2018 (9) TMI 1234 - AT - Income Tax

Validity of order U/s 206C(6)/206C(7) - period of limitation - Held that - When no limitation is provided in the statute then a period of four years is considered as reasonable for passing the order U/s 201(1)/201(1A) of the Act. The provisions of Section 206C of the Act are analogous and a measure for compliance of collection of tax at source as a similar measure for compliance of deduction of tax at source is provided U/s 201 of the Act. The department has accepted those decisions and consequently brought amendment to the provisions of Section 201 and thereby provided the limitation for passing the orders U/s 201(1)/201(1A) of the Act which was inline with the view taken by the Hon ble High Courts on this issue. Though, subsequently an amendment vide Finance Act, 2014 was again brought in the said provisions of Section 201 enlarging the period of limitation, however, the said amendment is not retrospective. The liability of tax collected at source is also a vicarious liability of the assessee to assist the department in the measure to avoid any possibility of tax avoidance by the persons with whom the specific transactions have been entered into by the assessee. The provisions of Section 201 and 206C of the Act are having same scheme and object being the measures against the avoidance of tax by the opposite parties with whom the assessee had the transactions. Hence, applying the reasonable period of limitation as four years within which the Assessing Officer could pass the order U/s 206C(6)/206C(7) of the Act, we hold that the impugned order passed by the Assessing Officer on 30/3/2016 is beyond the said reasonable period of limitation and consequently is invalid being barred by limitation. Accordingly, we quash the impugned order passed U/s 206C(6)/206C(7) of the Act.- decided in favour of assessee

Issues Involved:
1. Validity of the order passed by the Assessing Officer under Sections 206C(6) and 206C(7) of the Income Tax Act, 1961.
2. Limitation period for passing the order under Sections 206C(6) and 206C(7).
3. Justification of the relief granted by CIT(A) based on additional evidence without calling for a remand report.
4. Non-collection of Tax at Source (TCS) and the demand raised.
5. Applicability of Section 206C(1A) read with Rule 37C.

Detailed Analysis:

1. Validity of the Order Passed by the Assessing Officer:
The assessee challenged the validity of the order passed by the Assessing Officer under Sections 206C(6) and 206C(7) on the ground of limitation. The Tribunal first addressed this issue as it is a legal issue that goes to the root of the matter. The assessee argued that even though Section 206C does not prescribe any time limit for initiating proceedings or passing an order, the Assessing Officer cannot take action after an indefinite period, and a reasonable time limit should be considered.

2. Limitation Period for Passing the Order:
The Tribunal noted that Section 206C or any other provisions of the Income Tax Act do not provide a limitation period for passing the order under Sections 206C(6) and 206C(7). However, the Tribunal emphasized that the absence of a statutory limitation does not mean the Assessing Officer has unlimited time to pass an order. The Tribunal referred to various High Court decisions, which held that a reasonable time period for passing orders under similar provisions (like Section 201(1) and 201(1A)) is four years. The Tribunal concluded that the same reasoning applies to orders under Section 206C, and thus, the order passed by the Assessing Officer on 30/03/2016 was beyond the reasonable period of four years and was therefore invalid and barred by limitation.

3. Justification of Relief Granted by CIT(A) Based on Additional Evidence:
The Revenue's appeal questioned whether the CIT(A) was justified in granting relief based on additional evidence without calling for a remand report under Rule 46A and without conducting an inquiry under Section 250(4). The Tribunal did not address this issue in detail, as it quashed the order of the Assessing Officer on the ground of limitation, making other issues raised on merits infructuous.

4. Non-Collection of TCS and the Demand Raised:
The assessee was engaged in the trading of Tendu leaves and was found liable for non-collection of TCS as per Section 206C(1). The Assessing Officer had passed an order holding the assessee in default for non-collection of TCS amounting to ?98,84,195, including interest. The Tribunal, having quashed the order on the ground of limitation, did not delve into the merits of the demand raised.

5. Applicability of Section 206C(1A) Read with Rule 37C:
The assessee argued that the sales were made to ultimate consumers for use in manufacturing, processing, or producing, and hence, the provisions of Section 206C were not applicable. This issue was also rendered infructuous as the Tribunal quashed the Assessing Officer's order on the ground of limitation.

Conclusion:
The Tribunal quashed the order passed by the Assessing Officer under Sections 206C(6) and 206C(7) as it was barred by limitation, holding that a reasonable period for passing such an order is four years. Consequently, the appeal of the assessee was allowed, and the appeal of the Revenue was dismissed.

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