2016 (2) TMI 414 - HC - Income Tax

Non deduction of tds - challenge to the notices / summonses issued u/s 201 - period of limitation for passing an order u/s 201 - whether section 201(3) of the Income Tax Act as amended on 1/10/2014 by Finance Act of 2014 would be applicable retrospectively or prospectively - TDS on Tele-Communication Interconnection Usage Charges - Held that - While amending section 201 by Finance Act, 2014, it has been specifically mentioned that the same shall be applicable w.e.f. 1/10/2014 and even considering the fact that proceedings for F.Y. 2007-08 and 2008-09 had become time barred and/or for the aforesaid financial years, limitation under section 201(3)(i) of the Act had already expired on 31/3/2011 and 31/3/2012, respectively, much prior to the amendment in section 201 as amended by Finance Act, 2014 and therefore, as such a right has been accrued in favour of the assessee and considering the fact that wherever legislature wanted to give retrospective effect so specifically provided while amending section 201(3) (ii) of the Act as was amended by Finance Act, 2012 with retrospective effect from 1/4/2010, it is to be held that section 201(3), as amended by Finance Act No.2 of 2014 shall not be applicable retrospectively and therefore, no order under section 201(i) of the Act can be passed for which limitation had already expired prior to amended section 201(3) as amended by Finance Act No.2 of 2014. Under the circumstances, the impugned notices / summonses cannot be sustained and the same deserve to be quashed and set aside and writ of prohibition, as prayed for, deserves to be granted. In view of the above and for the reasons stated above, all these petitions succeed. The impugned notices / summonses are held to be invalid and the same are hereby quashed and set aside and the respondents herein are hereby restrained by writ of prohibition from proceedings with the impugned notices / summonses which are, as such, hereby quashed and set aside. Rule is made absolute accordingly in each of the petitions. - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the notices issued under Section 201(1) of the Income Tax Act are barred by the proviso to Section 201(3) of the Act.
2. Whether Section 201 of the Act, as amended by the Finance Act, 2014, is prospective or retrospective.
3. Whether the petitions against the Show Cause Notices are maintainable.

Detailed Analysis:

1. Barred by Proviso to Section 201(3):
The petitioners contended that the notices issued under Section 201(1) for the assessment years 2008-09 and 2009-10 were barred by the limitation period specified in the proviso to Section 201(3) of the Income Tax Act. The limitation period for passing orders under Section 201(3) for the financial years 2007-08 and 2008-09 had expired on 31/03/2011 and 31/03/2012, respectively. Therefore, the issuance of notices in December 2014 was beyond the permissible period, rendering them invalid.

2. Prospective or Retrospective Application of Section 201:
The petitioners argued that the amendment to Section 201(3) by the Finance Act, 2014, which extended the limitation period to seven years, should not apply retrospectively. They asserted that the amendment was explicitly stated to be effective from 01/10/2014 and did not cover periods where the limitation had already expired. The court agreed, noting that the legislature did not intend for the amendment to have retrospective effect, as it was not expressly provided. The court referenced several Supreme Court decisions, including *S.S. Gadgil v. Lal & Co.*, *J.P. Jani v. Induprasad Devshanker Bhatt*, and *K.M. Sharma v. ITO*, which held that amendments to limitation periods should not revive rights that had already lapsed.

3. Maintainability of Petitions Against Show Cause Notices:
The revenue argued that the petitions should not be entertained as they were against Show Cause Notices, and the petitioners had adequate statutory remedies under the Income Tax Act. However, the court overruled this objection, stating that the issue involved a pure question of law regarding the applicability of Section 201(3) as amended by the Finance Act, 2014. The court cited the Supreme Court decisions in *Harbanslal Sahnia v. Indian Oil Corpn.* and *Filterco v. Commissioner of Sales Tax*, which allowed for judicial review when pure questions of law were involved.

Conclusion:
The court held that Section 201(3), as amended by the Finance Act, 2014, was not applicable retrospectively. Therefore, the notices issued under Section 201(1) for the financial years 2007-08 and 2008-09, where the limitation period had already expired, were invalid. The court quashed the impugned notices and granted a writ of prohibition restraining the respondents from proceeding with the invalid notices.