2016 (11) TMI 650 - AT - Income Tax

Order u/s 201(1) and 201(1A) - barred by limitation - order passed within reasonable time - Held that - Statutory powers should be exercised within a reasonable time even if no time limit is prescribed. Finality of the issue is the underlying principle embedded and is the core of every action under the law. If the legislature is silent in prescribing a particular time limit, then the action can only be taken within a reasonable time Assessing Officer passed the orders after expiry of eight years from the date of issuance of notice, therefore, the order passed by the are barred by limitation. Consequently, we set aside the orders passed by the Ld. Commissioner of Income Tax (Appeal) as the orders passed by the Assessing Officer are barred by limitation. All these appeals of the assessee, are, therefore, allowed.

Issues Involved:
1. Whether the order passed by the Assessing Officer (AO) under Section 201(1) and 201(1A) of the Income Tax Act, 1961, is barred by limitation.

Issue-wise Detailed Analysis:

1. Limitation on Orders under Section 201(1) and 201(1A):

The primary issue in these appeals is whether the orders passed by the Assessing Officer under Section 201(1) and 201(1A) of the Income Tax Act, 1961, are barred by limitation.

The assessee contended that the orders were not passed within a reasonable time and thus should be considered barred by limitation. The Tribunal had previously ruled in favor of the assessee in a similar case for the Assessment Year 2001-02, relying on the decision of the Hon’ble Bombay High Court in DIT vs. Mahindra & Mahindra Ltd. (2014) 365 ITR 560 (Bom.) and the Special Bench of the Tribunal in the same case.

The Revenue, represented by the ld. DR, argued that there is no prescribed time limit in the Income Tax Act for passing an order under Section 201(1) and 201(1A). They cited the case of Hindustan Times Ltd. vs. UOI (AIR 1999 SC 688) to support their contention that in the absence of a statutory time limit, it is not open to the court to introduce such a limitation.

The Tribunal considered the submissions and reviewed the relevant portion of the order dated 01/06/2016 in the case of the assessee for Assessment Year 2001-02 (ITA No.1810/Mum/2014). It was noted that the AO had passed the impugned order on 28.3.2011, following a notice issued on 23.9.2003, which was well beyond a reasonable period of eight years from the date of issuing the notice.

The Tribunal referenced the decision of the Special Bench in Mahindra & Mahindra Ltd., which held that:
- Proceedings under Section 201(1) can be initiated within six years from the end of the relevant assessment year if the income chargeable to tax in the hands of the payee exceeds one lakh rupees. If the amount is less than one lakh rupees, the period is four years.
- The completion of proceedings under Section 201(1) must be within one year from the end of the financial year in which the proceedings were initiated.

The Hon’ble Bombay High Court upheld this view, asserting that proceedings initiated under Section 201(1)/201(1A) should be completed within one year from the end of the financial year in which they were initiated. Consequently, the Tribunal concluded that the orders passed by the AO after eight years were barred by limitation.

The Tribunal also considered the decision of Hindustan Times Ltd. and found that it had already been addressed by the Special Bench in Mahindra & Mahindra and the Hon’ble Bombay High Court. The Tribunal reiterated that statutory powers should be exercised within a reasonable time, even if no time limit is prescribed by the statute.

Conclusion:

The Tribunal set aside the orders passed by the Ld. Commissioner of Income Tax (Appeals), as the orders by the AO were barred by limitation. All the appeals of the assessee were allowed on this ground. The judgment emphasized the necessity for statutory powers to be exercised within a reasonable time to ensure finality and fairness in tax proceedings.

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