TaxTMI 
TaxTMI 
2016 (7) TMI 1515
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....nt that the said case laws relate to the period prior to 01/04/2010, hence these are not applicable to the present case. 3. The Ld. CIT (A) has erred in law and on facts of the case in relying on the case law in the case of Mahindra and Mahindra Ltd. Vs. DCIT 365 ITR 560 ignoring the fact that in the said case provision of sub-section (3) of section 201 was not the issue before the Hon'ble High Court." 2. The issue involved in the ground taken by the Revenue is that whether the order passed by the Assessing Officer u/s 201 of the Act is barred by limitation. 3. The facts of the case, in brief, are that the assessee is State Government corporation engaged in providing finance for trade and industry and for that purpose also resorts to borrowings. A survey was carried out by the Income Tax Department on the premises of the assessee on 16/10/2005 wherein it was noted that the assessee has not deducted the tax at source u/s 193 of the Act. The Assessing Officer therefore, issued show cause notice to the assessee u/s 201(1)/201(1A) of the Act on 09/02/2007. The assessee filed detailed submissions on 20/03/2007. The Assessing Officer was not satisfied with the explanat....
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....case under sections 201(1) and 201(A) were initiated on 09-02-2007 and order u/s201(1)/ 201(1A) was passed on 10-03-2011 after a lapse of over 3 years and 11 months from end of the financial year in which proceedings under the aforesaid sections was initiated as also after a lapse of over 5 years and 11 months from the close of the relevant financial year. The only contention of the AO is that the impugned order dated 10-03-2011 was passed in accordance with proviso to section 201(3). He has further contended that at the time the decisions, as cited by the assessee in his written submissions, were rendered proviso to section 201(3) was not inserted which was only inserted by Finance (No.2) Act, 2009 w.e.f. 1- 04-2010. I find that in the decision cited by the assessee Corporation in the case of Mahindra and Mahindra Ltd. v. DCIT 313 ITR (AT) 263 which has been upheld by the Hon'ble Bombay High Court cited at 365 ITR 560. It is clearly upheld by the High Court that the maximum time limit for passing the order under section 201(1) or section 201(1A) is the same as prescribed under section 153(2) being one year from the end of the financial year in which proceedin....
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....ffects the period of limitation for earlier years. Similarly the decision of Hon'ble Delhi High Court in the case of CIT v. Hutchison Essar Telecom Ltd. 322 ITR 230 was rendered on 15th April 2010 much after insertion of section 201(3) in the I.T. Tax Act 1961, and relates to AY 2002-03. The issue before the Hon'ble High Court of Delhi was in relation to period of limitation in initiating proceedings u/s 201(1)/201(1A) of the I.T. Tax Act 1961. In the case of ACIT v. Catholic Relief Service (212) 28 Taxmann.com 168, order u/s 201(1)/201(1A) was passed on 27/04/2010 for FY 2002- 03, 2003-04 & 2004-05. The CIT (Appeals) following the decisions of Jurisdictional High Court held that the order dated 27.04.2010 passed by the AO were barred by limitation. The Tribunal in upholding the order of CIT (Appeals) held that since proceedings in this case have been initiated after the search on 16.11.2009, as concluded by the Commissioner (Appeals) and the amended provision had not come into force on the said date, the law on the date the proceedings were initiated was to be considered. Therefore, I quash the impugned order dated 10- 03-2011 passed under section 201(1)/....
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....er: "(3) No order shall be made under sub-section (1) deeming a person "to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of- (i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed; (ii) four years from the end of the financial year in which payment is made or credit is given, in any other case: Provided that such order for a financial year commencing on or before the 1st day of April, 2007 may be passed at any time on or before the 31st day of March, 2011. (4) The provisions of sub-clause (ii) of sub-section (3) of section 153 and of Explanation 1 to section 153 shall, so far as may, apply 'to the time limit prescribed in sub-section (3)." 6. The Statement of Objects and Reasons of the Finance (No. 2) Bill, 2009 in relation to the amendment to Section 201 of the Act read as under: "Sub-clause (b) of clause 65 seeks to provide time limit for passing of order under sub-section (1) of section 201 in case of resident tax payers. It provides th....
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...., 2007 and earlier years can be completed by the 31st March, 2011. However, no time-limits have been prescribed for order under sub-section(1) of section 201 where-- (a) the deductor has deducted but not deposited the tax deducted at source, as this would be a case of defalcation of government dues, (b) the employer has failed to pay the tax wholly or partly, under sub-section (1A) of section 192, as the employee would not have paid tax on such perquisites, (c) the deductee is a non-resident as it may not be administratively possible to recover the tax from the nonresident. It is proposed to make these amendments effective from 1st April, 2010. Accordingly it will apply to such orders passed on or after the 1st April, 2010." 8. It is claimed that, therefore, as far as the Department was concerned it understood the insertion of the proviso to Section 201(3) as providing "sufficient time for pending cases" in respect of which the proceedings were to be completed by 31st March, 2011. 9. However, it appears that contrary to the above understanding by the Department itself depicted in the above circular issued by the CBDT, the Department underst....
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....ent in India, at any time after the expiry of seven years from the end of the financial year in which payment is made or credit is given." 8. Secondly, Section 201 itself was amended by introduction of sub-section 1 (A) - with retrospective effect, from 1.4.1966. The provision underwent legislative changes on different occasions. The decision in NHK Japan was rendered on 23.04.2008. The Revenue's appeal was rejected on 3.7.2014. Although, the Supreme Court had granted special leave and has apparently stated in its final order rejecting the Revenue's appeal that the question is left open, the mere circumstance that the Parliament did not spell out any time limit before it did eventually in 2009 - and subsequently in 2014 - would not lead to the sequitur that this Court's ruling in NHK Japan requires consideration. In that judgment, the Division Bench had given various reasons, including the application of the rationale in Bhatinda District (supra). In NHK Japan, the Court had noticed that the facts in Bhatinda District (supra) judgment concern exercise of jurisdiction by a statutory authority in the absence of specific period of limitation. The Court in Bhatinda....
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....t aside the reasoning in NHK Japan (supra), it would have, like other instances and more specifically in the case of Section 201 (1A), brought in a retrospective amendment, nullifying the precedent itself. That it chose to bring Section 201 (3) in the first instance in 2010 and later in 2014 fortifies the reasoning of the Court. Accordingly, the issue is answered against the Revenue." 11. We have also gone through the decision on Hon'ble Delhi High Court rendered in the case of Vodafone Essar Mobile Services ltd. (supra). We noted that in this case while interpreting Circular No. 5 of 2010 dated 03/06/2010 of CBDT under para 28 of its order, the Hon'ble High Court held as under: "28. Circular 5 of 2010 of CBDT clarifying that the proviso to Section 201(3) of the Act was meant to expand the time limit for completing the proceedings and passing orders in relation to 'pending cases'. The said proviso cannot be interpreted, as is sought to be done by the Department, to enable it to initiate proceedings for declaring an WP (C) Nos.8535, 8536, 8537/2011 and Assessee to be an Assessee in default under Section 201 of the Act for a period earlier than four years ....
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.... the proceedings were initiated within the permissible time. The question whether the order u/s 201(1)/201(1A) has been passed within the permissible u/s 201(3) has not been decided. We may mention that both the actions i.e. the initiation of proceedings and passing of the order are different. The CIT(A), in our opinion, could not appreciate the decisions along with the proviso to section 201(3) and the facts of the case. In the decisions with which the CIT(A) got confused related to the initiation of proceedings and the proceedings were not pending before the Assessing Officer when the proviso to section 201(3) was inserted with effect from 01/04/2010. In the case of the assessee before us, it is not denied that the proceedings have been initiated by the Assessing Officer within the permissible time i.e. on 09/02/2007 and therefore, the proceedings were pending as on the date when the proviso to section 201(3) was inserted into the statute and as per the provisions of section 201(3), the Assessing Officer could have passed the order at any time on or before the 31st March 2011 for financial year commending on or before 01/04/2007. 11.2 We have also gone through the decision of ....