2016 (7) TMI 1515 - AT - Income Tax

Assessing Officer's Time-Barred Order Upheld by ITAT

The ITAT concluded that the Assessing Officer's order dated 10/03/2011 was not time-barred under section 201 of the Income Tax Act as it was within the ... Demand u/s 201 - barred by limitation - proceedings initiated within the permissible time limit or not ? - HELD THAT:- In the case of the assessee, we noted that the Assessing Officer initiated the proceedings u/s 201(1)/201(1A) for the impugned assessment year on 09/02/2007. The proceeding was not concluded. The proceedings remained pending as on the date when the proviso to section 201(3) was inserted by the Finance Act No. 2 of 2009 with effect from 01/04/2010. It is not denied by the Learned A. R. of the assessee that the proceedings were pending as on 01/04/2010. The proviso to section 201(3) therefore, was clearly applicable in the case of the assessee which 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 [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. Issues Involved:1. Whether the order passed by the Assessing Officer under section 201 of the Income Tax Act is barred by limitation.Detailed Analysis:Issue 1: Whether the order passed by the Assessing Officer under section 201 of the Income Tax Act is barred by limitation.Background and Facts:The case involves a State Government corporation engaged in providing finance for trade and industry. A survey by the Income Tax Department on 16/10/2005 revealed that the assessee had not deducted tax at source under section 193. The Assessing Officer (AO) issued a show-cause notice under section 201(1)/201(1A) on 09/02/2007. Despite the assessee's detailed submissions on 20/03/2007, the AO passed an order on 10/03/2011, creating a demand of Rs. 12,63,98,214/- for non-deduction/short deduction of tax and interest thereon. The CIT(A) quashed the AO's order as time-barred.CIT(A) Decision:The CIT(A) held that the order dated 10/03/2011 was barred by limitation, as it was passed after a lapse of over 3 years and 11 months from the end of the financial year in which proceedings were initiated and over 5 years and 11 months from the close of the relevant financial year. The CIT(A) relied on various judicial precedents, including Mahindra and Mahindra Ltd. v. DCIT and CIT v. Hutchison Essar Telecom Ltd., which established that statutory powers must be exercised within a reasonable time.ITAT Analysis:The ITAT examined whether the AO's order dated 10/03/2011 was barred by limitation. The ITAT noted that the proceedings were initiated within the permissible time frame as per the prevailing law before the insertion of section 201(3) by the Finance (No. 2) Act, 2009, effective from 01/04/2010. The ITAT emphasized that the proviso to section 201(3) allowed pending proceedings to be completed by 31/03/2011.Key Judicial Precedents Considered:1. Mahindra and Mahindra Ltd. v. DCIT: Upheld by the Bombay High Court, establishing that the maximum time limit for passing the order under sections 201(1) or 201(1A) is one year from the end of the financial year in which proceedings were initiated.2. CIT v. Hutchison Essar Telecom Ltd.: Delhi High Court held that proceedings under sections 201(1)/201(1A) must be initiated within three years from the end of the assessment year or within four years from the end of the relevant financial year.3. Vodafone Essar Mobile Services Ltd.: Delhi High Court clarified that the proviso to section 201(3) was meant to expand the time limit for completing pending cases, not to initiate new proceedings for periods earlier than four years prior to 31/03/2011.ITAT Conclusion:The ITAT concluded that the AO's order dated 10/03/2011 was not barred by limitation as it was passed within the permissible time frame stipulated by the proviso to section 201(3). The ITAT set aside the CIT(A)'s order and restored the AO's order, allowing the Revenue's appeal.Final Judgment:The appeal of the Revenue was allowed, and the order of the CIT(A) was set aside, restoring the AO's order.Order Pronounced:The order was pronounced in the open court on 27/07/2016.This comprehensive analysis preserves the legal terminology and significant phrases from the original text, ensuring a thorough understanding of the judgment and the issues involved.