When no limitation is provided in the statute for initiation of action and passing the order, held that the same has to be done within a reasonable time which according to the Tribunal was four years.

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When no limitation is provided in the statute for initiation of action and passing the order, held that the same has to be done within a reasonable time which according to the Tribunal was four years.

Section 206C – Assessee defaulted in collection of tax at source for which AO took action after seven years – When no limitation is provided in the statute for initiation of action and passing the order, held that the same has to be done within a reasonable time which according to the Tribunal was four years.

Eid Mohammad Nizamuddin vs. Income Tax Officer (Jaipur)

Members: Vijay Pal Rao (J. M.) and
Vikram Singh Yadav (A. M.) 

ITA NO. 248 and 316 /JP/2018

A. Y: 2009-10. Dated: 29th August, 2018

Counsel for Assessee / revenue: Mahendra
Gargieya and Fazlur Rahman /  J.C. Kulhari

Section 206C – Assessee defaulted in collection of tax at source for which AO took action after seven years – When no limitation is provided in the statute for initiation of action and passing the order, held that the same has to be done within a reasonable time which according to the Tribunal was four years.

 Facts

The assessee is a partnership firm, engaged in the business of manufacturing and trading of Bidi. During the course of survey proceedings, it was detected that for the F.Y. 2008-09 relevant to assessment year 2009-10, the assessee firm was liable to collect tax at source (TCS) @ 5% on sale of tendu leaves as per provisions of section 206C(1) but it defaulted for non-collecting of TCS. Accordingly, the Assessing Officer proceeded to pass order u/s. 206C(6)/206C(7) on 30/03/2016 whereby the assessee was held as “assessee in default” within the meaning of section 206C(6) read with section 206C(7) for non-collection of tax of Rs. 98.84 lakhs, including interest. The assessee challenged the order passed by the Assessing Officer before the CIT(A) and also raised objection against the validity of the said order on the ground of limitation. The CIT(A) rejected the ground of limitation however, granted part relief to the assessee to the extent of return of income filed by the purchaser of tendu leaves, for which they issued Form No. 27BA. Hence, the assessee as well as the revenue, being aggrieved by the order of the CIT(A), filed the appeal and the cross appeal. One of the grounds of appeal by the assessee was about the validity of the order passed by the Assessing Officer.  According to it, the order passed by the Assessing Officer was barred by limitation. The Tribunal decided to take the said ground first as it was the root of the matter.

 The assessee’s contention was that the order passed by the Assessing Officer on 30/3/2016 was barred by limitation even though the provisions contained u/s 206C did not prescribe any time limit for initiation of proceedings or for passing order. However, according to the revenue, when no limitation is provided in the statute for initiation of action and passing the order u/s. 206C, then there was no bar on the jurisdiction and power of the Assessing Officer to pass the order.

 Held

According to the Tribunal, 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. As otherwise, the Assessing Officer would get an unfettered powers to take action at any point till an indefinite period which would defy or defeat the very purpose and scheme of the statute. According to the Tribunal, the analogy and reasoning given in the decisions of various High Courts (listed below) in respect of the limitation for passing the order u/s. 201 was also applicable for considering the reasonable time period for passing the order u/s. 206C. According to the Tribunal, the provisions of sections 201 and 206C have the 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 should pass the order u/s. 206C(6)/206C(7), the Tribunal held that the order passed by the Assessing Officer on 30/3/2016 was beyond the said reasonable period of limitation and consequently invalid, being barred by limitation.

 Cases relied on by the tribunal:

CIT vs. NHK Japan Broadcasting 305 ITR 137 (Delhi);

Vodafone Essar Mobile Services Ltd. vs. Union of India & ors. (2016) 385 ITR 436 (Del);

Tata Teleservices vs. Union of India & Anr. (2016) 385 ITR 497 (Guj);

CIT (TDS) vs. Anagram Wellington Assets Management Co. Ltd. (2016) 389 ITR 654 (Guj);

CIT vs. U.B. Electronics Instruments Ltd. (2015) 371 ITR 314 (AP);

CIT(TDS) & Anr. vs. Bharat Hotels Limited (2016) 384 ITR 77 (Karn.).

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