Retrospective second proviso to section 201(1) applies, but relief needs verified Form 26A support and payment reconciliation.

The second proviso to section 201(1) of the Income-tax Act, 1961 operates retrospectively, so its benefit is not confined to payments made after 1 July 2012. However, relief from treatment as an assessee in default depends on proper proof that the payee has discharged tax liability on the relevant payments and that the supporting Form 26A and reconciliations cover the amounts in question. Because the certificate covered only some categories of payments and the figures did not fully match the assessment record, complete relief could not be granted on the existing material. The matter was therefore remanded for fresh verification and de novo adjudication.

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Issues: Whether the assessee could be treated as an assessee in default under section 201(1) of the Income-tax Act, 1961, and charged consequential interest under section 201(1A), where the payee had furnished Form 26A and the matter required verification of the nature and reconciliation of the relevant payments.

Analysis: The second proviso to section 201(1) was held to be retrospective in operation, and therefore the mere fact that it was inserted with effect from 01.07.2012 did not prevent the assessee from relying on it. At the same time, the record showed that the certificate in Form 26A covered only payments relatable to sections 194A and 194J, while the assessment order also covered payments falling under sections 194C and 194I, and the figures in the certificate did not fully tally with the amounts identified by the Assessing Officer. In these circumstances, the factual foundation for granting complete relief required fresh verification.

Conclusion: The objection based on the date of introduction of the second proviso to section 201(1) was rejected, but the question whether the assessee could finally escape treatment as an assessee in default was remanded to the Assessing Officer for de novo adjudication after reconciliation and verification.

Final Conclusion: The appeal succeeded only to the extent that the retrospective applicability of the second proviso was accepted, while the substantive liability issue was sent back for fresh decision.

Ratio Decidendi: The second proviso to section 201(1) of the Income-tax Act, 1961 operates retrospectively, but relief from treatment as an assessee in default depends on proper proof that the payee has discharged tax liability on the relevant payments and that the supporting certificate and reconciliations cover those payments.

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