2026 (3) TMI 283 - HC - Income Tax

Limitation under Section 201(3) is computed quarter-wise, rendering three quarter orders time-barred and the fourth valid.

Whether the limitation under Section 201(3) is computed quarter-wise or annually: the court reasons that Section 201(3) links commencement to the ... Validity of order passed u/s 201(1) as barred by limitation - Limitation u/s 201(3) linked to date of filing of the TDS statement Whether limitation for issuing an order u/s 201(1) is to be computed quarter-wise from the end of the financial year in which each quarterly TDS statement is filed, or cumulatively/annually?- HELD THAT: - The Court held that Section 201(3) commences limitation from the end of the financial year in which the TDS statement is filed; thus the filing date of each statement is the determinative starting point for limitation. Rule 31A mandates that TDS statements be filed on a quarterly basis, so each quarterly filing constitutes a separate compliance event and furnishes an independent starting point for the two-year period specified in Section 201(3). The statutory language and the scheme of TDS compliance treat each quarter as a distinct period with its own due date and statement; nothing in the text or structure of the provisions supports an annual or cumulative computation of limitation. Limitation provisions in fiscal statutes must be strictly construed, and cannot be extended by implication to defeat the clear linkage between filing and commencement of limitation. [Paras 6, 7] Limitation is to be computed quarter-wise from the end of the financial year in which each quarterly TDS statement is filed; annual/cumulative computation is not permissible. Final Conclusion: The Tribunal correctly held that proceedings in respect of the first three quarters (filed in Financial Year 2008-09) were time-barred, and that proceedings in respect of the fourth quarter (filed in financial year 2009-10) were within limitation; the appeal is dismissed. Issues: Whether the limitation under Section 201(3) of the Income-tax Act, 1961 for issuing an order under Section 201(1) is to be computed on a quarter-wise basis (linked to quarterly TDS statement filings) or on an annual/cumulative basis.Analysis: Section 201(3) prescribes that no order under Section 201(1) shall be made after two years from the end of the financial year in which the statement referred to in Section 200 has been filed. Rule 31A requires TDS statements to be filed quarterly with distinct due dates for each quarter. The filing of each quarterly TDS statement therefore constitutes the statutory event from which the two-year limitation period prescribed by Section 201(3) commences for that particular quarter. The statutory language links commencement of limitation to the financial year in which the relevant statement is filed and does not prescribe an annual cumulative computation. Treating each quarter as a separate compliance period aligns with the scheme of the Act and Rules and with the requirement that limitation provisions in fiscal statutes be strictly construed.Conclusion: The limitation under Section 201(3) is to be computed quarter-wise linked to filing of the respective quarterly TDS statements under Rule 31A; the orders in respect of the first three quarters are time-barred and deleted, while the order in respect of the fourth quarter is within limitation. The decision is in favour of the assessee.