2021 (9) TMI 96 - AT - Income Tax

Rectification of mistake u/s 254 - Validity of order u/s. 201(1) and 201(1A) as barred by limitation - Revenue pointed out that the Income Tax Act does not provide time limit for passing of order u/s.201, 201(1) 201(1A) of the Act, on payments made to non-resident u/s.195 - HELD THAT - We noted that the AO has passed order u/s.201(1) 201(1A) of the Act, almost after six years. Considering judgments relied upon by the assessee in the case of CIT vs. Satluj Jal Vidyut Nigam Ltd. 2009 (12) TMI 679 - HIMACHAL PRADESH HIGH COURT , case of State of Punjab Ors. Vs. Bhatinda District Coop Milk P. Union Ltd 2007 (10) TMI 300 - SUPREME COURT and DIT (International Taxation) vs. Mahindra Mahindra Ltd. 2014 (7) TMI 265 - BOMBAY HIGH COURT we feel that order was not passed within a reasonable time by the AO and hence, the Tribunal has taken a view which does not fall under the rectification proceedings u/s.254(2) of the Act. Miscellaneous application of the Revenue is dismissed.

Summary

Issues:
Time limit for passing order u/s.201, 201(1) & 201(1A) of the Income Tax Act, 1961.

Analysis:
The Appellate Tribunal ITAT Chennai addressed a Miscellaneous Application filed by the Revenue under section 254(2) of the Income Tax Act against an order in ITA No.2947/Chny/2018 for the assessment year 2010-11. The Revenue contended that there is no time limit prescribed under the Act for passing orders u/s.201, 201(1) & 201(1A) regarding payments made to non-residents u/s.195. The Tribunal was informed that the order was passed almost six years after the relevant assessment year. The Revenue argued that the Tribunal erred in not considering the lack of a prescribed time limit and requested a recall of the order for a decision on merits.

On the other hand, the assessee's counsel acknowledged the absence of a specific time limit under the Act but referred to various judgments from High Courts and the Supreme Court. Notably, the counsel cited the Hon'ble Bombay High Court's decision in a similar case involving the reasonableness of time limits for passing such orders. Additionally, the counsel relied on the judgment of the Hon'ble Himachal Pradesh High Court, emphasizing the need for exercising statutory powers within a reasonable period, typically considered to be four years. The counsel argued that the Tribunal's decision was in line with established legal principles.

After considering the arguments and case laws presented, the Tribunal observed that the order u/s.201(1) & 201(1A) was passed almost six years after the assessment year in question. The Tribunal referenced the decisions of various High Courts and the Supreme Court, agreeing with the view that statutory powers must be exercised within a reasonable time frame. Consequently, the Tribunal concluded that the order was not passed within a reasonable time by the Assessing Officer, thereby dismissing the Revenue's miscellaneous application.

In conclusion, the Tribunal's decision highlighted the importance of exercising statutory powers within a reasonable time frame, as established by legal precedents. The judgment emphasized the need for timely actions by the authorities, even in the absence of specific time limits prescribed under the Income Tax Act.