2017 (8) TMI 1684 - HC - Income Tax

Charging of interest u/s 201(1A) - Period of limitation - Whether there is any period of limitation which can be applied in respect of proceedings under Section 201(1)/201(1A)? - HELD THAT - As decided in Mass Awash Private Limited 2017 (7) TMI 664 - ALLAHABAD HIGH COURT In State of Orissa Versus Debaki Debi 1963 (10) TMI 17 - SUPREME COURT S. B. Gurbaksh Singh Versus Union of India 1976 (1) TMI 153 - SUPREME COURT and CST Versus Halari Store 1997 (9) TMI 516 - SUPREME COURT Court said that a power conferred without any time limit if not exercised within reasonable time unreasonable delay in exercise may effect its validity. However it also held that what would be reasonable time is not to be fixed by Court since delay depends upon facts of each case. Though there are otherwise judgments in Uttam Namdeo Mahale Versus Vithal Deo and others 1997 (5) TMI 427 - SUPREME COURT and Ishar Singh Vs. Financial Commissioner and others 1984 (7) TMI 396 - SUPREME COURT but for the purpose of the present case we proceed to hold that if a power is not exercised within a reasonable time unreasonable delay which is not capable of explanation may affect validity of such power. Then next question would be whether in exercise of power under Section 201 and 201(1A) of Act 1961 in the case in hand can it be said to be an exercise of power with unreasonable delay so as to invalidate such exercise of power. In the light of aforesaid we answer the question in favour of Revenue and against Assessee.

Summary

Issues:
1. Interpretation of the time limitation for charging interest under section 201(1A) of the Income Tax Act, 1961.

Analysis:
The judgment in question pertains to multiple appeals arising from a common judgment of the Income Tax Appellate Tribunal, Lucknow Bench. The central issue revolved around the interpretation of the time limitation for charging interest under section 201(1A) of the Income Tax Act, 1961. The primary question raised was whether the charging of interest under this section becomes time-barred when action under section 201(1) of the Act is time-barred, despite the absence of a specific time limitation provision in section 201(1A).

The High Court referred to a previous judgment where a similar issue was considered and formulated a question regarding the existence of any period of limitation applicable to proceedings under sections 201(1) and 201(1A) of the Act. After a detailed analysis of various authorities and legal precedents, the Court concluded that when the passage of time results in the accrual of certain rights to a person, those rights cannot be divested by exercising power at any indefinite period. The Court emphasized that if a power is not exercised within a reasonable period, it may be held as barred and not exercisable.

Furthermore, the Court highlighted that the determination of what constitutes a reasonable time for exercising such power is contingent upon the specific facts and circumstances of each case. The judgment cited several cases to support the principle that a power conferred without a time limit, if not exercised within a reasonable time, may be deemed invalid due to unreasonable delay. The Court underscored that the validity of the exercise of power under sections 201 and 201(1A) of the Act hinges on whether such exercise was subject to unreasonable delay.

In light of the above analysis, the Court ruled in favor of the Revenue and against the Assessee, setting aside the Tribunal's judgment on this specific aspect. The matter was remanded to the Tribunal for reconsideration in alignment with the Court's judgment and to pass a fresh order in accordance with the law. The appeals were partly allowed, and no costs were awarded in this regard.