2010 (4) TMI 45 - HC - Income Tax

Period of limitation proceeding u/s 201 and 201(1) were were initiated after the period of four years from end of the Financial Year in question had elapsed. - Tribunal following the decision of this Court in the case of CIT Vs. NHK Japan Broadcasting Corporation (Delhi) 2008 -TMI - 30950 - DELHI HIGH COURT agreed with the contention of the Assessee and held the proceedings to be barred by time. Consequently the cross objections were allowed and the Revenue s appeal was dismissed. held that - it is clear that the proceedings under Section 201/ 201(A) of the Income Tax Act 1961 can be initiated only within three years from the end of the Assessment Year or within four years from the end of the relevant Financial Year. - Tribunal has correctly concluded that the proceedings were beyond time. Decided in favor of assessee

Summary

Issues:
- Appeal arising from a common order passed by the Income Tax Appellate Tribunal.
- Preliminary issue of limitation raised by the Respondent/Assessee.
- Interpretation of time limit for initiating proceedings under Sections 201 and 201(A) of the Income Tax Act, 1961.
- Applicability of the decision in the case of CIT Vs. NHK Japan Broadcasting Corporation.
- Determination of the time limit for initiating proceedings under Section 201/201(A).

Analysis:

The judgment delivered by the High Court involved appeals arising from a common order passed by the Income Tax Appellate Tribunal. The Respondent/Assessee raised a preliminary issue of limitation, arguing that the proceedings under Sections 201 and 201(A) were initiated after the prescribed time limit. The Tribunal, following the decision in the case of CIT Vs. NHK Japan Broadcasting Corporation, agreed with the Assessee's contention, holding the proceedings to be time-barred. The Tribunal allowed the cross objections and dismissed the Revenue's appeal, leading to the Revenue filing the present appeals before the High Court.

The High Court examined the impugned decision and the precedent set by the NHK Japan Broadcasting Corporation case. It emphasized the need for adopting a reasonable time limit for initiating proceedings under Section 201/201(A) of the Income Tax Act. The Court referred to Section 153(1)(a) of the Act, which prescribes a time limit of three years from the end of the relevant Financial Year for completing assessment proceedings. However, it noted that the Tribunal had considered four years as a reasonable period for initiating action in cases where no specific limitation is prescribed.

Based on the above analysis, the High Court concluded that proceedings under Section 201/201(A) must be initiated within three years from the end of the Assessment Year or within four years from the end of the relevant Financial Year. In the case at hand, concerning the Financial Year 2001-02 or Assessment Year 2002-03, the proceedings were initiated beyond both the three-year and four-year time limits. Consequently, the Tribunal's decision that the proceedings were time-barred was upheld by the High Court, leading to the dismissal of the appeals. The Court determined that no substantial question of law arose for consideration in this matter, thus bringing the case to a close.