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2016 (2) TMI 405 - ITAT DELHI

2016 (2) TMI 405 - ITAT DELHI - TMI - Validity of order u/s 201 - Failure to deduct tax at source - barred by limitation - Held that:- Impugned order of the AO passed on 31.3.2011 in pursuance to the notice dated 15.11.2010 after considering the reply of the assessee dated 23.11.2010 is clearly barred by limitation. It is pertaining to mention that since proceedings for AY 2002-03 has been also initiated after search on 16.11.2009 when the amended provision did not come into existence on the sai .....

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o be read into, which was four year for the end of relevant financial year. In the present case, the relevant financial year 2001-02 was ended on 31.03.2002 and when the proceeding initiated on 15.11.2010 and order passed on 30.03.2011 u/s 201(1)/201(1A) for AY 2002-03 i.e. after approximately 9 years has to be held as time barred and thus we are of the opinion that the conclusion of the CIT(A) deserves to be confirmed and hence we uphold the same - Decided in favour of assessee - ITA No. 506/De .....

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erred in holding that the order passed by the Assessing Officer for AY 2002- 03 is barred by limitation. 2. On the facts and circumstances of the case as well as in law, the Ld. CIT(Appeals) has erred in ignoring the Proviso to section 201(3) of the IT Act, wherein it is clearly provided that the order for a financial year commencing on or before the 1s t day of April, 2007 may be passed at any time on or before the 31s t day of March, 2011. 3. The cancellation of the order by the CIT(A) passed .....

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01.04.2007 may be passed at any time on or before the 31s t day of March, 2011. It was also contended that in view of specific provisions brought to the Act by the Legislature the stand of the assessee is nto acceptable. The Ld. DR vehemently contended that the CIT(A) was incorrect in granting relief to the assessee in view of the specific provisions brought in by the legislature. 4. The Ld. AR, replying to the above submissions, supported the first appellate order and contended that the issue .....

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arred by limitation. The Ld. AR took us through relevant paras of the Tribunal Order and submitted that in the order passed by CIT(A) on 27.04.2010 u/s 201(1)/201(1A) of the AY for AY 2002-03 to 2004-05 was held as barred by limitation in the similar set of facts and circumstances then no other sustainable view is possible and the issue in the present case having similar set of facts and circumstance is squarely covered by the Tribunal order (supra). 5. On careful consideration of above rival su .....

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der dated 27.04.2010 passed uls 201(1)/201(1A) for the aforesaid years. I have also perused the legal provisions and case laws as relied upon by the Ld. AR. I find that the appellant is a liaison office situated in New Delhi of a U.S. based NGO established in 1943 having its operation in India for many years as an approved agency under the Indo-US bilateral agreement. I further find that the Ld. AR instead of explaining the merits of the case, he has emphasized the limitation matter. The Ld. AR .....

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assessment year 2003-04 to 2005-06 were barred by limitation because of the fact the proceeding in this case was initiated on 16.11.2009, which was beyond the period of 4 years from the end of financial year. Hence, the A.O was not justified to treat the assessee in default and levied the taxes uls 201(1) and charged the interest uls 201 (1A) in these years. 4.1 0n going through the impugned order dated 27.04.2010, l find that the A.O has admitted the Ld. AR argument relating to limitation matt .....

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esaid NHK Japan Broadcasting Corporation by the Hon 'ble Delhi High Court, i.e. first, on the issue of taxes and interest u/s 201(1)/201(1A) which was reported in 172 Taxman 230 and secondly, against the Citizen Individual Inhabitant Tax Act, which was a Japanese Law, which was reported in (2007)210CTR(Del)349. The SLP was filed against the second decision which has been decided by the Hon'ble Apex Court as reported in (2009) 225 CTR SC 258. The copy of all these three judgments have bee .....

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w.e.f. 01.04.2010. According to the A.O, in the light of newly inserted 'Proviso' to section 201(3) of the Income Tax Act, 1961, the order could be passed on or before 31.03.2011 in this case. In this regard, the Ld. AR relying on the Explanatory Circular for Finance (No 2) Act, 2009 for which the copy has been placed as Annexure 7 of paper book, argued that in the light of para 50.2 of Explanatory Note, the order on or before 31.03.2011 could be passed only in those cases where the pro .....

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d relevant to Financial Years 2001- 2002 to 2007-2008 vide order sheet entry dated 16.11.2009 "Thus, it is established that in the appellant's case the proceedings u/s 201(1)/201(1A) was not pending as on 0l.04.2007. Hence, the 'Proviso' to section 201(3) in which the limitation is given upto 31.03.2011 is not applicable in this case. 4.3 I further find that Hon'ble Delhi High Court in the case of CIT Vs. Hutchison Essar Telecom Ltd. (2010) 323 ITR 230 (Del) has held the pro .....

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.e. after the date of application (0l.04.2010) of newly inserted provision of Section 201 (3) by holding period of limitation for 4 years, from the end of financial year, the date of limitation on or before 31.03.2011 is not applicable in those case where the proceeding on or before 01.04.2007 was not pending. In the light of facts and circumstances of the case, legal provision and case laws decided by Hon'ble Jurisdictional High Court and also by the Apex Court, I hold that the proceedings .....

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. CIT (Appeals). The ld. DR while carrying us through the impugned orders invited our attention to the relevant provisions of section 201(3) , introduced by the Finance Act, 2009 with effect from 1.4.2010 and contended that in terms of proviso to section 201(3)of the Act, order for a financial year commencing on or before 1.4.2007 can be passed at any time on or before 31st day of March, 2011. Since proceedings in this case were initiated on 16/11/2009 in consequent of search u/s 132 of the Act, .....

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oceedings . To a query by the Bench, the ld. AR admitted that the said proviso was not considered by the Hon ble Delhi High Court in their decision in CIT Vs. Hutchison Essar Telecom Ltd. [2010] 323 ITR 230 (Del.), which was decided on 15th April, 2010 i.e. after the insertion of amended provisions u/s201(1)(3) of the Act, even though the ld. CIT (Appeals) concluded that the Hon ble Delhi High Court having decided a similar issue in their order dated 15th April, 2010, were aware of the said amen .....

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e aforesaid decisions referred to by the ld. CIT (Appeals). Indisputably, the assessee ,in the instant case, did not deduct tax at source at the time of payment or credit of salary to the aforesaid exptariates nor paid TDS to the credit of Government before the search on 11.9.2007. The impugned orders do not reveal any finding as to whether or not any statement referred to in sec. 200 of the Act was filed by the assessee nor even the date(s) of payment of salary or TDS or date of credit for such .....

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limitation without going in to merits of the case nor the assessee seems to have explained the issues on merits before the ld. CIT(A). The issue before us is as to whether the AO was competent to initiate proceedings u/s 201(1)/201(1A) of the Act in the year 2009 for these three financial years 2002-03 to 2004-05. While referring to proviso in the newly inserted provisions of section 201(3) introduced by Finance Act, 2009 with effect from 1.4.2010, the AO concluded that he was competent to pass .....

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n Broadcasting Corporation (supra) and therefore, the ratio of this decision has become final while in the grounds of appeal, the AO mentioned that on SLP filed by the Revenue, the Hon ble Apex Court have disposed of the SLP while leaving the question of limitation open. Inter alia, the ld. CIT(A) concluded that since in the instant case the proceedings u/s 201(1)/201(1A) were not pending as on l.04.2007, the 'Proviso' to section 201(3) was not applicable. Here , we may refer to the amen .....

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ears from the end of the financial year in which payment is made or credit is given, in any other case; Provided that such order for a financial year commencing on or before the 1st day of April, 2007 may be passed at any time on or before the 31st day of March, 2011. 7.1 The relevant extracts from the explanatory notes to the aforesaid newly inserted provisions, which have been referred to by the ld. CIT(A) in para of his order, read as under: 50. Providing time limits for passing of orders u/s .....

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rovided that an order u/s 201(1) for failure to deduct the whole or any part of the tax as required under this Act, if the deductee is a resident taxpayer, shall be passed within two years from the end of the financial year in which the statement of tax deduction at source is filed by the deductor. Where no such statement is filed, such order can be passed up till four years from the end of the financial year in which the payment is made or credit is given. To provide sufficient time for pending .....

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he employee would not have paid tax on such perquisites, (c) the deductee is a non-resident as it may not be administratively possible to recover the tax from the non-resident. 50.4 Applicability - This amendment has been made applicable with effect from 1st April, 2010 and will accordingly apply in relation to assessment year 2011- 12 and subsequent assessment years. 7.2 Before proceeding further, we may have a look at the decision in NHK Japan Broadcasting Corporation (supra) ,where in while r .....

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page 130 of the Report) is whether an order of assessment under section 11(3) of the Punjab General Sales Tax Act, 1948 or section 28(3) of the Haryana General Sales Tax Act, 1973 could now be completed or it would be barred by limitation. In that case, the assessment proceedings had been unduly delayed and the Supreme Court came to the conclusion that for completing the assessment proceedings there is no period of limitation prescribed and that would depend upon the facts of each case. Conside .....

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within a reasonable period of time and considering the provisions of the Punjab General Sales Tax Act, 1948, it was held that a reasonable period of time for initiating proceedings would be five years. 17. There is a qualitative difference between Bharat Steel Tubes Ltd. s case (supra) and Bhatinda District Co-op. Mill (P.) Union of Ltd. s case (supra ). In the former case, the question pertained to completion of proceedings, while in the latter case it pertained to initiation of proceedings. We .....

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eriod as accepted under section 153 of the Act, though for completion of assessment proceedings. The provisions of re-assessment are under sections 147 and 148 of the Act and they are on a completely different footing and ,therefore, do not merit consideration for the purposes of this case. 19. Even though the period of three years would be a reasonable period as prescribed by section 153 of the Act for completion of proceedings, we have been told that the Income-tax Appellate Tribunal has, in a .....

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or initiation of proceedings. 21. We are not inclined to disturb the time-limit of four years prescribed by the Tribunal and are of the view that in terms of the decision of the Supreme Court in Bhatinda District Co-op. Mil (P.) Union Ltd. s case (supra) action must be initiated by the competent authority under the Income-tax Act where no limitation is prescribed as in section 201 of the Act within that period of four years. 22. Learned counsel for the revenue submitted that the Department came .....

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ningless if the concept of knowledge is imported into the scheme of the Act. 23. The second part of the argument of learned counsel for the revenue in this regard was that the question of limitation did not at all arise because the assessee had itself admitted its liability and it voluntarily paid the tax and interest on that amount. Again, we are not in agreement with learned counsel for the revenue in this regard. 24. It appears that the assessee paid the tax voluntarily as well as interest th .....

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ould of course have to be in the negative in view of the reason that we have already indicated above. The fact that the assessee agreed to pay the tax voluntarily cannot put the assessee in a situation worse than if it had contested its liability. 25. We may also note that under section 191 of the Act, the primary liability to pay tax is on the person whose income it is that is the deductee. Of course, a duty is cast upon the deductor, that is the person who is making the payment to the deductee .....

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ssing an order under section 201 of the Act or through making an assessment of the income of the deductee. 26. For the reasons given by us we are not inclined to disturb the order passed by the Tribunal and, therefore, we answer the question in the affirmative in favour of the assessee and against the revenue and hold that the initiation of proceedings under section 201 of the Act against the assessee in respect of the assessment year 1990-91was barred by limitation having been initiated beyond .....

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(1A) of the Income Tax Act, 1961 are invalid and barred by time having been passed beyond a reasonable period." Having heard learned counsel on both sides, we are of the view that, on the facts and circumstances of these cases, the question on the point of limitation formulated by the Income Tax Appellate Tribunal in the present cases need not be gone into for the simple reason that, at the relevant time, there was a debate on the question as to whether TDS was deductible under the Income T .....

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, the assessee(s) could be declared as assessee(s) in default under Section 192 read with Section 201 of the Income Tax Act, 1961. Further, we are informed that the assessee(s) have paid the differential tax. They have paid the interest and they further undertake not to claim refund for the amounts paid. Before concluding, we may also state that, in Eli Lilly & Co. (India) Pvt. Ltd. (supra) vide Paragraph 21, this Court has clarified that the law laid down in the said case was only applicabl .....

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Essar Telecom Ltd.(supra), held that the proceedings under section 201/201(1A) of the Act, can be initiated only within three years from the end of the assessment year or within four years from the end of the relevant financial year . 8. Since proceedings in this case have been initiated after the search on 16.11.2009, as concluded by the ld. CIT(A) and the amended provisions had not come in to force on the said date , the law prevailing as on the date was pronounced in the aforesaid two decisio .....

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