2016 (2) TMI 629 - AT - Income Tax

Non-deduction of tax at source u/s 194H - non-cash payment to dealers - CIT(A) deleting the demand raised u/s 201(1) treating the same as incentives and discounts - whether the initiation of proceedings u/s 201 of the IT Act against the assessee in respect of FY 2001-02 was barred by limitation? - Held that - We are inclined to hold that the present case of the assessee is also concerned with the FY 2001-02 pertaining to assessment year 2002-03 wherein notice for initiation of proceedings u/s 201(1) of the act was issued on 9.2.2011 which were admittedly initiated beyond eight years and 10 months from the end of FY 2001-02 and obviously much beyond the period of 3 years from the end of relevant assessment year and also beyond the period of 4 years from the end of relevant Financial Year 2001-02. In this situation, we are inclined to hold that the conclusion of the CIT(A) also gets strong support from the dicta laid down in the case of CIT vs. Hutchinson Essar Telecom Ltd. ( 2010 (4) TMI 45 - DELHI HIGH COURT) and it was rightly concluded by the first appellate authority that impugned proceedings were beyond prescribed time limitation and thus the same deserve to be annulled. Therefore, we are unable to see any ambiguity, perversity or any other valid reason to interfere with the impugned order. - Decided in favour of assessee

Summary

Issues:
Appeal against CIT(A) order - Deletion of demand u/s 201(1) for non-deduction of tax at source u/s 194H - Barred by limitation for FY 2001-02.

Analysis:
The appeal by the Revenue challenged the CIT(A) order deleting the demand u/s 201(1) for non-deduction of tax at source u/s 194H on non-cash payments to dealers treated as incentives. The Revenue contended that the AO rightly determined TDS liability and interest u/s 201(1) and 201(1A). The AR argued, citing legal precedents, that proceedings initiated after 4 years from the relevant FY are time-barred. The AR emphasized that the Revenue cannot pass orders beyond the prescribed limit, especially when the AO does not take action within a reasonable time, preventing access to necessary records.

The DR rebutted the AR's contentions, stating that there is no fixed limitation under the Act for initiating proceedings u/s 201(1)/201(1A). The DR argued that the notice issued to the assessee was valid, as specific information was available to the AO at the time. The ITAT observed the CIT(A) granted relief to the assessee based on the conclusion that proceedings beyond 4 years from the relevant FY are time-barred, citing legal principles and the unavailability of records due to the passage of time.

The ITAT referenced the decisions of the Hon'ble High Court of Delhi in various cases to support the conclusion that proceedings under Sections 201/201(A) must be initiated within 3 years from the end of the Assessment Year or within 4 years from the end of the relevant Financial Year. Since the proceedings in this case were initiated beyond these time limits for the FY 2001-02, the ITAT upheld the CIT(A)'s decision that the proceedings were time-barred. Consequently, the appeal by the Revenue was dismissed, affirming the CIT(A)'s order.

In conclusion, the ITAT dismissed the Revenue's appeal, as the proceedings initiated beyond the prescribed time limitation were considered time-barred. The legal principles and precedents cited supported the decision that the CIT(A) rightly annulled the impugned proceedings. Therefore, the ITAT found no valid reason to interfere with the CIT(A)'s order and dismissed the appeal, rendering the issue of the deletion of demand and the limitation for FY 2001-02 resolved in favor of the assessee.