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 India cannot be applied retrospectively. Relying on the decision in Tata Teleservices case, the Court allowed the petitions, quashed the notices dated 15.9.2015, and disposed of the petitions accordingly.

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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.

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