2016 (6) TMI 1352 - HC - Income Tax

Demand u/s 201(1)/201(1A) - inquiry is time barred - period of limitation - HELD THAT - The admitted facts emerging from the record are that as per sub-section (3) of section 201 which stood prior to 1.10.2014, the initiation of action for failing to deduct tax at source is barred by limitation. The amended sub-section(3) of section 201 with effect from 1.10.2014 enlarges the period of limitation to seven years which, as held by this Court in the case of Tata Teleservices 2016 (2) TMI 414 - GUJARAT HIGH COURT cannot be applied retrospectively. For such reason, the petitions are allowed. The impugned notices dated 15.9.2015 are quashed. Petitions disposed of accordingly.

Summary

Issues:
Challenge to notices under section 201(1)/201(1A) of the Income Tax Act, 1961 for assessment year 2009-10 on the ground of being time-barred.

Analysis:

The petitioners contested notices dated 15.9.2015 seeking information, including the petitioner's account for the assessment year 2009-10, under section 201(1)/201(1A) of the Income Tax Act, 1961. The challenge was based on the argument that such inquiry was time-barred. The petitioners highlighted sub-section (3) of section 201 of the Act prior to the amendment by the Finance Act, 2014, which limited the time for deeming a person to be in default for failure to deduct tax from a resident in India. However, post-amendment, the time limit was extended to seven years from the financial year in which payment is made or credit is given. The Assessing Officer issued notices based on this amended provision, but the petitioners argued that it does not have retrospective applicability, citing the case of Tata Teleservices vs. Union of India.

The High Court examined the facts and noted that under the previous sub-section (3) of section 201, the initiation of action for failure to deduct tax at source was time-barred. The amended sub-section (3) of section 201, effective from 1.10.2014, extended the limitation period to seven years. Relying on the decision in Tata Teleservices case, the Court held that this extension cannot be applied retrospectively. Consequently, the petitions were allowed, and the impugned notices dated 15.9.2015 were quashed, disposing of the petitions accordingly.