2020 (7) TMI 643 - AT - Income Tax

Tribunal Quashes Tax Assessment Order as Time-Barred, Leaves Other Grounds Open

HCL Technologies Ltd Versus ACIT (TDS), Noida

The Tribunal allowed the appeal of the assessee, holding that the order passed by the Assessing Officer under section 201(1) and 201(1A) of the Income-tax ... Assessee in Default for non deduction of TDS - Validity of order u/s 201(1) and 201(1A) - period of limitation - HELD THAT:- As decided in TATA TELESERVICES VERSUS UNION OF INDIA & 1 [2016 (2) TMI 414 - GUJARAT HIGH COURT] section 201(3) has amended by Finance Act No. 2 of 2014 shall not be applicable retrospectively and therefore, no order u/s 201(1) could be passed for which limitation had already expired prior to amended section 201(3) as amended Finance Act 3 of 2014 came into force. In the present case order should have been passed before two years from the end of the financial year in which the statement [ TDS Statements] are filed or four years from the end of the financial year in which payment is made - statement of TDS was required to be filed on or before 30.06.2009 and therefore, the time limit as per the 201(3)(i) expires by 31.03.2012. Further as per 201(3)(ii) such time limit expires on 31.03.2013 - that to the assessee the time limit prescribed u/s 201(3)(i) applies as assessee has filed its statement of TDS. Therefore, as the impugned order is passed on 29.03.2016, it is barred by limitation. - Decided in favour of assessee. Issues Involved:1. Whether the order passed by the Assessing Officer (AO) under section 201(1)/201(1A) of the Income-tax Act, 1961 was time-barred.2. Whether the provisions of Chapter XVIIB of the Act applied to year-end provisions for various expenses.3. Whether the tax liability under section 201(1) could be fastened on the appellant when the payees were not known at the end of the financial year.4. Computation of interest under section 201(1A) of the Act.Detailed Analysis:Issue 1: Time-Barred OrderThe primary issue was whether the order passed by the AO under section 201(1)/201(1A) was time-barred. The assessee argued that the order should have been passed before two years from the end of the financial year in which the TDS statement was filed or four years from the end of the financial year in which the payment was made. The AO issued the notice on 11.01.2016, and the order was passed on 16.02.2016. The assessee contended that the time limit for passing the order had already expired on 31.03.2012, as per the provisions before the amendment by the Finance Act No. 2 of 2014.The Tribunal noted that the Gujarat High Court in Tata Teleservices Vs. Union of India held that the amendment to section 201(3) by the Finance Act No. 2 of 2014, which extended the time limit to seven years, was not applicable retrospectively. The Hon'ble Gujarat High Court's decision was based on the principle that the amendment did not revive the right to pass an order which was already time-barred under the old law. The Tribunal followed this decision and concluded that the order passed by the AO on 16.02.2016 was barred by limitation and quashed it.Issue 2: Application of Chapter XVIIB to Year-End ProvisionsThe assessee argued that there was no liability to deduct tax at source on year-end provisions for various expenses, which were reversed at the beginning of the next financial year. The CIT(A) held that the provisions were made under specific heads of expenditure with reference to the likely demand of the parties, and therefore, tax was required to be deducted at the time of provision.The Tribunal, however, did not adjudicate this issue as it was left open due to the resolution of the primary issue of the time-barred order.Issue 3: Tax Liability Under Section 201(1)The assessee contended that no tax under section 201(1) could be recovered from the appellant for the alleged failure to deduct tax from the year-end provision of expenses, as the liability to pay such tax was that of the payees directly. The CIT(A) rejected this contention, holding that the appellant was required to deduct tax at the time of making provisions.Since the primary issue of the time-barred order was resolved in favor of the assessee, this issue was not further adjudicated by the Tribunal.Issue 4: Computation of Interest Under Section 201(1A)The assessee argued that the CIT(A) erred in not directing the AO to compute interest under section 201(1A) from the date on which tax was deductible up to the date of deposit of tax or the due date of filing the return by the payee, whichever was earlier. The CIT(A) upheld the AO's computation of interest.Given the resolution of the primary issue, the Tribunal did not need to address this issue further.Conclusion:The Tribunal allowed the appeal of the assessee, holding that the order passed by the AO under section 201(1) and 201(1A) was barred by limitation and thus quashed. The other grounds of appeal were left open and not adjudicated.