2023 (12) TMI 91 - AT - Income Tax

TCS of u/s. 206C(1) and interest u/s. 206C(7) - period of limitation - notice issued after 4 years period - HELD THAT - Admittedly the assessment year involved in this cases A.Y. 2012- 13 and four years ends on 31-03-2016. However the show cause notice was issued by the A.O. on 27-06-2017 and order was passed on 26-07-2017 which is beyond 4 years. Therefore the order passed by the A.O. is construed to be an order passed after the period of limitation, the same is not maintainable in law and the same is liable to be quashed.

Summary

Issues Involved:
The judgment involves issues related to failure to collect Tax at Source (TCS) under section 206C of the Income Tax Act, 1961 for the Assessment Year 2012-13, and the imposition of interest under section 206C(7).

Issue 1: Failure to Collect Tax at Source (TCS)

The assessee, engaged in trading metal sheets, sold scrap to various parties without deducting TCS at 1% as per section 206C. The Assessing Officer demanded TCS and interest, which the assessee contested, arguing that the definition of scrap did not apply to the metal sheets being traded, and hence TCS was not applicable. Despite the assessee's explanation, the Assessing Officer upheld the demand.

Issue 2: Imposition of Interest under section 206C(7)

The assessee, challenging the imposition of interest under section 206C(7), contended that the order passed by the Assessing Officer was beyond the limitation period prescribed by law. The assessee cited various case laws in support of this argument, emphasizing the need for orders to be passed within a reasonable time frame. The Revenue supported the lower authorities' decision, asserting that the order was timely and the additional ground raised by the assessee should be rejected.

Judgment Summary:

The Appellate Tribunal, considering the additional ground raised by the assessee regarding the limitation period, referred to relevant case laws and highlighted the necessity of initiating proceedings within a reasonable time frame. Citing judgments from the Hon'ble High Courts and the Apex Court, the Tribunal concluded that the order passed by the Assessing Officer was beyond the prescribed limitation period, rendering it unsustainable in law. Consequently, the appeal filed by the assessee challenging the demand for TCS and interest was allowed.

In a separate judgment related to penalty levied under section 271CA for the same Assessment Year, the Tribunal noted the delay in filing the appeal, attributing it to the COVID pandemic situation. Following a Supreme Court judgment excluding the time limit for filing appeals during the pandemic period, the Tribunal dismissed the penalty levied under section 271CA, as the quantum appeal had already been allowed in favor of the assessee.

In conclusion, both appeals filed by the assessee were allowed, with the Tribunal ruling in favor of the assessee on the issues of TCS, interest, and penalty, based on the grounds of limitation and pandemic-related delays.