2020 (8) TMI 619 - HC - Income Tax

Limitation Period for Income Tax Appeals: High Court sets 4-year cap, quashes Tribunal's order

The High Court considered appeals regarding the reasonable period of limitation for initiating proceedings under Section 201(1) and 201(1A) of the Income ... Default u/s 201(1) and 201(1A) - Period of limitation for initiating proceedings under Section 201(1) and 201(1A) - HELD THAT:- It is not in dispute that for the relevant Assessment years i.e., 2000-01 to 2002-03, the proceedings were initiated after a period of four years. The aforesaid issue is no longer res integra. The Supreme Court in BHATINDA DISTRICT COOPERATIVE MILK PRODUCERS UNION LTD. [2007 (10) TMI 300 - SUPREME COURT] Reasonable period for initiation of proceedings in respect of the Assessment years in question, at the time where no limitation was prescribed has been held to be four years. It is not in dispute that in the instant case, the proceedings under Section 201(1) and 201(1A) of the Act have been initiated after a period of four years. Therefore, the same cannot be held to be initiated within the reasonable time and consequently, the proceedings cannot be sustained in the eye of law. - Decided in favour of the assessee Issues involved:1. Determination of reasonable period of limitation for initiation of proceedings under Section 201(1) and 201(1A) of the Income Tax Act.2. Whether the Tribunal correctly interpreted the provisions of the Act regarding the period of limitation for initiating proceedings.3. Applicability of the decision in 'STATE OF PUNJAB V. BHATINDA DISTRICT COOPERATIVE MILK PRODUCERS UNION LTD.' in the present case.4. Assessment of the proceedings initiated by the Assessing Officer against the assessee for short deduction and interest.Issue 1: Determination of reasonable period of limitation for initiation of proceedings under Section 201(1) and 201(1A) of the Income Tax Act:The High Court considered the appeals arising from a common order passed by the Income Tax Appellate Tribunal concerning the Assessment years 2000-01 to 2002-03. The primary issue was the reasonable period of limitation for initiating proceedings under Section 201(1) and 201(1A) of the Act. The Tribunal had held that the period of limitation would be four years for tax deductions below one lakh and six years for deductions exceeding one lakh. The Court referred to the decision in 'STATE OF PUNJAB V. BHATINDA DISTRICT COOPERATIVE MILK PRODUCERS UNION LTD.' and subsequent interpretations by various High Courts to establish that a reasonable period for initiation of proceedings in the absence of a specific limitation was considered to be four years. As the proceedings in question were initiated after four years, they were deemed unsustainable in the eyes of the law.Issue 2: Interpretation of the provisions of the Act regarding the period of limitation for initiating proceedings:The Court analyzed the contentions of both parties regarding the absence of a prescribed time limit for initiating proceedings under Section 201(1) and 201(1A) of the Act. The revenue argued for a six-year limitation, while the assessee relied on legal precedents to support the four-year limitation. The Court referred to relevant decisions, including those from the Supreme Court and various High Courts, to establish that the reasonable period for initiation of proceedings in such cases was considered to be four years. The Court upheld this interpretation and ruled that the proceedings initiated after four years were not sustainable.Issue 3: Applicability of the decision in 'STATE OF PUNJAB V. BHATINDA DISTRICT COOPERATIVE MILK PRODUCERS UNION LTD.' in the present case:The Court extensively discussed the precedent set by the decision in 'STATE OF PUNJAB V. BHATINDA DISTRICT COOPERATIVE MILK PRODUCERS UNION LTD.' and its relevance to the present case. The decision established a reasonable period of four years for initiating actions where no specific limitation was prescribed. The Court affirmed the applicability of this decision to the Assessment years under consideration and held that the proceedings initiated after four years were not initiated within a reasonable time, rendering them unsustainable in the eyes of the law.Issue 4: Assessment of the proceedings initiated by the Assessing Officer against the assessee for short deduction and interest:The Court detailed the facts leading to the appeals, where the Assessing Officer demanded additional tax and interest from the assessee for short deduction of tax at source. The Commissioner of Income Tax (Appeals) and the Tribunal had differing views on the period of limitation for initiating proceedings under Section 201(1) and 201(1A) of the Act. The Court ultimately quashed the impugned order of the Tribunal pertaining to the Assessment years 2000-01 to 2002-03. Consequently, the appeal filed by the assessee was allowed, while the appeal by the revenue was dismissed.This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Court's decision on each aspect of the case.