By TIOL News Service

AHMEDABAD, FEB 19, 2016: THE issue is - Whether section 201(3) as amended by Finance Act No.2 of 2014 shall be applicable retrospectively. NO is the answer.

Facts of the case

The Assessee is engaged in the business of providing tele-communication services and selling service products across the country. Assessee filed its TDS statement regularly for the F.Y. 2007-08 for respective quarter. According to the Assessee, the period for passing order under Section 201 (3) expired on 31/03/2011 for relevant financial year. According to the Assessee, the Assessee filed its TDS statement regularly for the F.Y. 2008-2009 for respective quarter and therefore period for passing order under Section 201 (3) expired on 31/03/2012 for relevant financial year. The Assessee was served with the summons by respondent No. 2 requiring personal attendance in connection with proceedings under the Income Tax Act for A.Y. 2008-2009 and 2009-2010 seeking details regarding TDS for F.Y. 2007-2008 and 2008-2009. The Assessee contended that the assessment proceedings sought to be initiated are time barred in view of Section 201(3) of the Act as it stood at the end of the respective FY 2007-2008 and 2008-2009. Respondent No. 2 rejected the submissions without considering the issue of limitation. The Assessee pointed out that the aspect regarding proceedings barred by the limitation while dealing the objections has not been considered. In response thereto the respondent No. 2 held that the proceedings for F.Y. 2007-2008 and 2008-2009 were valid and were within time relying upon the amended Section 201(3) of the Finance Act, 2014.

Having heard the parties, the Court held that,

+ In the present case, the issue involved is pure question of law, more particularly as to whether, section 201(3) as amended by Finance Act (No.2) 2014 would be applicable retrospectively or not? Under the circumstances, when pure question of law is involved, this Court is of the opinion that present petitions cannot be dismissed solely on the ground that the present petitions are against the Show Cause Notices.

++ prior to section 201 came to be amended by Finance Act No.2 of 2009, Income Tax Act did not provide for any limitation of time for passing an order under section 201(1) holding a person to be an assessee in default. It appears that in absence of such a time limit, dispute arose when the proceedings were taken up or completed after substantial time has elapsed. Therefore, by Finance Act No.2 of 2009 sub-sections (3) and (4) came to be introduced w.e.f. 1/4/2010 and it provided that an order under section 201(1) for failure to deduct the whole or any part of the tax as required under the Act, if the deductee is a resident payer, shall be passed within two years from the end of the financial year in which statement of tax deducted at source is filed by the deductor. It further provides that where no such statement is filed, said order can be passed up till 4 years from the end of the financial year in which payment is made or credit is given.

++ in the present cases, limitation for passing orders as per the provisions prevailing at the relevant time and even as provided under section 201(3)(i) as amended by Finance Act of 2012 had already expired on 31/3/2011 and 31/3/2012, respectively.

++ section 201(3) of the Act has been further amended by Finance Act No.2 of 2014 w.e.f. 1/10/2014, by which, time limit provided under section 201(3)(ii) of the Act for passing order under section 201(1) of the Act came to be extended by one year and it also provides that no orders shall be made under sub-section (1) holding a person to be in default for failure to deduct whole or part of the tax from a person resident in India at any time after expiry of seven years from the end of the financial year in which payment is made or credit is given.

++ while making amendment in section 201(3) of the Act by Finance Act No.2 of 2014, does not so specifically provide that the said amendment shall be made applicable retrospectively.

++ it is specifically stated that the said amendment will take effect from 1/10/2014. In the present cases, limitations provided for passing order under section 201(1) of the Act for A.Y. 2007-08 and 2008-09 had already been expired on 31/3/2011 and 31/3/2012, respectively, i.e. prior to section 201(3) came to be amended by Finance Act No.2 of 2014.

++ considering the fact that while amending section 201 by Finance Act, 2014, it has been specifically mentioned that the same shall be applicable w.e.f. 1/10/2014 and even considering the fact that proceedings for F.Y. 2007-08 and 2008-09 had become time barred and/or for the aforesaid financial years, limitation under section 201(3)(i) of the Act had already expired on 31/3/2011 and 31/3/2012, respectively, much prior to the amendment in section 201 as amended by Finance Act, 2014 and therefore, as such a right has been accrued in favour of the assessee and considering the fact that wherever legislature wanted to give retrospective effect so specifically provided while amending section 201(3) (ii) of the Act as was amended by Finance Act, 2012 with retrospective effect from 1/4/2010, it is to be held that section 201(3), as amended by Finance Act No.2 of 2014 shall not be applicable retrospectively and therefore, no order under section 201(i) of the Act can be passed for which limitation had already expired prior to amended section 201(3) as amended by Finance Act No.2 of 2014.

++ the impugned notices / summonses are held to be invalid and the same are hereby quashed and set aside and the respondents herein are hereby restrained by writ of prohibition from proceedings with the impugned notices / summonses which are, as such, hereby quashed and set aside.

(See 2016-TIOL-302-HC-AHM-IT)