2015 (8) TMI 1040 - AT - Income Tax

TDS liability - time limit for making assessment u/s 201(1) - assessee deemed to be in default - Held that - We have also perused the facts of the present case as well as the orders of ITAT in case of the appellant for AY. S.2006-07 to 2010-11 and we are satisfied that issues covered in those appeals are identical to the facts and issues of the present appeals wherein find that the FAA has not given any direct finding. He had given direction to the AO to find out the details of filing of quarterly statements for the year considerationand to verify for his records as to whether the assessee had filed the necessary quarterly statements (or yearly TDS return) . He further held that if the quarterly statement as required under section 201(3) had been filed with the due dates, the order passed by the AO was invalid and had to be annulled. He also mentioned that the assessee had not filed the TDS statements for the year under appeal as per law the case would be governed by the provisions of section 201(ii) of the Act and the impugned order passed would be treated valid. In our opinion, the order of the FAA does not suffer from any legal infirmity. Provisions of section 201(3) were amended and word six years were substituted by words four years with retrospective effect from 1April 2010. Survey action carried out in October 2010 and the amendment had come on statute before six months. So, the FAA, in our opinion has rightly interpreted the section and the time limit. Time limit depends upon the filing of quarterly/yearly statement. The FAA has emphasized the same point and has directed the AO to make verification, as stated earlier. In these circumstances, we are of the opinion that the order of the FAA does not suffer from any legal infirmity. - Decided against revenue.

Summary

Issues Involved:
1. Validity of the order passed under section 201(1) and 201(1A) of the Income Tax Act, 1961.
2. Limitation period for passing the order under section 201(1) and 201(1A).
3. The impact of CBDT Circular No. 5 of 2010 on the limitation period.
4. Whether the assessee should be deemed to be in default for various payments.
5. The validity of interest charged under section 201(1A).

Detailed Analysis:

1. Validity of the order passed under section 201(1) and 201(1A):
The Assessing Officer (AO) had passed orders under section 201(1) and 201(1A) of the Income Tax Act, 1961, against the assessee for the assessment years 2004-05 and 2005-06. The Commissioner of Income Tax (Appeals) [CIT(A)] quashed these orders, holding them to be time-barred. The AO had raised demands of tax and interest against the assessee, treating it as an assessee-in-default (A-I-D) for certain payments. The CIT(A) annulled the orders on the ground that they were passed beyond the limitation period prescribed under section 201(3).

2. Limitation period for passing the order under section 201(1) and 201(1A):
The CIT(A) held that the orders passed by the AO under section 201(1) and 201(1A) were beyond the limitation period. As per clause (i) of section 201(3), the limitation for passing the order would be two years from the end of the financial year in which the statement was filed. For the financial year 2004-05, the limitation period expired on 31.03.2007, and for the financial year 2005-06, it expired on 31.03.2008. Since the orders were passed on 24.03.2011, they were considered time-barred. The CIT(A) directed the AO to verify whether the quarterly statements were filed within the due dates and annulled the orders if they were filed on time.

3. The impact of CBDT Circular No. 5 of 2010 on the limitation period:
The CIT(A) relied on CBDT Circular No. 5 of 2010, which clarified that the AO could complete TDS proceedings for financial years beginning from 01.04.2007 and earlier years by 31.03.2011. However, the CIT(A) held that the circular was only clarificatory and could not override the statute. The Tribunal upheld the CIT(A)'s decision, stating that the circular clarified the position about the time limit and there was no scope for ambiguity. The Tribunal confirmed that the orders passed by the AO were beyond the prescribed time limit.

4. Whether the assessee should be deemed to be in default for various payments:
The CIT(A) and the Tribunal held that the orders passed by the AO under section 201(1) and 201(1A) were invalid due to being time-barred. Consequently, the Tribunal did not need to adjudicate on the merits of whether the assessee should be deemed to be in default for various payments, including payments to hospital-based consultants, Hinduja Foundation, and drug handling charges.

5. The validity of interest charged under section 201(1A):
The CIT(A) quashed the order under section 201(1A), whereby interest was charged on the short deduction determined under section 201(1). The Tribunal upheld this decision, stating that since the order under section 201(1) was annulled, the order charging interest under section 201(1A) also did not survive. The Tribunal confirmed that the orders charging interest under section 201(1A) were invalid due to the annulment of the primary orders under section 201(1).

Conclusion:
The Tribunal upheld the CIT(A)'s decision to annul the orders passed by the AO under section 201(1) and 201(1A) for the assessment years 2004-05 and 2005-06, as they were beyond the limitation period. The Tribunal also confirmed that the orders charging interest under section 201(1A) did not survive due to the annulment of the primary orders. The appeals filed by the AO were dismissed, and the cross-objections filed by the assessee were allowed for statistical purposes.