2018 (4) TMI 450 - AT - Income Tax

Validity of order u/s 201(1) - period of limitation - Held that - As per provisions contained in Finance (No.2) Act, 2014, effective from 01.04.2010, the order u/s 201 was required to be passed within two years from the end of financial year in which statement is filed or four years from the end of financial year in which payment is made or credit is given in any other case. But, in the instant case, TDS verification letter / notice was issued on 23.01.2015 and order u/s 201(1) was passed on 30.03.2015 and 05.03.2015 for AYs 2008-09 and 2010-11 respectively which are hopelessly barred by limitation as the same were required to be passed within a period of two years or four years as the case may be, as amended provisions of Finance (No.2) Act, 2014 relied upon by AO as well as CIT (A) are not applicable in these cases. Assessment order passed by AO is beyond the period of limitation, which is without jurisdiction - Decided in favour of assessee.

Summary

Issues Involved:

1. Whether the appellant is an assessee in default under section 201(1) of the Income-tax Act, 1961.
2. Whether the order passed under section 201(1)/201(1A) is barred by limitation.
3. Liability to deduct tax at source under section 194J on transmission/wheeling charges.
4. Treatment of operating charges and application fees under section 194J.
5. Reimbursement of expenses and its liability under section 194J.
6. Levy of interest under section 201(1A) for non-deduction of tax.
7. Treatment of rent paid to GNIDA and its tax implications.
8. Discharge of tax liability by payees/recipients and its effect on the demand under section 201(1).

Detailed Analysis:

1. Assessee in Default under Section 201(1):
The appellant contested the CIT(A)'s decision confirming the ACIT (TDS)'s action of treating the appellant as an assessee in default under section 201(1) of the Act. The Tribunal noted that the issue revolved around whether the appellant failed to deduct tax at source on transmission and wheeling charges and rent paid to GNIDA, thereby being treated as an assessee in default.

2. Limitation of Order under Section 201(1)/201(1A):
The appellant argued that the orders passed by the AO were barred by limitation. The Tribunal examined the relevant provisions of section 201(3) as they stood at the time of filing the TDS returns. It was noted that the AO issued a letter for TDS verification on 23.01.2015, and the orders were passed in March 2015. The Tribunal referred to the jurisdictional High Court's decision in the appellant's own case for AY 2009-10, which held that the Finance (No.2) Act, 2014, effective from 01.10.2014, does not apply retrospectively. Consequently, the orders were deemed barred by limitation.

3. Liability under Section 194J on Transmission/Wheeling Charges:
The appellant contested the liability to deduct tax at source under section 194J on transmission/wheeling charges. The Tribunal noted that the AO and CIT(A) had relied on the amended statute by Finance (No.2) Act, 2014, to assume jurisdiction. However, the Tribunal found that the amended provisions were not applicable retrospectively, thereby invalidating the AO's reliance on them.

4. Treatment of Operating Charges and Application Fees:
The appellant argued that certain amounts paid as operating charges and application fees should not fall within the purview of section 194J. The Tribunal did not specifically address this issue in detail, as the primary contention was the applicability of the amended provisions and the limitation period.

5. Reimbursement of Expenses:
The appellant contended that a significant portion of the transmission/wheeling charges represented reimbursement of expenses, which should not attract TDS under section 194J. The Tribunal's decision on the limitation period rendered a detailed examination of this issue unnecessary.

6. Levy of Interest under Section 201(1A):
The appellant challenged the levy of interest under section 201(1A) for non-deduction of tax. The Tribunal's finding that the orders were barred by limitation meant that the interest levied was also invalid.

7. Rent Paid to GNIDA:
The appellant disputed the treatment of rent paid to GNIDA and the associated interest for non-deduction of tax. As with the other issues, the Tribunal's decision on the limitation period rendered further examination of this issue unnecessary.

8. Discharge of Tax Liability by Payees/Recipients:
The appellant argued that the tax liability on income received from the appellant, including transmission/wheeling charges and lease rent, had been discharged by the respective payees/recipients. Therefore, no demand under section 201(1) should be raised. The Tribunal did not delve into this issue in detail due to the primary finding on the limitation period.

Conclusion:
The Tribunal concluded that the assessment orders passed by the AO were beyond the period of limitation and thus without jurisdiction. Consequently, the orders were quashed without addressing the merits of the cases. The appeals filed by the appellant were allowed.