2017 (8) TMI 476 - AT - Income Tax

TDS u/s 195A - assessee in default u/s 201(1)/201(1A) - non deduction of tds - period of limitation - Held that - In the instant case the property was registered on 18.7.2007 and the assessee is liable to deduct the TDS during the F.Y.2007-08 and the 4 years time limit for initiating action u/s 201/201A expires before March 2012. In the instant case, notice u/s 195 treating the assessee as assessee in default was issued on 11.08.2013 beyond the 4 years of the financial year in which the assessee required to deduct tax at source. As held by Hon ble Delhi High Court, the time limit for initiating the proceedings u/s 201 and 201(1A) is 4 years and it is barred by limitation. Therefore, following the decision of Hon ble Delhi High Court, we are unable to sustain the orders of the lower authorities. Accordingly, the order passed u/s 201 / 201(1A) is set aside and the appeal of the assessee is allowed.

Summary

Issues:
Treatment of assessee as assessee in default u/s 201(1)/201(1A) for non-deduction of TDS u/s 195A of the Income Tax Act, 1961 for A.Y. 2008-09.

Analysis:
1. The appeal challenged the order treating the appellant as "assessee in default" for non-deduction of TDS u/s 195A. The CIT(A) upheld the order of the Assessing Officer (A.O) based on the time limit for passing the order u/s 201(1)/201(1A) of the Act. The A.O invoked sections 201(1) & 201(1A) due to non-deduction of tax at source on payments made to a non-resident Indian for property purchase. The CIT(A) held that the order was passed within the limitation period of 6 years from the end of the financial year, dismissing the appeal.

2. The appellant argued that the order u/s 201/201(1A) should not exceed 4 years, citing a Delhi High Court judgment. The Department contended that there is no specific time limit for non-residents under the Income Tax Act, relying on a Bombay High Court decision. The Tribunal examined the provisions of section 201(1A) and considered relevant case laws.

3. The Tribunal referred to the Delhi High Court's decision in Bharti Airtel case, which established 4 years as a reasonable time limit for initiating proceedings u/s 201/201(1A). It emphasized that the Parliament did not amend time limits for non-residents, accepting judicial precedents. Following the Delhi High Court's ruling, the Tribunal held that the 4-year period had lapsed in this case, rendering the order u/s 201/201(1A) invalid.

4. Consequently, the Tribunal set aside the lower authorities' orders and allowed the appellant's appeal. The stay petition for demand was dismissed as the appeal was granted. The decision was pronounced in open court on 23rd June 2017.