ORDER
V. Dongzathang, Vice-President
1. These appeals of the assessee are directed against the orders of the CIT (Appeals) for the assessment years 1978-79 to 1986-87. The Id. CIT(A) passed a speaking order dated 3-4-1990 for assessment year 1978-79 and on that basis disposed of the remaining appeals for the same reasons discussed by him in the said order.
2. The facts are that the assessee deducted tax at source from payments on account of interest. There was, however, delay in the deposit of the tax into the account of the Government for the above assessment years. The Assessing Officer, by impugned orders dated 21-5-1990, passed orders for the above assessment years levying interest under Section 201 (1A) of the Act.
3. Aggrieved by the said order, the assessee took up the matter in appeal before the CIT(A) and it was submitted that the Assessing Officer was not justified in charging interest after such a lapse of time and that even if there were no limitations provided, the orders charging interest should have been passed within reasonable time of the default. Reliance was placed on the decision of the Hon’ble Kerala High Court in the case of Krishna Bhatta v. Agrl. ITO [1981] 132 ITR 21. The learned CIT(A) however, did not accept the contentions. According to him, in the present case, only simple interest for the period of delay has been charged and the assessee has not been visited with any penalty under the impugned orders for the default on its part. Secondly, the assessee had made use of the funds beyond the prescribed time and, therefore, no hardship has been caused to the assessee for the delayed action on behalf of the department for charging interest under a delayed order. Since the department was getting under the impugned orders what was the bare minimum due to it, it was held by him that the delay in passing an order in such circumstances would not vitiate the orders, as the assessee had not been put to any unnecessary or avoidable hardship. The Id. CIT(A) also rejected the claim of reasonable cause and confirmed the interest charged by the Assessing Officer.
4. The assessee is aggrieved and has come up in appeal before the Tribunal. Ms. Vasanti Patel, learned Counsel, assisted by Shri S.K. Thakkar, appeared for the assessee and Shri M.P. Kotwal, Id. Departmental Representative, appeared for the revenue. They were heard at length.
5. Both the parties are agreed that interest under Section 201 (1A) of the Act is mandatory and there is no precondition of consideration of “reasonable cause” for non-payment in time of deducted at source. This is the view consistently taken by the Hon’ble High Court of Bombay in the case of PentagonEngg. (P.) Ltd. v. CIT [1995] 212 ITR 92 andin its earlier decision in the case of Bennet Coleman & Co. Ltd v. V.P. Damle, Third CIT [1986) 157 ITR 812. It is also an admitted position that the bar of recovery under the provisions of Section 231 will not stand in the way of the assessee to pay interest under Section 201 (1A) of the Act, and the proceedings initiated by the revenue authorities for levy of interest under Section 201(1A) are not barred by limitation as held by the Hon’ble High Court of Calcutta in the case of Grindlays Bank Ltd. v. CIT [1992] 193 ITR 457 and in the case of British Airways v. CIT [1992] 193 ITR 439.
6. It is, however, the claim of the learned Counsel of the assessee before us that in the absence of time-limit for initiation and completion of the proceedings under the Act, the authorities should initiate such proceedings within a reasonable time. It is further submitted that this aspect of the matter has never been considered in the cases cited above. The Id. counsel of the assessee heavily’relied on the decision of the Hon’ble Kerala High Court in the case of Iswara Bhat v. CAIT[1993] 200 ITR 238, wherein it was held as follows:
It is trite law that statutory powers must be exercised bona fide, reasonably, without negligence, and for the purpose for which they were conferred (see p. 244E).
Even in the absence of a time-limit prescribed by the statute, the repository of the power should initiate the proceedings within a reasonable time; by the same token even for the completion of the proceedings, the same logic should apply and the final order should be passed within a reasonable time, even in the absence of a time-limit in the statute concerned. Both “termini” stand on the same footing. If suo motu revisional proceedings can be invoked only within a reasonable time, by the same logic, the proceedings themselves should be rendered or passed within a reasonable time. The repository of statutory power should be reasonable, that means that Damocles’ sword should not hang endlessly, at the caprice of any statutory authority (see p. 245C-E).
Reliance is also placed on the earlier decisions in the case of Nelliampathy Tea & Produce Co. Ltd. v. CAIT[1991] 190 ITR 227 (Ker.) and in the case of Traco Cable Co. Ltd. v. CIT [1987] 166 ITR 278 (Ker.) and in the cases cited before the CIT(A). The decisions of the Hon’ble High Court of Bombay in the case of Indian Hume Pipe Co. Ltd. v. CIT [1991] 189 ITR 683 and of the Hon’ble Calcutta High Court in the case of Vinar & Co. v. ITO [1992] 193 ITR 300 and of the Hon’ble Calcutta High Court in the case of CIT v.Dunlop Rubber Co. (India) Ltd. [1980] 121 ITR 476 are also cited for the above proposition.
7. On the other hand, Shri M.P. Kotwal, learned Departmental Representative, maintained that the issue is concluded by the decisions of the jurisdictional High Court. Interest under Section 201(1A) of the Act is mandatory and automatic and no limitation can be placed for the recovery of such liability which the assessee itself should have automatically deposited. In the instant case, the assessee has been using the money due to the Government and, therefore, no hardship can be said to have been caused by such recovery. The finding of the Id. CIT(A) is fair and reasonable. There being no infirmity in the orders of the CIT(A), it is submitted that no interference is called for in this regard.
8. On consideration of the above submissions, we are inclined to accept the contentions of the assessee that the revenue authorities are bound to exercise the powers within a reasonable time as held by the Hon’ble Kerala High Court in the case of Iswara Bhat (supra). In that case, the Hon’ble High Court considered the issue in the context of the Kerala Agricultural Income-tax Act, 1950. However, the ratio is equally applicable under the Income-tax Act. The Hon’ble Kerala High Court came to the said conclusion on the basis of the general principle of law that it is trite law that statutory powers must be exercised bona fide, reasonably, without negligence, and for the purpose for which they were conferred. In following the said principle, the Hon’ble High Court also referred to the decision of the Hon’ble Supreme Court in the case of State of Gujarat v. Patel Raghav Natha AIR 1969 SC 1297 and S.B. Gurbaksh Singh v. Union of India AIR 1976SC 1115; (1976)37 STC 424 (SC), where the Supreme Court held that for the exercise of suo motu power of revision, the revisional authority should initiate proceedings within a reasonable time even in the absence of a “time-limit” prescribed by the statute. The Hon’ble Bombay High Court considered the question of “reasonable time” in the context of surtax assessment where there is no time-limit prescribed for completion of assessment in the case of Indian Hume Pipe Co. Ltd. (supra). In that case, the Hon’ble High Court held that the surtax assessment completed within less than two years cannot be said to be an unreasonable period. It was further held that what will constitute reasonable time will depend on the nature of the order and the circumstances of the case.
9. The finality of any proceedings is implicit in the scheme of the Income-tax Act. All the proceedings including assessment proceedings and penalty proceedings have a specific time for commencement and completion of the proceedings. Section 153 of the Act deals with time-limit for completion of assessment within two years from the end of the assessment year in which the income is first assessable. Section 149 of the Act provides the period within which the order can be re-opened and such period is limited to 4 years at the first instance by the Assessing Officer. Section 154 of the Act provides the period within which the order can be rectified within a limited period of 4 years by the authorities. Similarly, penalty imposable under Chapter XXI is to be initiated and completed within two years from the date of completion of the proceedings, in the course of which proceedings for the imposition of penalty have been commenced. This section was amended with effect from 1-4-1989 and the limitation period is substantially reduced. Action of Commissioner under Section 263 of the Act is to be taken within two years from the end of the financial year in which the order sought to be rectified was passed. From the above provisions, it is clear that there is a time-limit for completion of any proceedings taken under the Act.
10. In the case of tax deducted at source, it is seen that the basic and main purpose of the section is to mop up taxes before the assessment and tax deducted at source is in the nature of pre-assessment tax which should come to the treasury before the end of the previous year itself. The Act, therefore, provides for filing the return under Section 206 within one month of the end of the financial year or June in each of the years. This is to enable the Assessing Officer to monitor the payment of pre-assessment taxes before dealing with the regular assessment proceedings. In this view of the matter, it appears that the Legislature did not consider it necessary to put even time-limit for levy of interest under Section 201(1A) of the Act, as the proceedings under Section 201 of the Act are expected to be finalised before the assessment is completed.
11. If the facts of the case of the assessee are examined in the light of the above decisions, the contentions of the assessee have considerable merit. There appears to be no proceedings initiated for delay in the filing of the returns under Section 206 of the Income-tax Act. The delay in the payment ranges from less than 1 month, 1 to 3 months and in few cases 6 to 12 months. The idea of calling for the annual return under Section 206 is for the revenue authorities to ensure prompt payment of the tax deducted at source within time and also to enforce proper deduction of tax at source. Since the assessee was to furnish within 30 days from the 31st March or June, as the case may be, in each year, the Assessing Officer would be in a position to monitor the annual return within one month from the end of the financial year or before the return of income is due. The assessee filed the income-tax returns for the above assessment years and the assessments for the above assessment years were completed and the appeals were disposed of by the CIT(A) as follows :
Asstt. Year Date of ITO's Date of CIT(A)'s
order order
1978-79 4-1-1982 30-3-1984
1979-80 29-9-1983 30-3-1984
1980-81 24-9-1983 30-3-1984
1981-82 25-9-1984 29-3-1985
1982-83 19-9-1985 17-3-1987
1983-84 31-7-1987 17-3-1987
1984-85 25-9-1987 19-1-1988
1985-86 30-3-1988 24-1-1989
1986-87 22-9-1989 20-3-1991
In such a case, even if the Assessing Officer failed to scrutinise the short deduction of tax or delay in payment of the annual returns in the normal time, he could have done the same at the time of passing the assessment order or when he gives effect to the appellate order of the CIT(A). Nothing appears to have been done. However, on 25-1-1990, the Assessing Officer passed the impugned orders for the above assessment years and levied interest under Section 201 (1A) of the Act. From the analysis of the above facts, it is seen that the first order was passed on 4-1 -1982 and the CIT(A) passed the appellate order on 30-3-1984. The previous year is the year ending 31-3-1978. In that view of the matter, the delay of more than 11 years cannot be said to be a reasonable delay in the light of the above decisions. Coming to assessment year 1985-86, it is seen that the assessment order was passed on 30-3-1988 and even the appellate order of the CIT(A) was passed on 24-1 -1989. In this case also, there is a delay of more than 4 years. Such delay, in our view, cannot be said to be reasonable if the scheme of the Act highlighted above and the principle laid down by the various High Courts including that of the Hon’ble Bombay High Court are applied. We accordingly hold that the orders levying interest under Section 201(1A) passed by the Assessing Officer are not justified insofar as assessment years 1978-79 to 1985-86 are concerned and are accordingly cancelled.
12. In holding that a period of 4 years constitute a reasonable time, we take into account the various periods of limitation highlighted above which ranges from 2 to 4 years except in exceptional cases. We also hold that the intention of the Parliament not to put a specific bar of limitation is not to give licence to the Assessment Officer to hold the assessee to ransom for all time to come but to ensure that all pre-assessment taxes are collected promptly and such proceedings are finalised much before taking up the regular assessment proceedings.
13. With regard to assessment year 1986-87, it is seen that the assessment order was passed on 22-9-1989. The appellate order was passed by the CIT(A) on 20-3-1991. In such a case, the order of the Assessing Officer levying interest under Section 201 (1A) for this assessment year can be said to be within reasonable time, as the Assessing Officer in this case handled the case of the assessee as late as on 20-3-1991. Therefore, the order passed by him for levy of interest under Section 201(1A) of the Act on 25-1-1990 can be said to be within a reasonable time and no interference is called for in this regard.
14. In the result, the appeals for assessment years 1978-79 to 1985-86 are allowed, while the appeal for the assessment year 1986-87 fails and is dismissed.