TDS recovery limitation runs from year-end default date, not a later default order, under the Income-tax scheme.

Under the TDS recovery scheme, liability arises immediately when tax is not deducted under section 195 or, after deduction, is not paid under section 200, and a person may be treated as an assessee in default under section 201 without any separate demand order. Section 231 is read as containing two distinct limbs: for default-based recovery, limitation begins from the last day of the financial year in which the default occurred, not from the date of a later section 201 order. The commentary distinguishes the old Act because it lacked this second limb and notes that legislative materials support this interpretation.

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Issues: Whether recovery proceedings for tax deductible at source were barred by limitation under section 231 of the Income-tax Act, 1961 when the assessee failed to deduct tax under section 195 and to pay it under section 200.

Analysis: The statutory scheme under sections 195, 200 and 201 creates an immediate liability on the person responsible for deduction once the tax is not deducted or, after deduction, is not paid within the prescribed time. That liability arises by operation of law and not by any separate order or notice of demand. Section 231 has two distinct limbs: the first applies to sums payable after demand, while the second applies where a person is deemed to be an assessee in default. For the latter category, limitation runs from the last day of the financial year in which the default occurred, not from the date of an order under section 201. The corresponding provision in the old Act lacked this second limb, so decisions under that Act were distinguishable. Legislative materials also supported this construction.

Conclusion: The recovery proceedings were barred by limitation, and the question was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: Where a person becomes an assessee in default under the tax-deduction provisions, the period for commencing recovery proceedings runs from the end of the financial year in which the default occurs, and not from the date of any later section 201 order.

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