2018 (3) TMI 1981 - AT - Income Tax

Addition u/s.201(1) r.w.s. 201(1A) - period of limitation - HELD THAT - Limitation in initiating proceedings u/s.201(1) of the Act would therefore, be governed by section 201(3)(i) of the Act as it stood at the relevant time wherein it provided for a period of limitation of two years from the end of the Financial Year in which the statement was filed as referred under section 200. Their limitation for initiating action u/s.201(1) for the statement filed on 04.09.2010 has elapsed on 31.03.2013 whereas the time limitation for initiating action u/s.201(1) for the statement filed during period from 23.10.2010 to 15.05.2012 was elapsed on 31.03.2014. We may also observe that the amendment in section 201 of the Act as amended by Finance Act No.2 (2014) came into force w.e.f. 20.05.2012. Therefore, the impugned notice and order u/s.201(1) in respect of the appeals under consideration have been clearly barred by limitation, therefore, same cannot be sustained in the light of the decision in case of M/s. Tata Tele Services vs. Union of India 2016 (2) TMI 414 - GUJARAT HIGH COURT and M/s. Troikaa Pharmaceuticals Ltd. Vs. Union of India 2016 (3) TMI 285 - GUJARAT HIGH COURT . It may also be noted that amendment made to section 201(3) by Finance Act 2014 is prospective in nature and is applicable from 01.10.2014 wherein, the time to pass order u/s 201(1) was increased to seven years from the end of the financial year in which the payment is made or credit is given. Therefore, the said amendment is not applicable for those assessment years for which time limit to pass the order u/s.201(1) is expired 01.10.2014. Since in the case of assessee, the time limit for passing the order u/s.201(1) of the Act has expired on 31.03.2013 and 31.02.2014 respectively i.e. 01.10.2014. Therefore, the impugned order under appeal is clearly barred by limitation. Accordingly, the order passed u/s.201(1A) of the Act for the impugned assessment years under consideration are therefore quashed on this legal ground.

Summary

Issues:
1. Time limitation for passing order u/s.201(1) of the Act.
2. Exemption u/s.10(5) of the Act and TDS deduction on LTC payment.
3. Interpretation of section 201(3) of the Act regarding time limits.

Analysis:
1. The primary issue in this case revolves around the time limitation for passing orders under section 201(1) of the Act. The appellant argued that the orders passed by the Assessing Officer were time-barred as per the provisions of section 201(3) of the Act. The appellant contended that the time for passing the order had expired in the mentioned cases, rendering the orders invalid. The appellant supported this argument by citing relevant case law and previous judgments in similar cases.

2. Another crucial aspect of the case involved the incorrect allowance of exemption u/s.10(5) of the Act on LTC payments to employees who traveled outside India. The Assessing Officer observed this discrepancy and issued orders under section 201(1) r.w.s. 201(1A) of the Act for the relevant assessment years. The appellant challenged this action, leading to an appeal before the CIT(A) and subsequently before the ITAT. While the CIT(A) upheld the action of the Assessing Officer, partial relief was granted concerning the rate of TDS deduction and interest charging.

3. The interpretation of section 201(3) of the Act played a significant role in determining the outcome of the case. The ITAT analyzed the provisions of section 201(3) as inserted by the Finance Act 2009, which specified time limits for passing orders under section 201(1) of the Act. The ITAT observed that the orders in question were clearly barred by limitation as per the provisions of section 201(3)(i) of the Act. The ITAT further noted that the subsequent amendment to section 201(3) by the Finance Act 2014 was not applicable to the assessment years in question, as the time limit for passing orders had already expired before the amendment came into force.

In conclusion, the ITAT ruled in favor of the appellant, quashing the orders passed under section 201(1A) of the Act for the relevant assessment years on the grounds of being time-barred. The ITAT's decision was based on a thorough analysis of the provisions of the Act, relevant case law, and the specific timeline for initiating actions under section 201(1).