2019 (1) TMI 1269 - AT - Income Tax

Order passed beyond the time limit prescribed u/s 201 (3)- assessee in default for failure to deduct the tax at any time after the expiry of two years from the end of the financial year in which statement as prescribed u/s 200 - Held that - In the present case, it could be 31 March 2009 for first three quarters and 31 March 2010 for quarter no four of F Y 2006 07. Apparently, the order is made by the AO on 28.03.2011. Section 201(3) also has proviso where the time limit for the financial year commencing of year before first day April 2007 is up to 31 March 2011. Apparently, the order of the AO is made on 28.03.2011. The assessee has also submitted Circular No. 5/2010, which provides that such proviso; apply only in those cases where TDS proceedings are pending before the tax authorities. It is also a fact that this argument raised before the ld CIT(A) have not been adjudicated and it is also not known whether any proceeding are pending before the tax authorities for applicability of proviso to section 201(3) of the Act. In view of this we set aside the ground number 2 of the appeal to the file of the CIT(A) to decide the above argument of the assessee whether the order passed by the ld AO is barred by limitation or not.

Issues Involved:

1. Validity of the TDS officer's order.
2. Legality of proceedings under section 201(1)/(1A) of the Act.
3. TDS on discount to prepaid distributors.
4. TDS on roaming charges.
5. Onus of the appellant to provide sufficient information for tax verification.
6. Charging of interest under section 201(1A) of the Act.

Issue-wise Detailed Analysis:

1. Validity of the TDS officer's order:

The appellant contended that the TDS officer's order was "bad in law." They argued that the CIT(A) erred in upholding the appellant as an "assessee in default" under sections 201(1) and 191 of the Act, referencing the judgment in Jagran Prakashan Limited Vs DCIT(TDS) (345 ITR 288) (All HC). The appellant asserted that there was no finding by the TDS officer regarding the failure of pre-paid distributors and roaming partners to pay tax directly, which is a jurisdictional prerequisite. Additionally, they argued that the order contradicted the principle that the payer cannot be held liable for the tax demand in cases of non-deduction of tax at source, and only interest liability under section 201(1A) can be levied.

2. Legality of proceedings under section 201(1)/(1A) of the Act:

The appellant argued that the proceedings initiated by the TDS officer under section 201(1)/201(1A) were "bad in law and void-ab-initio." They contended that section 201(3) was inserted by the Finance (No. 2) Act, 2009, effective from April 1, 2010, and could not be given retrospective operation to confer jurisdiction for the subject year. They also cited CBDT Circular No. 5 of 2010, which clarified that TDS proceedings for financial years starting from April 1, 2007, and earlier could be completed by March 31, 2011, only if TDS proceedings were pending before tax authorities. The appellant argued that no proceedings were pending as of the notice date, and the limitation had expired, making the assumption of jurisdiction invalid.

3. TDS on discount to prepaid distributors:

The appellant contended that the CIT(A) erred in upholding the TDS officer's decision to treat the appellant as an "assessee in default" for non-deduction of tax under section 194H on discounts extended to prepaid SIM card/talk time distributors. They argued that the relationship between the appellant and the distributors was "Principal to Principal," and the discount allowed was not commission liable for TDS under section 194H. The appellant also asserted that the discount was not income in the hands of the distributors and that there was no flow of money from the appellant to the distributor.

4. TDS on roaming charges:

The appellant argued that the CIT(A) erred in upholding the TDS officer's decision that the appellant was required to deduct tax under section 194J on roaming charges paid to other telecom operators. They contended that no human intervention, which is essential for a service to qualify as technical service, was involved in providing roaming services. They referred to technical expert statements indicating that roaming facility is an automatic activity without human intervention.

5. Onus of the appellant to provide sufficient information for tax verification:

The appellant argued that they had discharged their onus by submitting PANs and addresses of the payees, enabling the TDS officer to verify whether taxes had been paid by the payees. They cited the ITAT ruling in Vodafone Essar Limited, where the AO was directed to verify tax payments by the payees using the provided PANs.

6. Charging of interest under section 201(1A) of the Act:

The appellant contended that no interest under section 201(1A) could be charged when the tax due had already been paid by the payee.

Judgment:

The tribunal noted that the primary issue to be decided was whether the order passed by the AO was time-barred under section 201(3). The tribunal observed that the CIT(A) had not adjudicated this issue, despite it being raised by the appellant. The tribunal set aside the ground to the CIT(A) to decide whether the order was barred by limitation. Consequently, all other grounds were deemed infructuous and not adjudicated. The appeal was allowed for statistical purposes, with the direction to the CIT(A) to address the limitation issue.

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