I-T - Limitation period for passing order u/s 201 is to be applied for considering reasonable time period for passing order u/s 206C as both sections have same scheme and objects: ITAT
By TIOL News Service
JAIPUR, OCT 17, 2018: THE ISSUE IS - Whether merely because the statute does not provides the limitation for passing the order by the AO u/s 206C(6)/206C(7), AO can be given unfettered powers which can be exercises even beyond a reasonable time - NO IS THE VERDICT.
Facts of the case
The assessee, partnership firm was engaged in the business of manufacturing and trading of Bidi. There was a survey u/s 133A(2A) of the Act at the business premises of the assessee. On examination and verification of record, it was found that the assessee firm was engaged in trading of Tendu leaves mainly in three States, Rajasthan, M.P. and Maharastra. During the course of survey proceedings, it was detected that for the FY 2007-08 to 2013-14, the assessee firm was liable to collect tax at source (TCS) @ 5% on sale of Tendu leaves but it had defaulted for non-collecting of TCS. Accordingly, the AO proceeded to pass order u/s 206C(6)/206C(7) of the Act, whereby the assessee was held as "assessee in default" for non-collection of tax including interest. On appeal, CIT(A) granted part relief to the assessee. Hence, both the assessee as well as the revenue filed cross appeals before the Tribunal.
Tribunal held that,
++ there is no dispute that Section 206C or any other provisions of the Income Tax Act do not provide any limitation for passing the order by the Assessing Officer U/s 206C(6)/206C(7) of the Act holding the assessee in default due to failure to collect tax at source. However, non-providing the limitation in the statute would not confer the jurisdiction/powers to the Assessing Officer to pass order u/s 206C at any point of time disregarding the amount of time lapse from such default of collection of tax at source. If the contention of the revenue is accepted that the AO is free to initiate the action and pass the order u/s 206C at any time depending upon the circumstances of the case, it would amount to give an unfettered powers to the AO to take action at any point till an indefinite period. Therefore, such interpretation or inference would defy or defeat the very purpose and scheme of the statute and further the concept of finality of matters. Hence, in such a situation, a reasonable time period is allowed to the taxing authority for a particular action or an order to be passed otherwise it would lead to unregulated powers and authorities to the taxing authority. The law is to be followed by the authorities concerned as well as the persons governed by the law and therefore, in absence of the limitation on the powers of the taxing authority, it would allow the misuse of such powers and provisions of the Act. It is pertinent to note that when a limitation is not provided in statute for a specific purpose then the limitation provided for the purpose of completing the assessment would be a proper guidance for taking the reasonable time period within which an order has to be passed by the taxing authority. An identical situation was prevailing in respect of the order passed U/s 201(1)(201(1A) of the Act prior to the amendment vide Finance Act, 2009 w.e.f. 01/4/2010 whereby subsection (3) was inserted to Section 201 of the Act and limitation has been provided for passing the order U/s 201(1) and 201(1A) of the Act. When this issue of limitation for passing the order U/s 201(1)/201(1A) of the Act came before the Courts, it was held that the Assessing Officer cannot be given unfettered powers which can be exercises even beyond a reasonable time because of non-providing the limitation in the statute. Hence, the courts have taken a consistent view that reasonable time period for passing the order U/s 201(1)/201(1A) of the Act would be four years;
++ provisions of Section 206C of the Act are analogous and a measure for compliance of collection of tax at source as a similar measure for compliance of deduction of tax at source is provided U/s 201 of the Act. The department has accepted those decisions and consequently brought amendment to the provisions of Section 201 and thereby provided the limitation for passing the orders U/s 201(1)/201(1A) of the Act which was inline with the view taken by the High Courts on this issue. Though, subsequently an amendment vide Finance Act, 2014 was again brought in the said provisions of Section 201 enlarging the period of limitation, however, the said amendment is not retrospective. Accordingly, the liability of tax collected at source is also a vicarious liability of the assessee to assist the department in the measure to avoid any possibility of tax avoidance by the persons with whom the specific transactions have been entered into by the assessee. Therefore, the analogy and reasoning given in the decisions of various High Courts in respect of the limitation for passing the order U/s 201 of the Act, is also applicable for considering the reasonable time period for passing the order U/s 206C of the Act. The provisions of Section 201 and 206C of the Act are having same scheme and object being the measures against the avoidance of tax by the opposite parties with whom the assessee had the transactions. Hence, applying the reasonable period of limitation as four years within which the Assessing Officer could pass the order U/s 206C(6)/206C(7) of the Act, it was hold that the impugned order passed by the Assessing Officer on 30/3/2016 is beyond the reasonable period of limitation and consequently is invalid being barred by limitation. Accordingly, the impugned order passed U/s 206C(6)/206C(7) of the Act was quashed. In the result, appeal of the assessee is allowed and that of revenue is dismissed.
(See 2018-TIOL-1839-ITAT-JAIPUR)
