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TMI Blog2019 (9) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... a perusal of the letters/notices that the ITO(IT)-TDS, Range-2, Mumbai had only called upon the assessee to furnish certain documentary evidence along with its explanation as to why tax on the payments therein stated was not deducted at source. Neither of the aforesaid letters dated 28.09.2007, 15.02.2008 and 05.09.2013 can be construed as a Show cause notice under Sec. 201(1). In fact, as is discernible from the order passed by the A.O under Sec. 201(1) 201(1A) r.w.s 195, dated 31.10.2013, the Show cause notice was issued by the ITO(IT)-TDS, Range-2, Mumbai to the assessee for the first time on 18.10.2013,wherein it was called upon to explain as to why it may not be deemed to be an assessee in default and therein be directed to pay the defaulted tax along with interest as per the provisions of Sec.201(1) 201(1A). A perusal order of the ITO(IT)-TDS, Range-2, Mumbai reveals that till 05.09.2013 neither any order under Sec. 201(1) 201(1A) had been passed nor any proceedings were pending with him under Chapter XVII of the I.T. Act in the case of the assessee for A.Y. 2007-08. Proceedings under Sec. 201(1) were initiated by the ITO(IT)-TDS, Range-2, Mumbai for the first ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciating that rendering of services by a non-resident to an Indian payer, which though may be a technical in nature can lead to accrual of Business Income in India if the Non- Resident is not Making available any technology to the payer. 3. The learned CIT (A) has erred in law and in facts by holding that the Entec has made available any technology to the appellant which make the payment therefore as fees for Technical service' as defined in the DTAA with UK. 4. The learned CIT(A) has erred in law and in facts by holding that payments made to Entec does not get covered under the Article 7 read with Article 5.2(k) of the India-UK Treaty viz. Business Income since the Entec does not have permanent Establishment in India. 5. The appellant craves it s leave to add, alter, amend any ground or grounds. Apart therefrom, the assessee has also raised the following additional grounds of appeal before us: The appellant craves leave to raise the following additional grounds without prejudice to the grounds raised in original appeal: 1. On the facts and circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Sec. 40(a)(ia) made by the A.O before the CIT(A). The CIT(A) vide his order dated 21.03.2012 directed the A.O to get an opinion of the ITO(IT)-TDS, Mumbai regarding applicability of the TDS provisions as regards the aforesaid payments. Observing, that the assessee had claimed to have filed a letter with the ITO (IT)-TDS, Range-2, Mumbai for non-deduction of tax at source on foreign remittances, the CIT(A) directed the A.O to obtain necessary clarification from the ITO (IT)TDS, Range-2, Mumbai and accordingly reduce the disallowance made under Sec. 40(a)(ia) of the Act. The A.O in compliance to the aforesaid direction of the CIT(A) unsuccessfully sought a clarification from the ITO(IT)-TDS, Range-2, Mumbai. In the absence of any reply from the ITO(IT)-TDS, Rage-2, Mumbai, it was observed by the A.O that the relief was to be allowed to the assessee only on receipt of the necessary clarification from him. Aggrieved, the assessee once again carried the matter before the CIT(A), who now directed the A.O to positively obtain the clarification in respect of the aforesaid issue from the ITO(IT)-TDS, Range-2, Mumbai and reduce the disallowance in terms of the clarification obtained. Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited, and also the time for taking such action had already expired, therefore, no order under Sec.201(1)/201(1A) r.w. Sec. 195 treating the assessee as being in default could have been validly passed. 7. As the assessee has assailed the validity of the jurisdiction assumed by the A.O for passing the order under Sec. 201(1)/201(1A) r.w.s 195 of the Act, therefore, we shall first advert to and adjudicate the same. It is the claim of the ld. A.R, that as the order passed by the A.O under Sec. 201(1)/201(1A) r.w.s 195, dated 31.10.2013 is beyond the prescribed time limit contemplated in the proviso to sub-section (3) of Sec.201 of the Act, therefore, the same is barred by limitation. On a specific query by the bench as to how the sub-section (3) of Sec.201 would be applicable in respect of payments made by an assessee to a non-resident payee, the ld. A.R relied on the judgment of the Hon ble High Court of Delhi in the case of Bharti Airtel Limited Vs. Union of India (2017) 245 Taxman 80 (Del) and the order of the ITAT, Mumbai bench L in the case of Tech Mahindra Ltd. Vs. ITO, IT, Circle-1, Mumbai (2018) 96 taxman.com 357 (Mum). It was submitted by the ld. A.R that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .s 195, dated 31.10.2013, had categorically stated that neither any order under Sec.201(1)/201(1A) was passed in the case of the assessee nor any proceedings were pending in its case under Chapter XVII of the Act for A.Y. 2007-08. Accordingly, it was submitted by the ld. A.R that as the revenue had not initiated any proceedings for declaring the assessee as being in default within a period of 4 years from the end of the relevant financial year i.e up to 31.03.2011, therefore, on the said count also the order passed by him under Sec. 201(1)/201(1A), dated 31.10.2013 was clearly barred by limitation and was liable to be quashed. Further, it was further submitted by the ld. A.R that an order under Sec. 201(1) is statutorily required to be passed within a period of one year from the end of the financial year in which the proceedings for treating the assessee as being in default were initiated. On the basis of his aforesaid contention, it was submitted by the ld. A.R, that as the proceedings in the case of the assessee were initiated on 28.09.2007, therefore, the order passed by the ITO(IT)-TDS-2, Mumbai under Sec. 201(1)/201(1A), dated 31.10.2013 was beyond the prescribed limit and thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We shall first advert to the contentions advanced by the ld. A.R that the order passed by the ITO(IT)-TDS, Range-2, Mumbai is beyond the time limit prescribed in the statute. It is the claim of the ld. A.R that as per the proviso to sub-section (3) of Sec. 201 of the Act, an order under Sec. 201(1) 201(1A) could have been validly passed in the hands of the assessee only up to 31.03.2011. In sum and substance, it was the claim of the ld. A.R that as the order passed under Sec. 201(1) 201(1A), dated 31.10.2013 is beyond the prescribed time period, therefore, the same cannot be sustained and is liable to be vacated. We have given a thoughtful consideration to the contentions advanced by the ld. A.R and find substantial force in the same. At the first blush, on a perusal of the language employed in sub-section (3) of Sec.201, we held a doubt that the said statutory provision as was made available on the statute for the first time by the Finance Act, 2009 w.e.f 01.04.2010 was applicable only in respect of resident deductees. However, our doubts had been dispelled by the judgment of the Hon ble High Court of Delhi in the case of Bharti Airtel Limited Vs. Union of India(2017) 245 Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) the order under Sec. 201(1)/201(1A) could have been passed latest by 31.03.2009. We have given a thoughtful consideration to the aforementioned contention of the ld. A.R and are unable to persuade ourselves to subscribe to his aforesaid claim. We find that the ITO(IT)TDS, Range-2, Mumbai had vide his letter dated 28.09.2007 only called upon the assessee to explain as to why no tax was deducted at source before making the remittances to the 30 non-resident payees (as stated in the Annexure enclosed with the query letter). The aforesaid letter was thereafter followed by a reminder letter dated 15.02.2008, wherein the assessee was once again called upon to furnish its explanation as was earlier sought vide the aforesaid letter dated 28.09.2007. Further, the A.O issued another letter dated 05.09.2013, wherein the assessee was called upon to furnish certain documentary evidence, failing which it was to be presumed that the payments made by the assessee were liable for deduction of tax at source. We find from a perusal of the aforementioned letters/notices that the ITO(IT)-TDS, Range-2, Mumbai had only called upon the assessee to furnish certain documentary evidence along with its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is non- payment of tax directly by the payee/recipient. It is the claim of the assessee before us that as neither the revenue had taken any action against the payee/recipient nor any such action could be taken against the payee as the same was barred by limitation, therefore, in the absence of conjoint satisfaction of the aforementioned twin conditions the assessee could not have been held as being in default in terms of Sec. 201(1) of the Act. The ld. Departmental Representative has not controverted the contention advanced by the ld. A.R that neither any assessment in had been made in respect of the tax liability of payee/recipient for A.Y. 2007-08, nor there was any possibility for the revenue for taking any action as regards the same in the hands of the payee/recipient, as the same was barred by limitation. In fact, the A.O in his factual report dated 22.07.2019 on the additional grounds of appeal filed with the Tribunal (through proper channel), had admitted that there was no record which would show that any assessment had been made on the payee. We find that the aforesaid issue is squarely covered by the decision of the Special Bench of ITAT, Mumbai in the case of Mahindr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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