×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
04-09-2019, Shri Rang Infrastructure, Section 201(3), 201, Tribunal Ahmedabad
The captioned appeal has been filed by the Revenue against the order of the CIT(A), Gandhinagar (‘CIT(A)’ in short), dated 13.07.2017 arising in the assessment order dated 17.10.2017 passed by the Assessing Officer under s. 201(1) & 201(1A) of the Income Tax Act, 1961 (the Act) concerning A.Y. 2010-11.
2. The captioned appeal has been filed by the Revenue against the order of the CIT(A) dated 13.07.2017 whereby the action of the AO under s. 201(1) and 201(1A) of the Act was reversed by the CIT(A).
3. The AO observed that the assessee has failed to deduct TDS on an amount of Rs. 3,08,90,000/- lent by it to its shareholders which are covered under the provisions of sec. 2(22)(e) of the Act and consequently such deemed dividend is susceptible to TDS provision under s. 194 of the Act. The AO accordingly issued show-cause notice dated 27.01.2016 seeking explanation on applicability of sec. 201(1) for alleged default in non-deduction of tax and consequent liability of interest on such default committed as per s. 201(1A) of the Act. The AO, in conclusion, held that the assessee is to be regarded as an ‘assessee in default’ for having failed to deduct TDS as obliged under s. 194 of the Act As a consequence, the AO imposed tax liability under s. 201(1 of the Act amounting to Rs. 30,89,000/- for the default under s. 201 and also imposed consequential interest under s. 201(1A) amounting to Rs. 24,40,310/- thereon by passing an order dated 17.10.2016 under s. 201(1)/201(1A) of the Act.
4. Aggrieved by the aforesaid action of the AO holding the assessee as ‘assessee in default’ in respect of payment of loans/advances to its shareholders purportedly hit by s. 2(22)(e) of the Act and hence having failed to deduct TDS under s. 194 of the Act on such loans advances, the assessee preferred appeal before the CIT(A).
4.1 Before the CIT(A) the assessee made two fold submissions. (1) The action of the AO in passing the order under s. 201(1)7201(1 A) is time barred as such order could not be passed beyond six years from the financial year in which such default has been committed as contemplated under s. 201(3) of the Act and (2) the action of the AO in holding the routine business transactions with the shareholder as advance contemplated under s. 2(22)(e) of the Act and consequently holding assessee in default under s. 194 of the Act is not justified on merits.
4.2 The CIT(A), however, found merits in the first limb of arguments itself and held that the action of the AO in passing the order under s. 201(1) and 201(1A) vide order dated 17.10.2016 itself to be time barred as such order could not be passed beyond six years from the end of the financial year in terms of pre amended s.201(1) of the Act. The CIT(A) thus quashed the order of the AO under s. 201(1)7201(1 A) due to bar of limitation without going into the alternative claim of the assessee on merits towards applicability of sec. 2(22)(e) of the Act.
4.3 The relevant operative para of the order of the CIT(A) is reproduced hereunder:-
“6. I have carefully considered order passed u/s. 201(1) and 201(1A) of the Act and submission filed by appellant. The brief facts of present case are that appellant company has given loan of Rs.3,08,90,000 to Shri Jayantibhai S Patel in current assessment year and said person is major shareholder and director of the company. The Deputy Commissioner of Income Tax, Gandhinagar Circle has submitted such information to present AO regarding non deduction of TDS on above loan which is nothing but deemed dividend. The AO has referred to provisions of section 194 of the Act and held that appellant is liable for deduction of TDS @ 10% and raised demand of Rs.55,29,310 including interest u/s 201(1 A) for Rs.24,40,310. On the other hand, appellant has referred to provision of section 201(3) of the Act and argued that as present assessment year is 2010-2011 and AO has issued notice u/s 201(1) on 27/01/2016 and passed order on 17/10/2016 which is beyond four years from end of relevant assessment year hence such notice as well as order passed by AO is barred by limitation for which reliance is placed on decision of Hon'ble Gujarat High court in the case of Tata Teleservices 66 Taxman.com 157.
On careful consideration of entire facts, it is observed that appellant has relied upon decision of Hon'ble Gujarat High court in the case of Tata Teleservices 66 Taxman.com 157 (referred supra) and argued that present order passed by AO is time barred. The Hon'ble High court has held as under:
“Section 201 of the Income-Tax Act, 1961. Deduction of tax at source- Consequence of failure to deduct or pay (Time Limit for passing order) -Assessment years 2008-09 and 2009-10 - Whether amendment in section 201(3) by Finance Act, 2014 is not made expressly with retrospective effect but as per plain language of amended section it was to take effect from 1-10- 2014 - Held, yes - Whether thus increased limitation period of 7 years under section 201(3) as amended by Finance (No. 2) Act, 2014 with effect from 1-10-2014 shall not apply retrospectively to orders which had become time-barred under old time-limit set by unamended section 201(3) and no order under section 201(1) deeming deduct or to be asses see in default could have been passed if limitation had already expired as on 1-10-2014 - Held, yesfPara 15] [In favour of assessee]
The Hon'ble Gujarat High court has explained the provisions of section 201(3) as amended by Finance Act 2009, 2012 and 20[4 as under:
"12. While considering the aforesaid question, provisions of section 201 of the Income Tax Act, as amended from time to time, are required to be considered. 12.1 Section 201 of the Act provides for consequences of failure to deduct tax in accordance wi h the provisions of the Act. Section 201 of the Act as amended by Finance-Act of 2008 with retrospective effect from 1/6/2002 reads as under: "Consequences of failure to deduct or pay.
201. (1) Where any person, including the principal officer of a company,—
(a) who is required to deduct any sum in accordance with the provisions of this Act; or
(b) referred to in sub-section (IA) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, bedeemed to be an assessee in default in respect of such tax:
Provided that no penalty shall be charged under Section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax.