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2024 (9) TMI 1620 - AT - Income TaxReasonable time limit for issue of notice u/s 201(1)/201(1A) - HELD THAT - It is pertinent to refer to the judgments of GE India Technology Centre GE India Technology Centre 2010 (9) TMI 7 - SUPREME COURT and the judgment of Mahindra Mahindra Ltd. 2014 (7) TMI 265 - BOMBAY HIGH COURT wherein it has been held that the reasonable time limit for issue of notice u/s 201(1)/201(1A) is 4 years. In cases, where the notice is issued beyond 4 years, the Co ordinate Bench of ITAT held that the same is barred by limitation u/s 201(1) of the Act passed in September 2021. Since, in the present case, the orders are beyond 4 years from end of financial year, hence not sustainable and is quashed. It is pathetic to note that the entire proceeding arose out of a survey under section 133A(2A) conducted on 09/12/2019, at the office premises, which is our firm opinion is belated and unsustainable and is hereby quashed. However, we are in full agreement with the contentions of assessee and the case laws relied upon by him are squarely applicable to the facts of the present case. Hence, insofar as non residents are concerned, the order to that extent is clearly time barred. There is a small credit of income to a resident, but the transaction did not crystalize. Assessee appeal allowed.
Issues Involved:
1. Legality and correctness of the orders passed by the ACIT (TDS) and CIT(A). 2. Time-barred status of the TDS demand as per section 201(3) of the Financial Act, 2012. 3. Non-deduction of TDS and interest thereon under sections 201(1) and 201(1A) on share application money. 4. Levy of TDS on advance share capital from residents/non-residents and interest under section 201(1A). Detailed Analysis: 1. Legality and Correctness of the Orders Passed by the ACIT (TDS) and CIT(A): Assessee's Appeal - A.Y. 2012-13: The assessee argued that the orders passed by the ACIT (TDS) and the CIT(A) were "illegal, incorrect, bad in law and without natural justice." The Tribunal noted that the assessee is a Private Limited Company engaged in the manufacturing industry. The assessee filed its return of income for the year under consideration, disclosing a total taxable income of nil with TDS of Rs. 10,63,979 and a refund of the same amount. Assessee's Appeal - A.Y. 2013-14: The same grounds were raised, and the Tribunal found the issues to be "mutatis mutandis identical" to those in the appeal for A.Y. 2012-13. 2. Time-Barred Status of the TDS Demand as per Section 201(3) of the Financial Act, 2012: Assessee's Appeal - A.Y. 2012-13: The Tribunal admitted the issue relating to the provisions of limitation under section 201(3) of the Income Tax Act, 1961, as it "goes to the root of the matter and does not require investigation of fresh facts." The Tribunal referred to the decision in Adabala Manmohan v/s ITO, ITA no.135/Viz./2021, which held that the reasonable time limit for issuing a notice under sections 201(1)/201(1A) is 4 years. Since the orders in the present case were beyond 4 years from the end of the financial year, they were deemed not sustainable and quashed. Assessee's Appeal - A.Y. 2013-14: The Tribunal applied the same reasoning and set aside the impugned order, allowing the grounds of appeal raised by the assessee. 3. Non-Deduction of TDS and Interest Thereon under Sections 201(1) and 201(1A) on Share Application Money: Assessee's Appeal - A.Y. 2012-13: The assessee contended that the non-deduction of TDS and interest on share application money amounting to Rs. 55,89,527 was "incorrect, illegal, bad in law and without natural justice." The Tribunal found that the assessee had made a provision for interest on share application money but treated it as a contingent liability, hence not deducting TDS. The Tribunal agreed with the assessee's contention that contingent provisions for expenses are not liable for TDS. Assessee's Appeal - A.Y. 2013-14: The Tribunal found the facts and circumstances to be identical to those in the appeal for A.Y. 2012-13 and ruled in favor of the assessee. 4. Levy of TDS on Advance Share Capital from Residents/Non-Residents and Interest under Section 201(1A): Assessee's Appeal - A.Y. 2012-13: The Tribunal noted that the levy of TDS on advance share capital from residents/non-residents and interest under section 201(1A) was "incorrect, illegal, bad in law and without natural justice." The Tribunal held that the assessee could not be considered as an assessee in default, quashing the impugned order. Assessee's Appeal - A.Y. 2013-14: The Tribunal applied the same reasoning and ruled in favor of the assessee, setting aside the impugned order. Conclusion: Both appeals filed by the assessee for A.Y. 2012-13 and A.Y. 2013-14 were allowed. The Tribunal quashed the impugned orders, holding that the assessee could not be considered as an assessee in default. The orders were pronounced in the open Court on 23/09/2024.
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