2016 (6) TMI 373 - AT - Income Tax

Period of limitation u/s 201(1)/201(1A) for passing an order - TDS u/s 194C - non deduction of tds on the expenditure incurred as Pay Channel Cost - demand raised u/s. 201(1) and interest charged u/s. 201(1A) - Held that - The proceedings initiated u/s 201(1)/201(1A) should be completed within one year from the end of the financial year in which proceedings u/s 201(1)/201(1A) were initiated. Admittedly, in the instant case, the assessing officer has passed the orders after expiry of eight years from the date of issuing of notice. Accordingly, the order passed by the AO is barred by limitation. Accordingly we set aside the order passed by Ld CIT(A), since the order passed by the AO is barred by limitation. Accordingly the same stands quashed.

Summary

Issues:
1. Demand raised u/s. 201(1) and interest charged u/s. 201(1A) of the Act.
2. Whether the order passed by the Assessing Officer is barred by limitation.

Analysis:

Issue 1: Demand raised u/s. 201(1) and interest charged u/s. 201(1A) of the Act:
The appeal pertains to the demand raised under section 201(1) and the interest charged under section 201(1A) of the Income Tax Act. The Assessing Officer (AO) raised the demand and interest due to the non-deduction of tax at source on the expenditure incurred as "Pay Channel Cost." The AO issued a show cause notice to the assessee, leading to the final order being passed by the Tax Recovery Officer (TRO) on 28.3.2011. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the order of the AO, albeit granting partial relief regarding the interest computation under section 201(1A) of the Act.

Issue 2: Order passed by the Assessing Officer barred by limitation:
The key contention raised by the assessee was that the order passed by the AO was barred by limitation. The AO issued the order on 28.3.2011, eight years after the notice was issued on 23.9.2003. The Income Tax Act does not specify a time limit for initiating proceedings under section 201(1) or for passing orders thereafter. The assessee relied on a decision of the Bombay High Court in the case of DIT Vs. Mahindra and Mahindra Ltd, which clarified the time limits for initiating and completing proceedings under section 201(1) and 201(1A). The High Court held that proceedings under these sections must be completed within one year from the end of the financial year in which they were initiated.

The Tribunal noted that the AO's order was passed beyond the prescribed time limit, rendering it barred by limitation as per the High Court's decision. Consequently, the order passed by the CIT(A) was set aside, and the appeal of the assessee was allowed. The Tribunal's decision was in line with the Bombay High Court's ruling on the completion timeline for proceedings under section 201(1) and 201(1A).

In conclusion, the Tribunal's judgment focused on the legality of the order passed by the Assessing Officer in relation to the time limit prescribed by law, ultimately resulting in the appeal being allowed in favor of the assessee.