2018 (9) TMI 2011 - AT - Income Tax

Orders passed u/s.201(1) 201(1A) - period of limitation - assessee in default - Scope of amendment - whether returns of TDS filed by the Assessee in the present case for the three FYs were belated and therefore the provisions of Sec.201(3)(i) does not apply in the present case? - HELD THAT - Amending section 201 by Finance Act, 2014, it has been specifically mentioned that the same shall be applicable w.e.f. 1/10/2014 and even considering the fact that proceedings for F.Y. 2007-08 and 2008-09 had become time barred and/or for the aforesaid financial years, limitation under section 201(3)(i) of the Act had already expired on 31/3/2011 and 31/3/2012, respectively, much prior to the amendment in section 201 as amended by Finance Act, 2014 and therefore, as such a right has been accrued in favour of the assessee and considering the fact that wherever legislature wanted to give retrospective effect so specifically provided while amending section 201(3)(ii) of the Act as was amended by Finance Act, 2012 with retrospective effect from 1/4/2010, it is to be held that section 201(3), as amended by Finance Act No.2 of 2014 shall not be applicable retrospectively and therefore, no order under section 201(1) of the Act can be passed for which limitation had already expired prior to amendment to section 201(3) by Finance Act No.2 of 2014. It is not in dispute before us that the proceedings u/s.201(1) of the Act were barred by time if the law applicable for the relevant period is the law as it prevailed prior to amendment to Sec.201(3) by the finance Act No.2 of 2014. In these circumstances, we find no error in the order of the CIT(A) in holding that the orders passed for FY 2008-09 to 2010-11 were barred by limitation and consequently quashing them. We find no grounds to interfere with the order of the CIT(A) and therefore dismiss the appeals by the revenue.

Issues Involved:
1. Delay in tax deduction at source (TDS) on provision for expenses made at the end of the year.
2. Short deduction of TDS on payments made towards the supply of manpower.
3. Non-deduction of TDS on payments made to distributors towards price protection and special price clearance discounts.
4. Validity of the show cause notice issued under Sections 201(1) & 201(1A) of the Income Tax Act, 1961.
5. Applicability of the period of limitation for passing orders under Section 201(1) & 201(1A).

Issue-wise Detailed Analysis:

1. Delay in TDS on Provision for Expenses:
The Revenue conducted a survey on the Assessee's premises to verify TDS compliance and found delays in TDS deduction on year-end expense provisions. The Assessee argued that the returns were filed timely, and thus, the provisions of Section 201(3)(i) applied, making the show cause notice dated 8.2.2016 invalid due to the expiration of the time limit for passing orders.

2. Short Deduction of TDS on Manpower Payments:
The survey also revealed short deductions of TDS on payments for manpower supply. The Assessee's defense was that the returns for the relevant financial years were filed as required, and any action should have been taken within two years from the end of the financial year in which the TDS return was filed.

3. Non-deduction of TDS on Payments to Distributors:
The Assessee was also found to have not deducted TDS on payments to distributors for price protection and special price clearance discounts. The Assessee maintained that the orders for the financial years in question were time-barred under the provisions of Section 201(3)(i) as it existed before the amendment by the Finance (No. 2) Act, 2014.

4. Validity of the Show Cause Notice:
The respondent issued a show cause notice under Sections 201(1) & 201(1A) for treating the Assessee as a defaulter for not deducting TDS and for levying interest on the non-deposited tax. The Assessee contended that the notice was invalid as the time limit for passing such orders had expired.

5. Applicability of the Period of Limitation:
The CIT(A) agreed with the Assessee that the proceedings were barred by time and quashed the orders passed under Sections 201(1) & 201(1A) for the financial years 2008-09 to 2010-11. The Revenue appealed, arguing that the returns were filed belatedly and thus the provisions of Section 201(3)(i) did not apply. The Tribunal found no merit in the Revenue's argument, noting that the law did not distinguish between timely and belatedly filed statements under Section 200.

The Tribunal also referenced the Gujarat High Court's judgment in the case of TATA Teleservices, which held that the amendment to Section 201(3) by the Finance Act No. 2 of 2014 was not retrospective. Therefore, any order for which the limitation period had expired before the amendment could not be passed under the new law.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, confirming that the orders for the financial years 2008-09 to 2010-11 were barred by limitation. Consequently, the Revenue's appeals were dismissed, and the Assessee's cross-objections were rendered moot. The judgment emphasized that the amendments to Section 201(3) by the Finance Act No. 2 of 2014 were not applicable retrospectively, thus protecting the Assessee from actions initiated beyond the original limitation period.

Final Judgment:
The appeals by the Revenue and the cross-objections by the Assessee were dismissed. The judgment was pronounced on September 14, 2018.

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