2018 (9) TMI 1962 - AT - Income Tax

Assessee's appeal partially allowed due to invalid order under IT Act, demand and interest void.

The Tribunal partially allowed the assessee's appeal, ruling that the order passed under section 206C(6)/206C(7) of the IT Act was invalid due to being ... Limitation barred order - reasonable period of limitation of four years - analogy between Section 201 and Section 206C - order under Section 206C(6)/206C(7) invalid if passed beyond reasonable periodLimitation barred order - reasonable period of limitation of four years - analogy between Section 201 and Section 206C - order under Section 206C(6)/206C(7) invalid if passed beyond reasonable period - Validity of the order passed under Section 206C(6)/206C(7) of the Act dated 31.03.2015 being barred by limitation - HELD THAT: - The Tribunal observed that Section 206C does not prescribe a specific limitation period for passing an order under Section 206C(6)/206C(7). Relying on consistent decisions treating Section 201(1)/201(1A) as analogous and on High Court and Tribunal jurisprudence, the Tribunal adopted a reasonable limitation period of four years for initiation/issuance of orders where the statute is silent. Applying the analogy between Section 201 and Section 206C-both being measures to secure tax compliance and vicarious liabilities of payers-the Tribunal held that an unfettered power to act at any time would be inconsistent with the scheme and finality of the law. Consequently, an order under Section 206C(6)/206C(7) passed beyond the four year reasonable period is invalid. Following its earlier order in the assessee's own case, the Tribunal held the impugned order dated 31.03.2015 to be barred by limitation and quashed it; once that order was quashed, the related contentions on demand and interest became infructuous. [Paras 6, 7]Impugned order dated 31.03.2015 passed under Section 206C(6)/206C(7) is invalid being barred by limitation and is quashed.Final Conclusion: Appeal partly allowed: the order under Section 206C(6)/206C(7) for AY 2008-09 dated 31.03.2015 is quashed as barred by limitation; consequential grounds relating to demand and interest are rendered infructuous. Issues Involved:1. Validity of the order passed under section 206C(6)/206C(7) of the IT Act being barred by limitation.2. Confirmation of demand raised by the ITO for non-collection of Tax at Source (TCS) under section 206C(6) of the Act.3. Demand of interest related to the alleged non-collection of TCS under section 206C(7) of the Act.Issue-wise Detailed Analysis:1. Validity of the Order Passed Under Section 206C(6)/206C(7) of the IT Act Being Barred by Limitation:The assessee argued that the order dated 31st March 2015, passed under section 206C(6)/206C(7) of the IT Act, was barred by limitation. The Tribunal noted that there was no specific limitation period provided in Section 206C or any other provisions of the Income Tax Act for passing such orders. However, it was emphasized that the absence of a statutory limitation does not grant the Assessing Officer (AO) unfettered powers to pass orders at any point in time. The Tribunal referred to various judicial precedents, including the Hon'ble Delhi High Court's decision in the case of CIT Vs. NHK Japan Broadcasting, which established that a reasonable period for passing such orders is four years. The Tribunal concluded that the order passed on 31st March 2015 was beyond this reasonable period of four years and hence invalid due to being barred by limitation.2. Confirmation of Demand Raised by the ITO for Non-Collection of Tax at Source (TCS) Under Section 206C(6) of the Act:Given that the Tribunal quashed the order under section 206C(6)/206C(7) due to being barred by limitation, the confirmation of the demand raised by the ITO became infructuous. The Tribunal did not need to address the merits of the demand for non-collection of TCS, as the primary order itself was invalid.3. Demand of Interest Related to the Alleged Non-Collection of TCS Under Section 206C(7) of the Act:Similar to the demand for non-collection of TCS, the issue of interest demand under section 206C(7) also became infructuous following the quashing of the primary order. The Tribunal did not need to delve into the specifics of the interest demand since the foundational order was deemed invalid.Conclusion:The Tribunal allowed the appeal of the assessee partly, primarily on the ground that the order passed under section 206C(6)/206C(7) was barred by limitation. Consequently, the other issues concerning the confirmation of the demand and the interest related to non-collection of TCS became moot. The order was pronounced in the open court on 28/09/2018.