TMI Blog2016 (7) TMI 1515X X X X Extracts X X X X X X X X Extracts X X X X ..... We may mention that in the case of NHK Japan Broadcasting Corporation [ 2008 (4) TMI 182 - DELHI HIGH COURT] as well as in the case of CIT v. Hutchison Essar Telecom Ltd. [ 2010 (4) TMI 45 - DELHI HIGH COURT] have held that the proceedings u/s 201(1) and 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. In the case of the assessee, the relevant assessment year is the assessment year 2005-06 while the financial year is 2004-05. The Assessing Officer has initiated the proceedings on 09/02/2007. On the basis of these decisions also, the proceedings were initiated by the Assessing Officer within the permissible time. - Decided in favour of revenue. - ITA No. 510/Lkw/2015 - - - Dated:- 27-7-2016 - Shri P. K. Bansal, Accountant Member And Shri Aby T. Varkey, Judicial Member Appellant by : Dr. A. K. Singh, CIT, D.R. Respondent by : Shri AVikas Garg, F.C.A. ORDER Per P. K. Bansal, A. M. This appeal has been filed by the Revenue against the order of CIT(A)-II, Kanpur dated 08/04/2015 related to assessment year 2005-06 by taking the following grounds: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITO (TDS-II), Kanpur and the replies of the assessee Corporation in response to the remand reports. The assesses case is that the proceedings in the instant case under sections 201(1) and 201(A) were initiated on 09-02- 2007 and order u/s 201(1)/201(1A) was passed on 10-03- 2011 after a lapse of over 3 years and 11 months from end of the financial year in which proceedings under the aforesaid sections was initiated as also after a lapse of over 5 years and 11 months from the close of the relevant financial year. Therefore the impugned order dated 10-03-2011 is barred by limitation and is liable to be struck down as void ab initio. The assessee has placed reliance on the following decisions:- 1. Mahindra and Mahindra-Ltd. v. DCIT 313 ITR (AT) 263 which has been upheld by the Hon'ble Bombay High Court cited at 365 ITR 560. 2. CIT v. Hutchison Essar Telecom Ltd. 322 ITR 230 (Delhi) 3. ACIT vs Catholic Relief Service (212) 28 Taxmann.com 168 (ITAT Delhi). 4. Raymond Woolen Mills Ltd. v. ITO 57 ITD 536 (I.T.A.T. Mumbai). 5. Sahara Airlines Ltd. v. DCIT (2002) 83 ITD 11 (Delhi). 6. Mohqmmad Kavi Mohammad Amin vs. Fatabai Ibrahim (1997) 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ni stand on the same footing. If suo moto revisional proceedings can be invoked only within a reasonable time, by the same logic, the proceedings themselves should be rendered or passed within a reasonable time. The repository of statutory power should be reasonable, that means that 'Damocles' sword should not hang endlessly, at the caprice of any statutory authority. Even in the various decisions rendered by the Hon'ble Apex Court which have been relied upon by the Assessee Corporation, the Hon'ble Apex Court has held that statutory powers should be exercised within a reasonable time if no time limit is prescribed. In view of the above facts and decisions as relied upon and discussed in the written submissions and replies of the assessee Corporation, submitted in response to the remand reports, I am inclined to hold, that the impugned order dated 10-03-2011 passed u/s201(1)/201(1A) was barred by limitation. Further I also agree with the assessee Corporation that in respect of FY 2004-05 no time-limit was prescribed by the Act for passing an order u/s 201(1)/201(1A) of the Act and it was only w.e.f. AY 2010-11 that section 201(3) of the Act was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for non deduction of the tax at source and short deduction of tax at source and the imposition of the interest u/s 201(1A) of the Act. Before us, Learned A. R. of the assessee contended that the order passed by the Assessing Officer is barred by limitation therefore, to decide whether order passed by the Assessing Officer is barred by limitation, we have to interpret the provision of section 201(3) of the Act. Before us, Learned A. R. of the assessee relied on the decision of Hon'ble Delhi High Court in the case of CIT vs. NHK Japan Broadcasting Corporation [2008] 305 ITR 137 (Del) and in the case of CIT vs. Hutchison Essar Telecome Ltd. [2010] 323 ITR 230 (Del). The Hon'ble court held that the proceedings u/s 201(1)/201(1A) 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. On the face of these judgments, the judgments, in our opinion, will not assist the assessee as in the case of the assessee the proceedings were initiated by the Assessing Officer u/s 201(1)/201(1A) on 09/02/2007 i.e. within three years from the end of the assessment year or within four years from the end of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any time on or before the 31st day of March, 2011. The sub-clause also provides that the provisions of sub-clause (ii) of sub-section (3) of section 153 and of Explanation 1 to section 153 shall, so far as may apply to the time limit prescribed in proposed sub-section (3) of section 201. 7. There was a memorandum explaining the provisions of Finance (2) Bill, 2009, which was in the form of a circular issued by the Central Board of Direct Taxes (CBDT), which reads as under: f. Providing time limits for passing of orders u/s 201(1) holding a person to be an assessee in default Currently, the Income Tax Act does not provide for any limitation of time for passing an order u/s 201(1) holding a person to be an assessee in default. In the absence of such a time limit, disputes arise when these proceedings are taken up or completed after substantial time has elapsed. In order to bring certainty on this issue, it is proposed to provide for express time limits in the Act within which specified order u/s 201(1) will be passed. It is proposed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Assessee to be an Assessee in default. The discussion in the said judgment on this issue is contained in paras 6 to 10, which read as under: 6. It is evident from the above discussion that the assessee was sought to be proceeded against Section 201 as one in default, after the period of four years. This Court is conscious that the text of the provision nowhere limits the exercise of powers. Equally, there are several provisions of enactment, i.e., Sections 143 (2), 147, 148 and 263, and even through introduction of specific provisions in Section 153 of the Act, where the time limit is specifically prescribed. At the same time, this Court in NHK Japan (supra) was of the opinion that the power to treat someone as assessee in default is too drastic, vague and oppressive since it is conditioned by some measure of limitation. In these circumstances, the Court had insisted that for the purpose of initiation of proceedings under Section 201, the AO has to act within four years. In NHK Japan, the Court did take note of the judgment in State of Punjab v. Bhatinda District Co-op Milk Producers Union Ltd. (2007) 9 RC 637. 7. The judgment in NHK Japan to a certain extent was limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As indicated hereinbefore, maximum period of limitation provided for in Sub-section (6) of Section 11 of the Act is five years. 9. More recently in Commissioner of Income Tax-III v. Calcutta Knitwears, Ludhiana(2014) 362 ITR 673 (SC), the Supreme WP (C) Nos.8535, 8536, 8537/2011 and Court had the occasion to deal with the correct position in law as to the initiation of income tax proceedings. Although, the context of the dispute was in respect of recording of a satisfaction note as to the initiation of proceedings against third parties under erstwhile Section 158BD of the Act which did not prescribe the period of limitation and left it to the discretion of the AO to decide on being satisfied that such proceedings were required to be initiated, the Court limited such discretion in the following terms: 44. In the result, we hold that for the purpose of Section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch mandates that such order for a financial year commencing on or the first day of April, 2007 may be passed at any time on or before 31st day of March 2011. We noted that in the case of the assessee, the Assessing Officer has passed the impugned order on 10/03/2011 therefore, on this basis itself it cannot be said that the order passed by the Assessing Officer was barred by limitation. We may mention that in the case of NHK Japan Broadcasting Corporation (supra) as well as in the case of CIT v. Hutchison Essar Telecom Ltd., the High Courts have held that the proceedings u/s 201(1) and 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. In the case of the assessee, the relevant assessment year is the assessment year 2005-06 while the financial year is 2004-05. The Assessing Officer has initiated the proceedings on 09/02/2007. On the basis of these decisions also, the proceedings were initiated by the Assessing Officer within the permissible time. In the case of Vodafone Essar Mobile Services ltd. (supra), the facts were different. In that case the Department had initiated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this stage, it is required to be noted that subsection (3)(i) of section 201 came to be introduced by Finance Act No.2 of 2009 which 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 31st day of March, 2011. As per Memorandum of Finance Bill No.2 of 2009, in respect of HC-NIC Page 31 of 64 Created On Tue Mar 22 01:53:00 IST 2016 31 of 64 F.Y.2007-08 and earlier years only proceedings that were pending could be completed by 31/3/2011 and as such no fresh proceedings could be commenced for the said period. The Hon'ble High Court nowhere stated that the proviso to section 201(3) as inserted by the Finance Act No. 02 of 2009 will not apply where the proceedings are pending as on 01/04/2010. 11.4 We have also gone through the decision of I.T.A.T. Delhi B Bench in the case of ACIT vs. Catholic Relief Services [2012] 28 taxmann.com 168 (Delhi). We noted that in that case the proceedings for the assessment year 2003-04 to 2005-06 were initiated on 16/11/2009 i.e. after the expiry of three years from the assessment year and four years from the end of the relevant financial year. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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