2012 (3) TMI 188 - AT - Income Tax

Revenue's Appeals Dismissed: Barred by Limitation, Delhi HC Precedents Upheld

The Tribunal dismissed the Revenue's appeals, affirming that the proceedings initiated by the Assessing Officer were barred by limitation. It upheld the ... Non deduction of TDS - Period of limitation u/s 201(3) - assessee did not deduct tax at source from the salary paid to the aforesaid employees within the prescribed time, the AO treated the assessee company in default in terms of provisions of section 201(1) of the Act and accordingly, raised demand u/s 201(1) and 201(1A) of the Act- Assessee contented that as he paid the tax and tax thereon voluntarily but the acceptance of the liability would not extend the period of limitation nor would it extend the reasonable time that is postulated by the scheme of the Income-tax Act - Held that :- answer to the question of limitation is in the affirmative in favour of the assessee and against the revenue - initiation of proceedings under section 201 of the Act against the assessee in respect of the assessment year 1990-91 was barred by limitation having been initiated beyond a reasonable period of time of four years - 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. Issues Involved:1. Limitation period for initiating proceedings under Section 201(1)/201(1A) of the Income Tax Act.2. Applicability of the proviso to Section 201(3) introduced by the Finance Act, 2009.3. Interpretation of the Delhi High Court's decisions in NHK Japan Broadcasting Corporation and Hutchison Essar Telecom Ltd.4. Validity of the CIT(A)'s cancellation of the AO's order under Section 201(1)/201(1A).Detailed Analysis:1. Limitation Period for Initiating Proceedings Under Section 201(1)/201(1A):The core issue revolves around whether the proceedings initiated by the Assessing Officer (AO) in 2009 for the financial years 2002-03 to 2004-05 were barred by limitation. The AO contended that the limitation period was extended by the proviso to Section 201(3) introduced by the Finance Act, 2009, which allowed orders to be passed up to 31st March 2011 for financial years expiring before 1st April 2007. However, the CIT(A) and the Tribunal relied on the Delhi High Court's decision in NHK Japan Broadcasting Corporation, which held that a reasonable period for initiating such proceedings was four years from the end of the financial year.2. Applicability of the Proviso to Section 201(3):The AO argued that the newly inserted proviso to Section 201(3) allowed the order to be passed by 31st March 2011. The CIT(A) disagreed, stating that the proviso applied only to cases where proceedings were pending as of 1st April 2007, which was not the case here. The Tribunal upheld this view, noting that the proviso could not extend the limitation period beyond what was considered reasonable by the courts.3. Interpretation of the Delhi High Court's Decisions:The CIT(A) and the Tribunal heavily relied on the Delhi High Court's rulings in NHK Japan Broadcasting Corporation and Hutchison Essar Telecom Ltd. The former decision established a four-year limitation period for initiating proceedings under Section 201(1)/201(1A), while the latter reaffirmed this limitation even after the insertion of the new proviso by the Finance Act, 2009. The Tribunal noted that the Supreme Court had left the question of limitation open in its decision on the SLP filed by the Revenue in NHK Japan Broadcasting Corporation, implying that the High Court's decision remained authoritative.4. Validity of the CIT(A)'s Cancellation of the AO's Order:The CIT(A) concluded that the AO's order dated 27th April 2010 was barred by limitation and thus invalid. The Tribunal upheld this conclusion, noting that the AO had admitted the limitation issue but proceeded with the order based on the pending SLP. The Tribunal emphasized that the law as interpreted by the jurisdictional High Court must prevail, and since the proceedings were initiated beyond the four-year period, the AO's order was rightly canceled by the CIT(A).Conclusion:The Tribunal dismissed the Revenue's appeals, affirming the CIT(A)'s decision that the proceedings initiated by the AO were barred by limitation. The Tribunal upheld the interpretation that the four-year limitation period applied, as established by the Delhi High Court's decisions, and that the proviso to Section 201(3) did not extend this period for cases where proceedings were not pending as of 1st April 2007. Consequently, the AO's orders under Section 201(1)/201(1A) were invalidated.