2023 (3) TMI 1194 - AT - Income Tax

Validity of order u/s 206C(1C)/206C(6A) - Period of limitation - whether order barred by limitation as it was passed beyond the reasonable period of time? - non collection of taxes at source (TCS) on receipt of payments made by lessees, licensees or the right holders in form of royalties and related compensatory and other amounts - whether in the absence of any specific time period specified in the Act can an order be passed u/s 206 of the Act at any time or there should be a reasonable limitation of time? - HELD THAT - In the case on hand admittedly the order u/s 206C(1C)/206C(6A) assessment year 2009-10 was passed on 29.03.2016 which is admittedly beyond the period of four years from the end of the assessment year 2009-10. Order passed by the ITO(TDS), Moradabad u/s 206C(1C)/206C(6A) dated 29.03.2016 is barred by limitation and the same is quashed. Decided in favour of assessee.

Summary

Issues involved:
The issues involved in the judgment are the sustainability and legality of the order passed by the Ld. Commissioner of Income Tax (Appeals) u/s 206C (6A) of the Income Tax Act, the applicability of TCS on specific transactions, the limitation period for passing the order u/s 206C of the Act, and the refusal to adjudicate upon certain grounds of appeal by the Ld. CIT(A).

Issue 1: Sustainability of the order u/s 206C (6A):
The appellant challenged the order of the Ld. CIT (A) confirming the order of ITO (TDS) u/s 206C (6A) of the Income Tax Act, contending that the appellant is not a "person" for the purpose of section 206C(6C) of the Act. The appellant argued that the proceedings were illegal and unsustainable. However, during the hearing, the Ld. Counsel pressed only ground no. 2, which questioned the assessment order as being barred by limitation. Consequently, all other grounds were dismissed as not pressed except ground no. 2.

Issue 2: Limitation period for passing order u/s 206C of the Act:
The Ld. Counsel for the appellant argued that the order u/s 206C(1C)/206C(6A) of the Act, passed on 29.03.2016 for the AY 2009-10, was beyond the reasonable period of time and hence barred by limitation. The Ld. Counsel relied on decisions of the Tribunal and High Courts, stating that a reasonable period of four years from the end of the assessment year should be considered for passing such orders. On the other hand, the Ld. DR contended that there is no specific limitation prescribed in Section 206C of the Act for passing the order and suggested applying the seven-year limitation under Section 201(1) of the Act to Section 206C.

Judgment:
After considering the submissions and examining relevant precedents, the Tribunal held that a reasonable limitation of four years from the end of the relevant assessment year should apply to passing orders u/s 206C of the Act. Citing decisions of various High Courts and the Tribunal, it was concluded that the impugned order passed by the Assessing Officer on 29.03.2016 was beyond the reasonable period of limitation and thus invalid. The Tribunal quashed the order u/s 206C(6)/206C(7) of the Act, following the reasoning that the provisions of Section 201 and 206C of the Act share a similar scheme and object in combating tax avoidance. Consequently, the order passed by the ITO(TDS) was held to be barred by limitation and was quashed.

Outcome:
Ground no. 2 of the grounds of appeal was allowed, and the appeal of the assessee was partly allowed, with the order being pronounced in the open court on 24/03/2023.