Notice issued by AO under Section 201(1)/201(1A) held time-barred; orders quashed, assessee appeals allowed.

The Tribunal held that the notice issued by the AO under Section 201(1)/201(1A) was time-barred as it exceeded the reasonable period of four years. Consequently, the orders passed under these sections were quashed, and the appeals of the assessees were allowed.

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Issues Involved:
1. Limitation for issuing notice under Section 201(1)/201(1A) of the Income Tax Act, 1961.
2. Treatment of the assessee as an assessee in default for non-deduction of tax at source under Section 195.
3. Determination of tax liability in the hands of non-resident sellers.
4. Computation of long-term capital gains without reference to comparable cases.
5. Charging interest under Section 201(1A).

Issue-wise Detailed Analysis:

1. Limitation for Issuing Notice Under Section 201(1)/201(1A):
The primary contention of the assessees was that the notice issued under Section 201(1)/201(1A) dated 02.03.2015 was barred by limitation, as it was issued beyond the reasonable period of four years from the end of the relevant assessment year (2008-09). The Tribunal observed that the assessees purchased property from a non-resident on 09.01.2008 and failed to deduct tax at source as required under Section 195. The Tribunal referred to its earlier decision in the case of Bheemarasetty Sunitha and the Andhra Pradesh High Court's judgment in CIT-II, Hyderabad Vs. U.B. Electronic Instruments Ltd., which held that a reasonable period for initiating action under Section 201(1)/201(1A) is four years. The Tribunal concluded that the notice issued by the AO was beyond this period and thus barred by limitation.

2. Treatment of the Assessee as an Assessee in Default for Non-Deduction of Tax at Source Under Section 195:
The assessees argued that they were under the impression that the vendor was a resident and hence did not deduct tax at source. They also contended that the vendor had a valid PAN and would file the return of income. The Tribunal noted that the AO treated the assessees as defaulters for failing to deduct tax at source on payments made to the non-resident vendor. The AO computed the capital gains and raised a demand accordingly. However, since the notice under Section 201(1)/201(1A) was issued beyond the reasonable period, the Tribunal quashed the orders passed by the AO.

3. Determination of Tax Liability in the Hands of Non-Resident Sellers:
The assessees contended that the liability to tax should be determined in the hands of the non-resident sellers, who had filed their returns of income. The Tribunal noted that the AO had issued notices under Section 147 to the non-resident vendor, who responded and filed returns. The assessments were completed with 'Nil' demand. The Tribunal observed that the simultaneous action taken by the AO under Sections 147 and 201(1)/201(1A) indicated that there was no inaction on the part of the AO. However, since the notice under Section 201(1)/201(1A) was time-barred, the Tribunal set aside the orders.

4. Computation of Long-Term Capital Gains Without Reference to Comparable Cases:
Although the assessees initially raised this issue, they did not press it during the appeal hearing. Therefore, the Tribunal dismissed this ground as not pressed.

5. Charging Interest Under Section 201(1A):
The assessees argued that the interest under Section 201(1A) should be charged only up to the date on which the non-resident vendor ought to have filed his return of income under Section 139(1). However, since the Tribunal quashed the orders under Section 201(1)/201(1A) due to the time-barred notice, this issue became moot.

Conclusion:
The Tribunal held that the notice issued by the AO under Section 201(1)/201(1A) was beyond the reasonable period of four years and thus barred by limitation. Consequently, the orders passed under these sections were quashed, and the appeals of the assessees were allowed.

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