2019 (5) TMI 336

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.... strength of a certificate issued under section 195(2) of the Act, the assessee did not deduct any tax at source while remitting the aforesaid amount. As observed by the Assessing Officer, subsequently, in view of some observations made by the Hon'ble Jurisdictional High Court on the allegation of the Department that the certificate under section 195(2) of the Act was obtained by the assessee by mis-representation of fact, the Assessing Officer initiated proceedings under section 201 of the Act by issuing show cause notice on 28th March 2013 calling upon the assessee to explain why it should not be treated as an assessee in default for non-deduction of tax at source under section 195(1) of the Act. In response, the assessee made elaborate submissions objecting to the proposed action of the Assessing Officer in declaring the assessee to be an assessee in default. However, the Assessing Officer rejecting the submissions of the assessee passed an order under section 201(1) of the Act treating the assessee as an assessee in default for having not deducted tax at source under section 195(1) of the Act while remitting the amount to the Mauritius company. Accordingly, he raised demand....

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....ed prior to insertion of sub-section (3) by Finance Act, 2012, with retrospective effect from 1st April 2010. He submitted, in spite of the fact that no limitation was prescribed under the said provision, the Courts have held that even in the absence of any limitation prescribed under the said provision, an order has to be passed within reasonable period. He submitted, the Courts have interpreted that reasonable period for passing an order under section 201(1) of the Act would be similar to the limitation prescribed for re-opening of assessment under section 147 of the Act. The learned Authorised Representative submitted, after introduction of sub-section (3) of section 201 of the Act, limitation for passing the order is six years from the end of the financial year in which the payment is made. He submitted, it is now well settled that sub-section (3) of section 201 of the Act is also applicable to non-resident companies. Therefore, he submitted, as per the provision of sub-section (3) of section 201 of the Act as is applicable to the impugned assessment year, the order passed after expiry of six years from the end of the relevant financial year is barred by limitation. In support ....

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....of decisions including the decisions of the Hon'ble Jurisdictional High Court as cited by the learned Authorised Representative. While considering identical issue in Tech Mahindra Ltd. (supra), the Co-ordinate Bench has held that the order passed under section 201(1) and 201(1A) of the Act after expiry of six years from the end of the financial in which payment was made is barred by limitation. The observations of the Bench in this regard are as under:- "7. We have considered rival submissions and perused materials on record. We have also applied our mind to the decisions cited before us. At the outset, it needs to be observed that the alleged failure on the part of the assessee to deduct tax at source under section 195 of the Act relates to payment made to two non-resident companies in the financial year 2007-08 relevant to the assessment year 2008-09. It is also a fact on record that the Assessing Officer has initiated proceedings under section 201(1) of the Act by issuance of show cause notice on 27th January 2014. Therefore, admittedly, the proceeding under section 201(1) of the Act was initiated after expiry of four years from the end of relevant assessment year i.e., A.....

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....Ltd. [2015] 56 taxmann.com 458/231 Taxman 818/372 ITR 684 (Delhi). The Hon'ble Jurisdictional High Court in DIT (IT) v. Mahindra & Mahindra Ltd. [2014] 48 taxmann.com 150/225 Taxman 306/365 ITR 560 (Bom.) also followed the decision in NHK Japan Broadcasting Corpn. (supra). We are also conscious of the fact that the Tribunal, Mumbai Bench, in Vodafone India Ltd. v. ITO [IT Appeal no.4511 (Mum.) of 2012, dated 12-3-2018] following the decision of Hon'ble Delhi High Court in NJK Japan Broadcasting Corpn. (supra) held that initiation of proceeding under section 201(1) of the Act after expiry of four years from the end of relevant financial year is barred by limitation. Thus, in view of the legal principal laid down in the decisions referred to above, the impugned order passed under section 201(1) / 201(1A) of the Act is clearly barred by limitation as the initiation of proceedings under the said provision was after expiry of four years from the end of the relevant financial year i.e., financial year 2007-08. That being the case, the order passed under section 201(1) and 201(1A) of the Act deserves to be quashed. 8. There is another aspect to this issue. As stated earlier, the p....