2018 (3) TMI 1096 - AT - Income Tax

TDS u/s 194H - Validity of order passed u/s 201(1) and 201(1A) being passed beyond limitation period specified under section 201(3) - liability to deduct tax at source on discount extended to its distributors of pre-paid SIM cards and talktime (by way of recharge vouchers, e-top up, etc.) - Held that - The present section 201(3) of the Act provides the limit for passing the order to be within seven years from the end of financial year in which the payment was made or credit was given. Accordingly, we hold that order passed by the Assessing Officer raising the demand under section 201(1) of the Act is beyond the limit provided in sub-section (3) of the Act for quarter Nos.1 to 3. The return for quarter No.4 was filed on 15.06.2009 i.e. in financial year 2009-10 and the order raising the demand under section 201(1) of the Act is passed on 15.03.2012 i.e. before expiry of two years from the end of financial year in which TDS return was filed and hence, the same has been filed within time. Thus, we direct the Assessing Officer to delete the demand raised for quarter Nos.1 to 3 and sustain the demand for quarter No.4. However, under section 201(3) of the Act, no limit is provided for passing order charging interest under section 201(1A) of the Act, hence the assessee is liable to pay interest under section 201(1A) of the Act and the said order of Assessing Officer is upheld. - Decided partly in favour of assessee

Summary

Issues:
Jurisdictional issue regarding order passed under section 201(1) and 201(1A) of the Income Tax Act, 1961 beyond the limitation period specified under section 201(3) of the Act.

Analysis:
The appeal arose from the Tribunal's order in a Miscellaneous Application related to assessment year 2009-10. The Tribunal recalled a ground of appeal for adjudication, leading to the current hearing. The primary issue was the jurisdictional challenge raised by the assessee against the order passed under sections 201(1) and 201(1A) of the Income Tax Act, 1961, contending it was beyond the time limit specified in section 201(3) of the Act.

In the case, a survey was conducted under section 133A of the Act to verify TDS compliance for certain assessment years. The Assessing Officer held the assessee in default for not deducting tax at source from discounts given to distributors, leading to demands under section 201(1) and interest under section 201(1A) of the Act. The CIT(A) confirmed these orders, prompting the appeal by the assessee.

The assessee argued that the orders for the first three quarters of the relevant financial year were time-barred under section 201(3) of the Act, emphasizing the filing dates of TDS returns. The Revenue, however, relied on Tribunal and CIT(A) observations to support their position.

The Tribunal analyzed the provisions of section 201(1) and 201(3) of the Act to determine the time limit for passing orders deeming a person in default. It noted the amendment by the Finance Act, 2012, and subsequent changes by the Finance (No.2) Act, 2014, extending the time limit to seven years. The Tribunal found that the order for the first three quarters was indeed beyond the prescribed limit but upheld the demand for the fourth quarter. It directed the Assessing Officer to delete the demand for the first three quarters but upheld the interest charge under section 201(1A) for those quarters.

In conclusion, the Tribunal partly allowed the appeal, directing the deletion of demands for the first three quarters but upholding the demand for the fourth quarter, while also confirming the interest charge. The judgment was pronounced on March 12, 2018.