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Berger Paints India Ltd. and ors. Vs. Assistant Commissioner of Income-tax and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberWrit Petition No. 781 of 2000
Judge
Reported in(2000)164CTR(Cal)637,[2000]246ITR133(Cal)
ActsIncome Tax Act, 1961 - Sections 2, 2(7A), 116, 120, 120(1), 120(2), 124, 124(5) and 206; ;Income Tax Rules, 1962 - Rule 36A
AppellantBerger Paints India Ltd. and ors.
RespondentAssistant Commissioner of Income-tax and ors.
Appellant AdvocatePranob Kumar Pal, ;Chandrika Joshi and ;Ramendra Kumar Biswas, Advs.
Respondent AdvocateP.K. Mullick and ;J.C. Saha, Advs.
Excerpt:
- .....petitioners have to handle various contractors and whenever any payment made to them, the company deducted income-tax at source under the appropriate provisions of the same and deposited to the authority under section 200 and filed appropriate returns under section 206 of the income-tax act read with rule 37 of the rules framed thereunder. 4. the petitioners contended from the prescribed form, it will appear how much is paid and how much is deducted under section 194c(4) of the income-tax act. by a letter dated june 29, 1999, the petitioners duly filed form no. 26c for the financial year 1998-99 relevant to the assessment year 1999-2000 along with the details of amounts deducted and paid in respect of the companies or non-companies as also the amount deducted under section 194c(4) of.....
Judgment:

Amitava Lala, J.

1. Under this writ petition, the petitioner challenged a notice of the Assistant Commissioner of Income-tax (TDS), Circle-21(2), Calcutta, dated March 9, 2000, under annexure C to the petition.

2. Under this writ petition, the petitioners challenge the competency, authority or jurisdiction of the respondents to make requisition or enquiry relating to the returns filed under Section 206 of the Income-tax Act, 1961, read with Rule 37 of the Income-tax Rules, 1962, or to require the petitioners to produce or furnish documents or information in relation to tax deducted at source on the basis of the facts and circumstances herein.

3. The petitioner has contended before this court that in order to carry out the business of manufacturing and selling paints, varnishes, enamels and other products, your petitioners have to handle various contractors and whenever any payment made to them, the company deducted income-tax at source under the appropriate provisions of the same and deposited to the authority under Section 200 and filed appropriate returns under Section 206 of the Income-tax Act read with Rule 37 of the Rules framed thereunder.

4. The petitioners contended from the prescribed form, it will appear how much is paid and how much is deducted under Section 194C(4) of the Income-tax Act. By a letter dated June 29, 1999, the petitioners duly filed Form No. 26C for the financial year 1998-99 relevant to the assessment year 1999-2000 along with the details of amounts deducted and paid in respect of the companies or non-companies as also the amount deducted under Section 194C(4) of the Income-tax Act as required by the said form.

5. Since, according to the petitioners, there is no column under the prescribed form as to how much is deducted in cases of advertising and how much is deducted in cases of other than advertising the petitioners have also made annexures with the form showing the person who is the advertiser and the person who is not the advertiser as required by the form.

6. The petitioner company is a regular income-tax assessee under the Income-tax Act, 1961. The petitioners were previously being assessed by the Deputy Commissioner of Income-tax, Special Range-4, who is now known as the Joint Commissioner of Income-tax, Special Branch-IV, having his office at No. 3, Government Place, West Bengal, Calcutta-700 001. The said Joint Commissioner of Income-tax, Special Range 4, is under the Commissioner of Income-tax, West Bengal-IV, having his office at No. P-7, Chowringhee Square, Calcutta-700 069.

7. The Assistant Commissioner of Income-tax (TDS), Circle 21(2), Calcutta, has been designated by the Chief Commissioner or Commissioner of Income-tax under Rule 3GA of the Income-tax Rules. Respondents Nos. 2, 3, and 4 are superior officers to respondent No. 1. None of respondents Nos, 1 to 4 has anything to do with the income-tax assessment of the petitioner under the Income-tax Act and none of them has any jurisdiction over the income-tax assessment of petitioner No. 1. The petitioner filed a return along with the appropriate copies of the audited profit and loss account and the balance-sheet and tax audit report under Section 44AB of the Income-tax Act apart from the other documents which are required to be filed before the appropriate income-tax authority having jurisdiction in respect of the matter of the petitioner-company as aforesaid.

8. In compliance with the tax audit report under its relevant form, the auditor of the company has specified and certified as to whether petitioner No. 1-assessee has deducted tax at source and paid the amount so deducted to the credit of the Central Government in accordance with the provisions of Chapter XVII-B.

9. Now cause of action of this application before this court is challenging a notice issued by respondent No. 1 herein dated March 9, 2000, and received by the petitioners on March 14, 2000, as aforesaid in the context as above. According to the petitioner, such authority has no jurisdiction over and in respect of the matter in connection with the income-tax assessment of petitioner No. 1-company.

10. Before going to any controversy in respect of the matter, I have gone through the impugned notice and I found that the notice was issued on verification of the annual return Form No. 26C for the financial year 1998-99 submitted on June 29, 1999, by petitioner No. 1-company. The enquiry is made only in respect of short deduction which would be presumably meant short deduction of tax at source.

11. Under Section 206, it appears that the prescribed person in the case of every office of Government, the principal officer in the case of a company.

12. According to the petitioner under Section 200 of the Income-tax Act, tax deducted at source under various provisions of Chapter XVII-B of the Act is required to be deposited with the Government account. Section 206 of the Act requires the person who has deducted the tax and paid the tax to file annual returns in the forms prescribed under Rule 37 of the Income-tax Rules. Rule 36A of the Income-tax Rules provides that the prescribed income-tax authority would be the Assessing Officer as designated by the Chief Commissioner or Commissioner of Income-tax within whose area of jurisdiction the office of the person responsible for deducting tax under Chapter XVII-B is situated.

13. According' to the petitioners respondent No. 1 authority is required to be delivered to the return in the prescribed form and has no competenceor jurisdiction to do anything else under the Income-tax Act read with the Income-tax Rules. The Assessing Officer is the Joint Commissioner, Special Range, Calcutta. However, it is an admitted position that no hearing, however, has taken place in respect of the assessment years including the financial year 1998-99 and relevant to the assessment year 1999-2000.

14. Under the scheme of the Income-tax Act no power has been given to respondent No. 1 to make an enquiry and investigation under the Income-tax Act far less those contained in Chapter-XIII, XIV and XIV-B or any other provisions of the Income-tax which has been conferred upon the Assessing Officer having jurisdiction over the petitioners under Section 120 of the Income-tax Act, namely, the Joint Commissioner of Income-tax, Special Range-4, Calcutta.

15. In the premises, respondent No. 1 has no competence, authority or jurisdiction to issue the impugned notice dated March 9, 2000, which is under challenge.

16. It is a duty incumbent upon the petitioner-company to deduct the tax at source and comply with the formality to file the return under Section 206 read with Rule 37 of the Income-tax Rules. None of the provisions either in the Act or in the Rules requires the petitioner to furnish any evidence or to produce any document with the annual return or to make a resolution than the amount to be specified in the annual return filed under Section 206 of the Act with the annual report, namely, the audited profit and loss account and the balance-sheet of the petitioners.

17. Respondent No. 1 is designated for the prescribed purpose but he has not been empowered by the Chief Commissioner or Commissioner of Income-tax to become an Assessing Officer within the meaning of the said expression under Section 124 of the Income-tax Act read with Section 120 thereof. He has only been empowered to act under Section 206 read with Rule 36A of the relevant Rules.

18. Without prejudice to the rights and contentions of the parties, respondent No. 1 has been designated as Assessing Officer wrongly under the notification which is also ultra vires the provisions contained in Section 206 of the Income-tax Act read with Rule 36A as above.

19. It is well settled that Section 201(1) of the Income-tax Act is only a recovery provision which deems that liability has already been fixed, assessment and/or computation of income and the tax payable thereon has already been made and service of notice of demand on the assessee calling upon him to make the payment as already made. In view of the admitted position in law there cannot be any question of initiation of proceedings under Section 201 of the Income-tax Act for the purpose of making further enquiry which is being done prior to the assessment made under Chapter XIII of the Income-tax Act.

20. Therefore, the action on the part of the authority concerned being respondent No. 1 is mechanical without application of mind mala fide and/or arbitrary and/or capricious and/or perverse. Therefore, such notice is to be declared as invalid.

21. On the other hand, the respondent contended before this court that under Section 2(7A) of the Income-tax Act 'Assessing Officer' means the Assistant Commissioner or (Assistant Director) or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under Sub-section (1) or Sub-section (2) of Section 120 or any other provisions of this Act, the Deputy Commissioner (or Deputy Director) who is directed under Clause (b) of Sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act.

22. The moot point of the respondent before this court is that the definition clause in respect of giving meaning to 'Assessing Officer' is very wide. Power of delegation and the scheme speaks for the same. Moreover, the power as given to the concerned Assessing Officer being the Joint Commissioner and Assistant Commissioner (TDS) are concurrent in nature. The impugned notice is only to verify the subject-matter of deduction in respect of the contractors. Therefore, there is no question of exceeding jurisdiction by respondent No. 1 by issuing such notice.

23. It appears from the relevant documents as produced before the respondent that a notification is there being No. AC/HQ/Planning/10/ 1999-2000, dated September 15, 1999, which is issued by the Chief Commissioner of Income-tax whereunder Assistant Commissioner of Income-tax (TDS) and Income-tax Officer (TDS) as specified in column 2 of the schedule in the Joint Commissioner of Income-tax, Range-21, Calcutta, within the charge of the Commissioner of Income-tax, West Bengal-VII, Calcutta, hereunder shall exercise the powers and perform the functions of an Assessing Officer in so far as they relate to Chapter XVII-B, Chapter XV1I-D, Chapter XXI and Chapter XXII in respect of such person or a class of persons specified in column 3 of the Schedule attached. From the schedule as annexed to the notification, entrustment of power to respondent No. 1 is available.

24. Upon analysing the situation, I find that the matter is resting in a very short compass. It is definite that under Section 2(7A), the Legislature has given a very wide meaning of the words 'Assessing Officer'. Therefore, the Assessing Officer cannot be construed as the Joint or Deputy Commissioner alone but also the Assistant Commissioner meant for the purpose. Section 120 of the Income-tax Act, 1961, prescribes that the income-tax authority shall exercise all or any of the powers and perform all or any of the functions conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Boardmay issue for the exercise of the powers and perform the functions by all or any of those authorities.

25. From the conjoint reading of such Section 120 with Rule 36A, the Chief Commissioner or the Commissioner of Income-tax will designate an Assessing Officer within whose area of jurisdiction the office of the persons responsible for deducting tax under Chapter XVII-B is situated or in other cases, to the Assessing Officer within whose area of jurisdiction, the office of the person responsible for deducting tax under Chapter XVII-B is situated.

26. My interpretation in respect of Rule 36A is that one jurisdiction is meant for the jurisdiction wherein the assessee has its office whereas the other is the jurisdiction of the Assessing Officer that means where he sits or his area of jurisdiction which means herein a jurisdiction of tax deducted at source not the jurisdiction of the office of petitioner No. 1-company. Chapter XVII-B giving a heading of deduction at source and thereunder heading of the reference of Section 194C, i.e., payment to contractors and sub-contractors as well as other sections under such Chapter relevant for tax deduction or no deduction, issuance of certificate, etc. So far as the other power as available under Section 206 of the Income-tax Act is concerned, the same is meant for the persons deducting tax to furnish prescribed returns. No doubt, such power is meant for an officer who was empowered by the Chief Commissioner or Commissioner of Income-tax to make an assessment on the basis of the return, but I do not find from Rule 36A as to why it will not be applicable to call a person for making an enquiry or investigation in respect of the tax deduction at source under Section 206 of the Act when Rule 36A is made under heading in respect of the income-tax authority for the purpose of section by replacing the words 'Assessing Officer' which have been substituted by the Income-tax (Fifth Amendment) Rules, 1989, with effect from April 1, 1988, in the place and instead of the words 'Income-tax Officer'. The intention of the Legislature is very clear in this respect and Rule 3GA which is made for the purpose of Section 206 and it is very clear that the case is falling within the area of the jurisdiction of the Assessing Officer.

27. Section 124 has defined in respect of the jurisdiction of the Assessing Officers but even then Section 124(2) speaks that where a question arises under this Section as to whether any Assessing Officer has jurisdiction to assess any person, the question shall be determined by the Director-General or the Chief Commissioner or the Commissioner of Income-tax and where the question is one relating to areas within the jurisdiction of the different Directors-General or Chief Commissioners or the Commissioners, etc., the Board or the Commissioner by notification in the Official Gazette specify the matter.

28. Furthermore, Sub-section (3) of Section 124 speaks that no person shall be entitled to call in question the jurisdiction of the Assessing Officer, where he has made a return under Sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under Sub-section (1) of section 142 or Sub-section (2) of section 143, etc. The Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter with determination under Sub-section (2) before the assessment is made. In this respect, there is a notwithstanding clause under Sub-section (5) which speaks that notwithstanding anything contained in section or in any direction or order issued under Section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing Officer in respect of income accruing or arising or received of the area, if any, over which he has been invested jurisdiction by virtue of the directions or orders issued under Sub-section (1) or Subsection (2) of Section 120.

29. It appears to me that the assessment of the financial year 1998-99, and the assessment year 1999-2000 is not yet complete. Admittedly, therefore, it is pending before the Assessing Officer as per the petitioner, i.e., Joint Commissioner of Income-tax, Special Range-4. Similarly, verification of the annual return being Form No. 26C for the financial year 1998-99 as submitted on June 29, 1999, is asked for in compliance with the relevant provisions presumably for the purpose of Section 206 read with Rule 36A. Therefore, it is apparent that in respect of one financial year good, bad indifferent parallel proceedings are pending before the two officers.

30. It appears from Section 116 of the Income-tax Act that the post of the Deputy Commissioner of Income-tax which is now replaced by the post of the Joint Commissioner of Income-tax is superior to the post of an Assistant Commissioner. It also appears from the notification dated September 15, 1999, that a post of the Assistant Commissioner, i.e., respondent No. 1 herein, was created in respect of the tax deducted at source under the Joint Commissioner of Income-tax, Range-21, Calcutta. It further appears from the notification that under Section 120(1) of the Income-tax Act, 1961, and all other powers enabling the Chief Commissioner of Income-tax and in partial modification of earlier notification or notifications, the Assistant Commissioner of Income-tax (TDS) shall exercise the powers and perform the function of the Assessing Officer in so far as it relates to Chapter XVIIB, i.e., deduction at source, Chapter XVII-BB, i.e., collection at source, Chapter XVII-D, i.e., collection and recovery, Chapter XXI, i.e., penalty imposable, and Chapter XXII, offences and prosecutions.

31. Therefore, as per the notification, such Assistant Commissioner is vested with the full power of the Assessing Officer in respect of the tax deducted at source even up to the extent of taking steps about penalties, offences and prosecutions. Therefore, as it is contended by the respondents the notice under challenge is only made by such Assistant Commissioner (TDS) for the purpose of enquiry alone cannot be sustained. Hence,an inference can be drawn that when the Joint Commissioner of Income-tax, Special Branch-IV, is dealing with the matter of the company as an Assessing Officer then even this Assistant Commissioner is also dealing with the matter as an Assessing Officer in respect of the tax deducted at source part of the company up to the similar extent. It is also significant that both are arising out of the same assessment year and in respect of the same assessee. If it is so, in that case, the principle of concurrent jurisdiction cannot be applicable herein. Concurrent jurisdiction means a subordinate authority can deal with the matter equally with any superior authority in its entirety so that either one of such jurisdictions can be invoked. It cannot be construed as concurrent jurisdiction when one part of the assessment will be dealt with by one superior officer and the other part will be dealt with by one subordinate officer. Had it been the position that such subordinate officer is only vested with the power to deal with the matter only up to the stage of enquiry as to the tax deducted at source and forward his report to the actual Assessing Officer for the purpose of coming to conclusion in taking into totality of the matter, there would not have been any difficulty. But the power, as per the notification vested to such an extent that the question of excessive delegation of power cannot be ruled out.

32. Apart therefrom, it is a question of hierarchy. As and when under Section 116 of the Income-tax Act Deputy Commissioner of Income-tax which has now been replaced by Joint Commissioner holding superior post than the Assistant Commissioner of Income-tax who is working under different Joint Commissioner can he be directed to encroach in the field of another Joint Commissioner

33. This court is not on the point that the subject-matter of the tax deducted at source in respect of one assessee can or cannot be taken into account by different Assessing Officers but at the same time power should not be vested without considering the hierarchy. For an example, when the Joint Commissioner is Assessing Officer of the petitioner-company, if the tax deducted at source part is separated then, of course, the officer/s of such rank should only be deputed as the Assessing Officer but not below the rank otherwise it will definitely be construed as encroachment in the field of work of a superior officer. Moreover the notification does not at all restrict the power of the Assistant Commissioner up to the level of enquiry alone but amplifies vast power of assessment. Therefore, neither the notification is to be construed as appropriate nor the action taken by the Assistant Commissioner can be construed as restricted up to the extent of enquiry alone. Hence, it can only be construed as a case of excessive delegation of power and application of such power.

34. Therefore, this court declares that power under Section 120 of the Income-tax Act can be imposed by the authority giving separate jurisdiction in respect of the tax deducted at source but subject to hierarchy under Section 116 of the Income-tax Act. As a result whereof by virtue of Section 124(2) of the Income-tax Act, the Chief Commissioner of Income-tax, Calcutta, is directed to modify the Notification No. AC/HQ/Planning/10 of 1999-2000, dated September 15, 1999, and issue further notification in the light of the judgment and order passed by this court so that there cannot be any confusion in the mind of any assessee or Assessing' Officers. Such modified notification will be issued within a period of one month from the date of communication of this order without fail. Till one week after issuance of modified notification no effect or further effect of this notification dated September 15, 1999, will be given by respondent No. 1. Therefore, the impugned notice under challenge being annexure C to the petition stands quashed. Thus, the writ petition stands disposed of. No order is passed as to costs.

35. Xerox certified copies of this judgment and order will be supplied to the parties within 15 days from the date of putting in the requisition for drawing up and completion of the order as well as the certified copies thereof.

36. All parties concerned are to act on a signed copy minute of the operative part of the judgment on the usual undertaking and as per satisfaction of the above by the officer of this court.


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