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2016 (8) TMI 964 - HC - Income TaxTDS liability - limitation as prescribed as in Section 201 - Held that - It is true that it is the duty of the assessee to deduct TDS and the question is whether it is likely to cause any loss to the revenue if it is not deducted in time. If TDS is not deducted, it is required to be paid in the first installment of advance tax, which is required to be paid within four months from the date of filing of return. Therefore, even if the contention of Mr.Bhatt is accepted, loss that may be caused to the revenue is only to the tune of interest of four months on delayed payment of tax. Not only that when the declaration about this is made in the return, it comes within the knowledge of the Assessing Officer even if the TDS is not deducted. Therefore, we are of the view that the period of four years is reasonable period and we concur with the view taken by the Delhi High Court in the case of M/s. NHK Japan Broadcasting Corpn. (2008 (4) TMI 182 - DELHI HIGH COURT ) It is true that the Court cannot legislate the Act, however, the Assessing Officer also cannot be given unfettered powers, which he can exercise even beyond the reasonable period of four years. Therefore, in our view, period of four years is just and proper and the Tribunal has not committed any error while passing the impugned order. Therefore, all these appeals are dismissed. The questions posed for our consideration are answered in favour of the assessee and against the revenue.
Issues Involved:
1. Whether the Appellate Tribunal was correct in deleting the penalty levied under Section 201(1) and interest charged under Section 201(1A) of the Income Tax Act. 2. Whether the Tribunal committed a substantial error of law in directing the Assessing Officer to delete sums levied under Section 201 and interest charged under Section 201(1A) without appreciating the absence of a prescribed limitation period for passing orders under these sections. Issue-wise Detailed Analysis: 1. Deletion of Penalty and Interest: The revenue challenged the Tribunal's decision which confirmed the CIT(A)'s order deleting the penalty and interest levied under Sections 201(1) and 201(1A) of the Income Tax Act. The Tribunal relied on the Delhi High Court's decision in NHK Japan Broadcasting Corpn., which held that actions under Section 201 must be initiated within four years, despite no explicit limitation period in the Act. The CIT(A) had observed that the Assessing Officer's order was beyond the four-year limitation period and thus invalid. The Tribunal upheld this view, leading to the dismissal of the department's appeals for the relevant assessment years. 2. Substantial Error of Law: The revenue argued that the Tribunal erred by relying on the Delhi High Court's decision and ignoring the Punjab and Haryana High Court's ruling in H.M.T. Ltd., which stated that proceedings under Sections 201(1) and 201(1A) can be initiated at any time. The revenue's counsel cited various judgments, including Hindustan Times Ltd. v. Union of India and Bhura Exports Ltd. v. Income-Tax Officer, to support the argument that no limitation should apply where the statute does not prescribe one. The revenue contended that the Tribunal's decision could cause significant revenue loss due to non-deduction of TDS. Court's Analysis and Conclusion: The court acknowledged the conflicting views among different High Courts regarding the limitation period for initiating proceedings under Sections 201(1) and 201(1A). However, it favored the Delhi High Court's reasoning in NHK Japan Broadcasting Corpn., which considered a four-year period reasonable based on the scheme of the Income Tax Act. The court noted that the primary liability to pay tax remains with the deductee, and the deductor's liability is vicarious. The court also considered that a reasonable limitation period prevents the Assessing Officer from exercising unfettered powers indefinitely. The court concluded that a four-year period is reasonable and just, aligning with the Tribunal's decision. It emphasized that the Assessing Officer's powers should not extend beyond this period, ensuring fairness and preventing undue hardship to the assessee. The appeals were dismissed, and the questions of law were answered in favor of the assessee and against the revenue.
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