2023 (9) TMI 111 - HC - Income Tax

Initiation of proceedings u/s 201(1) - period of limitation - Matter was kept in abeyance on the request of assessee himself - what is a reasonable period in the absence of any statutory limitation ? - HELD THAT - In the instant case, it is seen that following a survey operation under Section 133A of the Act on 30.12.2015, it was detected that petitioner had made two payments to two foreign companies but did not deduct TDS under Section 195 of the Act. It was thereafter that the show cause notice was issued on 20.01.2016. It would be interesting to note that on the ground that the two foreign companies had filed applications before the AAR as to taxability of such transactions, petitioner had filed an application before respondent No. 1 to keep the proceedings under Section 201 of the Act in abeyance. Such an action of the petitioner would run counter to its very contention that the proceedings concluded by respondent No. 1 was beyond limitation. The survey was conducted on 30.12.2015, show cause notice was issued on 20.01.2016 and the proceedings came to be concluded on 14.12.2018 which was within a reasonable time in view of DCIT. We see no infirmity in the view taken by DCIT. We are therefore not inclined to entertain the writ petition.

Summary

Issues Involved:
1. Period of Limitation under Section 201(3) of the Income Tax Act
2. Impact of Double Taxation Avoidance Agreement
3. Maintainability of the Writ Petition

Summary:

1. Period of Limitation under Section 201(3) of the Income Tax Act:
The petitioner, a pharmaceutical company, challenged the legality and validity of the order dated 14.12.2018 passed by the respondent under Sections 201(1) and 201(1A) read with Section 195 of the Income Tax Act, 1961, for failing to deduct TDS on payments made to two foreign companies during the financial year 2015-2016. The petitioner contended that the initiation of proceedings was barred by limitation and that the reasonable period for passing an order under Section 201 had lapsed. The Court noted that the legislature had not prescribed any time limit for passing an order under Section 201(1) in the case of non-residents, and thus, the order passed within three years was within a reasonable period. The Court did not find any infirmity in the view taken by respondent No. 1 regarding the reasonable time frame for concluding the proceedings.

2. Impact of Double Taxation Avoidance Agreement:
The petitioner argued that payments made to the two foreign companies were not taxable in India and thus, there was no obligation to deduct TDS under Section 195. The Court refrained from expressing any opinion on the merits of this issue, stating that it would be addressed by the appropriate forum in an appropriate proceeding.

3. Maintainability of the Writ Petition:
The respondent questioned the maintainability of the writ petition, arguing that the petitioner had an adequate and efficacious alternative remedy under the statute, which included appeals before the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal. The Court acknowledged this point but chose to address the fundamental question of whether the impugned order was barred by limitation. The Court ultimately dismissed the writ petition, allowing the petitioner to seek the remedy as provided under the Act.

Conclusion:
The writ petition was dismissed on the grounds that the order passed by respondent No. 1 was within a reasonable period, and the petitioner was directed to seek alternative remedies provided under the statute. The Court did not delve into the merits of the double taxation avoidance agreement issue, leaving it to be addressed by the appropriate forum.