2016 (6) TMI 1352 - HC - Income Tax

Court rules against retrospective application of amended tax provision

The High Court held that the amended provision extending the time limit for deeming a person to be in default for failure to deduct tax from a resident in ... Limitation for initiation of proceedings under section 201(1)/(1A) - Non-retrospective application of amendment to section 201(3) - Deeming a person an assessee in default for failure to deduct tax at sourceLimitation for initiation of proceedings under section 201(1)/(1A) - Non-retrospective application of amendment to section 201(3) - Validity of notices dated 15.9.2015 issued under section 201(1)/201(1A) in respect of assessment year 2009-10 on the ground of limitation in view of the amendment to section 201(3). - HELD THAT: - Prior to the amendment effected by the Finance Act, 2014 (with effect from 1.10.2014), sub-section (3) of section 201 provided that no order under sub-section (1) could be made at any time after the expiry of seven years from the end of the financial year in which payment was made or credit was given. The post-amendment text, relied upon by the Revenue, purports to alter the temporal reference for computation of the seven-year period. This Court, following its decision in Tata Teleservices (reported in (2016) 6 taxmann.com 157), held that the amended provision cannot be given retrospective operation to extend limitation for actions already time-barred under the pre-amendment law. Applying that principle, initiation of proceedings for the facts before the Court is barred by limitation under the pre-amendment sub-section (3) and the notices issued on 15.9.2015 could not validly rely on the amended provision to avoid the bar of limitation. [Paras 3]Notices dated 15.9.2015 in respect of assessment year 2009-10 are barred by limitation and are quashed.Final Conclusion: The petitions are allowed; the impugned notices dated 15.9.2015 are quashed as time-barred because the amendment to section 201(3) could not be given retrospective effect. Issues:Challenge to notices under section 201(1)/201(1A) of the Income Tax Act, 1961 for assessment year 2009-10 on the ground of being time-barred.Analysis:The petitioners contested notices dated 15.9.2015 seeking information, including the petitioner's account for the assessment year 2009-10, under section 201(1)/201(1A) of the Income Tax Act, 1961. The challenge was based on the argument that such inquiry was time-barred. The petitioners highlighted sub-section (3) of section 201 of the Act prior to the amendment by the Finance Act, 2014, which limited the time for deeming a person to be in default for failure to deduct tax from a resident in India. However, post-amendment, the time limit was extended to seven years from the financial year in which payment is made or credit is given. The Assessing Officer issued notices based on this amended provision, but the petitioners argued that it does not have retrospective applicability, citing the case of Tata Teleservices vs. Union of India.The High Court examined the facts and noted that under the previous sub-section (3) of section 201, the initiation of action for failure to deduct tax at source was time-barred. The amended sub-section (3) of section 201, effective from 1.10.2014, extended the limitation period to seven years. Relying on the decision in Tata Teleservices case, the Court held that this extension cannot be applied retrospectively. Consequently, the petitions were allowed, and the impugned notices dated 15.9.2015 were quashed, disposing of the petitions accordingly.