2016 (2) TMI 405 - AT - Income Tax

Validity of order u/s 201 - Failure to deduct tax at source - barred by limitation - Held that - Impugned order of the AO passed on 31.3.2011 in pursuance to the notice dated 15.11.2010 after considering the reply of the assessee dated 23.11.2010 is clearly barred by limitation. It is pertaining to mention that since proceedings for AY 2002-03 has been also initiated after search on 16.11.2009 when the amended provision did not come into existence on the said date, and the law applicable on the said date was pronounced in the case of Hatchison Essan Telecom Ltd. (2010 (4) TMI 45 - DELHI HIGH COURT) and CIT vs. NHK Japan (2008 (4) TMI 182 - DELHI HIGH COURT). As per dicta laid down by Hon ble Jurisdictional High Court of Delhi and in the light of the same we are inclined to uphold the conclusion of the Ld. CIT(A) as in these judgments the Hon ble High Court explicitly held that in absence of any time frame in the statue a reasonable time limit was to be read into, which was four year for the end of relevant financial year. In the present case, the relevant financial year 2001-02 was ended on 31.03.2002 and when the proceeding initiated on 15.11.2010 and order passed on 30.03.2011 u/s 201(1)/201(1A) for AY 2002-03 i.e. after approximately 9 years has to be held as time barred and thus we are of the opinion that the conclusion of the CIT(A) deserves to be confirmed and hence we uphold the same - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the order passed by the Assessing Officer (AO) for AY 2002-03 is barred by limitation.
2. Interpretation and applicability of the 'Proviso' to section 201(3) of the Income Tax Act, 1961.
3. Validity of the cancellation of the order by the CIT(A) under sections 201(1) and 201(1A).

Detailed Analysis:

1. Limitation on the Order Passed by AO:
The primary issue was whether the order passed by the AO for AY 2002-03 was barred by limitation. The CIT(A) concluded that the order dated 27th April 2010 under sections 201(1) and 201(1A) for FYs 2002-03 to 2004-05 was barred by limitation. The Tribunal upheld this finding, referencing the Hon'ble Delhi High Court's decision in CIT vs. NHK Japan Broadcasting Corporation, which established a four-year limitation period where no specific limitation is provided. The AO's order was issued on 30th March 2011, long after the four-year period from the end of FY 2001-02, which ended on 31st March 2002.

2. Interpretation and Applicability of 'Proviso' to Section 201(3):
The Revenue argued that the 'Proviso' to section 201(3) of the Income Tax Act, introduced by the Finance Act, 2009 with effect from 1.4.2010, allowed for orders for financial years commencing on or before 1st April 2007 to be passed at any time on or before 31st March 2011. The Tribunal noted that the proceedings in this case were initiated on 16.11.2009, which was after the period specified in the 'Proviso'. The Tribunal also referred to the explanatory notes to the Finance Act, 2009, which clarified that the extended period until 31st March 2011 applied only to cases where proceedings were pending on or before 1st April 2007. Since the proceedings in this case were initiated later, the 'Proviso' was deemed inapplicable.

3. Validity of Cancellation of Order by CIT(A):
The CIT(A) had canceled the AO's order on the grounds of it being barred by limitation. The Tribunal supported this cancellation, emphasizing that the AO's reliance on the newly inserted 'Proviso' to section 201(3) was misplaced. The Tribunal reiterated that the Hon'ble Delhi High Court's decisions in CIT vs. NHK Japan Broadcasting Corporation and CIT Vs. Hutchison Essar Telecom Ltd. were binding and established that in the absence of a specific time frame in the statute, a reasonable time limit of four years from the end of the relevant financial year should be read into it. Consequently, the AO's order, passed nearly nine years after the end of FY 2001-02, was invalid.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming that the order passed by the AO for AY 2002-03 was indeed barred by limitation. The detailed analysis of the 'Proviso' to section 201(3) and the binding precedents from the Hon'ble Delhi High Court led to the conclusion that the CIT(A)'s cancellation of the AO's order was justified. The Tribunal's decision reinforced the importance of adhering to reasonable time limits in the absence of explicit statutory provisions.