2017 (4) TMI 1106 - HC - Income Tax

Validity of notice issued under Section 201 (1)/201(1A) - period of limitation - Held that - In view of the above, we are of the considered opinion that the provision of Section 201 (3) of the Act as amended by the Finance Act 2 of 2014 is effective from 1.10.2014 only and would not apply retrospectively to any returns or to the proceedings which may have become conclusive with the passage of time on the expiry of the limitation under the unamended provision. Having said so, we take up the impugned notice dated 5.1.2016. It may be a notice under Section 201 (3) of the Act but it only requires the petitioner to furnish the certain information and nothing else. It is not even a show cause notice which may be taken for the purposes of passing an order as contemplated under Section 201 (3) of the Act. Therefore, we are of the opinion that there is no necessity or any justification for us to disturb or quash the above notice and it would be in the fitness of thing if the petitioner appears in response of the said notice and submits the desired information to keep its record straight and not necessarily to enable the respondents to pass any order under Section 201 (3) of the Act.

Issues:
1. Jurisdiction of the authority to issue notice under Section 201 (1)/201(1A) of the Income Tax Act, 1961.
2. Interpretation of Section 201(3) of the Act regarding the limitation for passing orders in connection with TDS returns.
3. Retrospective application of the amended Section 201(3) of the Act.
4. Effect of previous judicial decisions on retrospective application of tax amendments.

Analysis:

1. Jurisdiction of the authority to issue notice under Section 201 (1)/201(1A) of the Income Tax Act, 1961:
The petitioner challenged a notice dated 5.1.2016 issued under Section 201 (1)/201(1A) of the Income Tax Act, 1961. The petitioner contended that the authority lacked jurisdiction due to Section 201(3) of the Act, which limits the authority's power to pass orders after a specified period. The respondent argued that the notice was merely a request for information and not a show cause notice, indicating that no order had been passed yet. The court emphasized that challenges to show cause notices should only be entertained if lacking jurisdiction or incompetence of the issuing authority is proven.

2. Interpretation of Section 201(3) of the Act regarding the limitation for passing orders in connection with TDS returns:
The court analyzed the evolution of Section 201(3) of the Act concerning the limitation for passing orders related to TDS returns. The unamended provision set a limitation of two years from the filing of the return statement. In the present case, the limitation expired before the notice was issued, granting valuable rights to the assessee. The court deliberated whether the amended provision, extending the limitation to seven years, applies retrospectively to returns filed earlier.

3. Retrospective application of the amended Section 201(3) of the Act:
Referring to past judicial decisions, the court highlighted that amendments to tax laws are not inherently retrospective unless expressly stated. Citing cases like Income Tax Officer v. S.K.Habibullah and S.S. Gadgil v. Lal and Co., the court emphasized that vested rights of the assessee should not be affected by subsequent amendments. The court concluded that the amended Section 201(3) of the Act, effective from 1.10.2014, does not apply retrospectively to returns or concluded proceedings under the unamended provision.

4. Effect of previous judicial decisions on retrospective application of tax amendments:
The court relied on decisions like K.M. Sharma v. Income Tax Officer to establish that tax provisions imposing liabilities are presumed not to be retrospective unless explicitly stated. The court noted that the amendment to Section 201(3) of the Act introduced by the Finance Act No.2 of 2014 does not have retrospective effect. The court also referenced a Division Bench ruling in Tata Teli Services v. Union of India, affirming that the amendment is not retrospective and does not affect rights accrued under the previous provision.

In conclusion, the court upheld the validity of the notice dated 5.1.2016, stating that it was a request for information and not a show cause notice for passing orders under Section 201(3) of the Act. The petition was disposed of accordingly, emphasizing the importance of responding to the notice to maintain accurate records without necessarily enabling the authorities to pass orders under Section 201(3) of the Act.

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