Bona fide TDS estimation and prospective limitation rules govern employer default exposure on cash medical benefit and earlier orders.

An employer's TDS obligation under section 192 was assessed on the basis of a bona fide estimate of salary income, and cash medical benefit paid on employee declarations was not treated as creating default where the estimate was honest and supported by prior approval. The extended seven-year limitation for orders under section 201 was held prospective, so earlier orders that had already become time barred under the two-year regime could not be revived. The jurisdictional challenge failed for want of prior objection and proof of lack of authority. The issue concerning payment to Sodexo SVC India Pvt. Ltd. for the later year was remanded for fresh consideration.

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Issues: (i) Whether the notice and orders passed by the Assessing Officer were without jurisdiction; (ii) whether the orders under section 201(1) and section 201(1A) were barred by limitation for the earlier assessment years; (iii) whether cash medical benefit paid to employees was liable for tax deduction at source and whether the assessee could be treated as an assessee in default; (iv) whether the issue relating to payment to Sodexo SVC India Pvt. Ltd. for assessment year 2016-17 required reconsideration.

Issue (i): Whether the notice and orders passed by the Assessing Officer were without jurisdiction.

Analysis: The challenge to jurisdiction was not raised before the first appellate authority. The assessee also participated in the assessment proceedings without objection. The record did not establish absence of authority in the officer who passed the orders.

Conclusion: The jurisdictional challenge was rejected against the assessee.

Issue (ii): Whether the orders under section 201(1) and section 201(1A) were barred by limitation for the earlier assessment years.

Analysis: The limitation under the earlier regime of section 201(3) was two years from the end of the financial year in which the TDS statement was filed. The later amendment extending the period to seven years was held to operate prospectively, as the legislature did not express retrospective intent. The orders for the relevant earlier years had already become time barred before the amendment came into force.

Conclusion: The orders for assessment years 2011-12 to 2014-15 were held to be barred by limitation and were set aside.

Issue (iii): Whether cash medical benefit paid to employees was liable for tax deduction at source and whether the assessee could be treated as an assessee in default.

Analysis: The payments were made as cash medical benefit on the basis of employee declarations and were supported by the earlier CBDT approval. The Court treated the employer's obligation under section 192 as one of making a bona fide estimate of salary income. It was held that the later insertion of section 192(2D) did not alter the position for the relevant period so as to compel a different result, and the absence of a specific rule requiring verification of medical proof for this benefit was material. The estimate was accepted as honest and bona fide.

Conclusion: The assessee could not be treated as an assessee in default for the cash medical benefit issue, and the related demand and interest were deleted for the years decided on merits.

Issue (iv): Whether the issue relating to payment to Sodexo SVC India Pvt. Ltd. for assessment year 2016-17 required reconsideration.

Analysis: The evidentiary material relating to the certificate under section 197 was not considered by the lower authority, and the matter required examination on the available documents after granting opportunity to the assessee.

Conclusion: The issue was remanded for fresh consideration.

Final Conclusion: The appeals were substantially allowed in favour of the assessee for the earlier years, relief was granted on the cash medical benefit issue for the later years, and the remaining issue was sent back for reconsideration.

Ratio Decidendi: An employer is liable under section 192 only on a bona fide estimate of salary income, and a later enlargement of the TDS default period cannot be applied retrospectively to revive orders already time barred.

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