first appellate authority that the assessee is in default and that there is a corresponding obligation to pay interest u/s 201(1) and section 201(1A) respectively. However, the Tribunal also upheld the view of the first appellate authority that the recovery of the tax and the interest have become barred u/s 231 of the Act. The Tribunal for the said purpose relied on the decisions of this court in Traco Cable Co. Ltd. Vs. Commissioner of Income Tax, and Commissioner of Income Tax Vs. Meat Products of India Ltd., . It is against these orders of the Tribunal that the department has come up in appeal.

Sri George K. George, learned Central Government standing counsel for taxes appearing for the appellant submits that the two decisions of this court mentioned above were rendered at a time when the provisions of section 231 of the Act was on the statute book. He submitted that the said provision was omitted as per the Direct Taxes Law (Amendment) Act, 1987 with effect from 1-4-1989. The counsel submitted that the decision rendered by this court in the two decisions mentioned above will apply to the assessment year 1986-87, in that, the period of limitation provided u/s 231 of the Act expired on 31-3-1989 and consequently the omission of section 231 with effect from 1-4-1989 will not save the period of limitation. However, so far as the assessment years 1987-88 and 1988-89 are concerned the standing counsel submitted that the period of limitation provided u/s 231 of the Act expires only on 31-3-1990 and 31-3-1991 respectively. The standing counsel further submitted that since the deletion of section 231 of the Act happened before the expiry of the period of limitation the effect is that the period of limitation provided u/s 231 no longer survives with respect to the assessment years 1987-88 and 1988-89. The standing counsel accordingly submitted that the orders of the Tribunal so far as the assessment years 1987-88 and 1988-89 will have to be set aside ''and the levy of interest u/s 201(1A) has to be upheld and the recovery of tax u/s 201(1) and the levy of interest u/s 201(1A) has to be sustained.

We have heard Sri Harisankar V. Menon, learned counsel appearing for the respondent- assessee. Though the counsel had vehemently argued to sustain the orders of the Tribunal we find that the submission made by the standing counsel merits acceptance. We accordingly uphold the order of the Tribunal so far as the assessment year 1986-87 is concerned since the period of limitation provided u/s 231 expired prior to the omission of section 231 with effect from 1-4-1989. However we set aside the orders in respect of the assessment years 1987-88 and 1988-89 and hold that the orders of the assessing authority passed u/s 201(1) and 201(1A) of the Act are legal and valid since there was no period of limitation in view of the omission of section 231 from 1-4-1989 prior to the expiry of the period of limitation provided in the said section.

These appeals are disposed of as above.