2018 (6) TMI 1602 - AT - Income Tax

Demand u/s 201(1) - Time limit as prescribed for initiation and completion of proceedings - order barred by limitation - scope of provisions of section 201 as amended by Finance Act, 2009 by insertion of sub section (3) w.e.f. 1st April 2010 - HELD THAT - As in NHK JAPAN BROADCASTING CORPORATION 2008 (4) TMI 182 - DELHI HIGH COURT held that initiation of proceeding under section 201(1) after expiry of four years from the end of relevant financial year is barred by limitation. Thus, in view of the legal principal laid down in the decisions referred to above, the impugned order passed u/s 201(1) / 201(1A) is clearly barred by limitation as the initiation of proceedings under the said provision was after expiry of four years from the end of the relevant financial year i.e., financial year 2007 08. That being the case, the order passed under section 201(1) and 201(1A) of the Act deserves to be quashed. Hon'ble Gujarat High Court in Tata Teleservices Ltd. v/s Union of India 2016 (2) TMI 414 - GUJARAT HIGH COURT have held that in respect of financial year 2007 08 and earlier years, only proceedings that were pending could be completed by 31st March 2011 and as such no fresh proceedings to be commenced for the said period. Undisputedly no proceedings under section 201 were pending before the AO. By the time the proceedings under section 201 of the Act were initiated by issuing notice under section 201 on 27th January 2014, it has already become barred by limitation. That being the case, looked at from any angle, the impugned order passed under section 201(1) and 201(1A) of the Act being barred by limitation has to be quashed. Accordingly, we do so. Consequently, the impugned order of the learned Commissioner (Appeals) is reversed and set aside.

Summary

Issues:
- Challenge to order under section 201(1) and 201(1A) of the Income Tax Act, 1961 as barred by limitation.

Detailed Analysis:
1. The appeal was against an order related to alleged failure to withhold tax under section 195 of the Act for payments to overseas companies. The main issue was the challenge to the order under section 201(1) and 201(1A) as time-barred. The Assessing Officer found the payments to be royalty and issued a notice in 2014. The assessee contended the order was beyond the limitation period.

2. The assessee argued before the Commissioner (Appeals) that the order was barred by limitation as there was no prescribed period in the Act for such proceedings. The Commissioner disagreed, citing a Special Bench decision and stating the order was within six years from the relevant assessment year. The Commissioner held the limitation provision did not apply to non-residents.

3. The authorized representative argued that without a time limit in the Act, the Assessing Officer should initiate proceedings within a reasonable period. Referring to a High Court decision, it was contended that a four-year period from the end of the relevant assessment year was reasonable. The representative also mentioned a judgment stating that even non-residents should have a reasonable limitation period.

4. The Tribunal considered the submissions and legal precedents. It noted the absence of a limitation period in the Act for the relevant assessment year. Citing various court decisions, including those from the Delhi High Court and the Tribunal, it held that a four-year period was reasonable for initiating proceedings under section 201 of the Act. The Tribunal found the order was beyond the limitation period and therefore quashed it.

5. Another aspect was the amendment to section 201 of the Act in 2009, introducing a limitation period. The Tribunal discussed the proviso to sub-section (3) and how it applied even to non-residents based on a High Court decision. It concluded that in this case, the proceedings were time-barred under the amended provision as well.

6. The Tribunal allowed the appeal solely on the ground of limitation, reversing the Commissioner's decision. As a result, the other grounds raised became irrelevant and were not adjudicated upon.

This comprehensive analysis highlights the legal intricacies and interpretations leading to the decision in favor of the appellant based on the limitation issue.