By TIOL News Service

ALLAHABAD, APRIL 27, 2017: THE issue before the Bench is - Whether limitation of seven years as provided by amended Section 201(3) of I-T Act would apply retrospectively even to returns filed in Year 2009. NO is the verdict.

Facts of the case:

The assessee had preferred the present petition challenging the notice purported to have been issued u/s 201 (1)/201(1A) of Income Tax Act. The matter related to the A.Y 2009-2010, where the assessee as an employer was required to deduct tax at source and to file quarterly returns. Though the assessee for the 4th quarter of the Financial Year 2008- 2009 submitted the TDS return on June 12, 2009 for the period of Jan 01, 2009 to Mar 31, 2009. In connection with the aforesaid return, the impugned notice had been issued requiring certain information from the assessee.

On appeal, the HC held that,

++ this Court is conscious of the fact that any challenge to the show cause notice is not to be entertained liberally unless it is shown to be without jurisdiction or that the authority issuing the same is not competent to issue it. Section 201 (3) of the Act as it stands today provides that the authority is not competent to pass any order in connection with the TDS returns after the expiry of 7 years from the end of the financial year in which the payment is made or the credit is given. Therefore, the limitation for passing the order is 7 years from the end of the relevant financial year. However, this was not the position earlier or at the time when the TDS return was filed. A plain reading of the unamended provision of Section 201(3) reveals that the limitation for passing an order in connection with the TDS return was two years from the end of the financial year in which the statement of return is filed or four years from the end of the financial year in which the payment is made or the credit is given, in any other case. In the present case, we are concerned with the earlier part of the unamended Section 201(3) of the Act, which lays down the limitation of two years. It would run from 31.3.2010 i.e. the end of the financial year in which the statement of return was filed. Accordingly, it would not be competent upon the authority to pass any order in connection thereto after 31.3.2012. Admittedly, the aforesaid period had expired much before the issuance of the impugned notice. Thus, valuable rights have accrued in favour of the assessee as during this period no order was passed. It is in these circumstances that a controversy has arisen as to whether the limitation of seven years as provided by the amended Section 201(3) would apply or whether the amendment therein is retrospective and would apply even to the returns filed in the year 2009;

++ it is seen that the case of K.M. Sharma vs. Income Tax Officer - 2002-TIOL-727-SC-IT-LB, lays down that the provisions of the Finance Act cannot be given retrospective effect and retrospectivity would only be limited as per the Act itself and that the amendment would not apply to assessments which have already become final that is before 1.4.1989 from which date the amended provision was made applicable. The Supreme Court as a general principle thus laid down that the taxing provision imposing a liability is governed by normal rule of presumption that it is not retrospective and the settled principle of law is that the law to be applied is that which is in force at the time of assessment order unless contrary is provided expressly or by necessary implication. Even a procedural provision cannot in the absence of clear contrary intendment expressed therein be given a greater retrospectivity then what has been expressly mentioned so as to enable the authority to affect the finality of the tax assessment or to open up liability which have become barred by lapse of time. We do not find any expression in the Act which may give retrospectivity to the amendment to Section 201(3) of I-T Act as introduced by the Finance Act No.2 of 2014 which came into effect on Oct 01, 2014. In addition to the above, the aforesaid provision of Section 201 (3) of the Act as amended by the Finance Act 2014 came up for consideration before the Division Bench of the Gujarat High Court in the case of Tata Teli Services vs. Union of India and others - 2016-TIOL-302-HC-AHM-IT and it has been specifically held that aforesaid amendment is not retrospective in nature and that a right which has accrued to the assessee prior to the aforesaid amendment cannot be affected by amendment. iN view of the above, the provision of Section 201 (3) as amended by the Finance Act 2 of 2014 is effective from 1.10.2014 only and would not apply retrospectively to any returns or to the proceedings which may have become conclusive with the passage of time on the expiry of the limitation under the unamended provision. Having said so, it may be a notice u/s 201(3) but it only requires the assessee to furnish the certain information and nothing else. It is not even a show cause notice which may be taken for the purposes of passing an order as contemplated u/s 201(3). Therefore, there is no justification to quash the above notice and it would be in the fitness of thing if the assessee appears in response of the said notice and submits the desired information to keep its record straight and not necessarily to enable the respondents to pass any order under Section 201 (3) of the Act.

(See 2017-TIOL-802-HC-ALL-IT)