Increased limitation period of seven years under section 201(3), as amended by Finance (No. 2) Act, 2014, with effect from 1-10-2014, would not apply retrospectively

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Increased limitation period of seven years under section 201(3), as amended by Finance (No. 2) Act, 2014, with effect from 1-10-2014, would not apply retrospectively

Increased limitation period of seven years under section 201(3), as amended by Finance (No. 2) Act, 2014, with effect from 1-10-2014, would not apply retrospectively

Short Overview:

Increased limitation period of seven years under section 201(3), as amended by Finance (No. 2) Act, 2014, with effect from 1-10-2014, would not apply retrospectively to orders which had become time-barred under the old time limit (two years/six years) set by un-amended section 201(3). As apparent, assessee filed quarterly returns for financial year 2010-11 on 15-7-2010 and on 13-10-2010. At that point of time, erstwhile sub-section (3) of section 201 was in force and as per section 201(3)(ii) condition of two years was applicable to the facts of assessee’s case and hence, no order under section 201(1)/201(1A) deeming the assessee as one in-default could be passed as limitation had already expired as on 1-10-2014.

AO by way of notice issued under section 201(1)/(1A) on 22-2-2016 required assessee to show cause as to why the assessee should not be treated as one in default for failure to deduct tax under section 194C on reimbursement of vouchers to various affiliates during financial year 2010-11. Assessee’s case was that notice issued under section 201(1) and 201(1A) after expiry of two years from the end of financial year, wherein TDS statements were filed by assessee under section 200 was barred by limitation.

It is held that, Increased limitation period of seven years under section 201(3), as amended by Finance (No. 2) Act, 2014, with effect from 1-10-2014, would not apply retrospectively to orders which had become time-barred under the old time limit (two years/six years) set by un-amended section 201(3). As apparent, assessee filed quarterly returns for financial year 2010-11 on 15-7-2010 and on 13-10-2010. At that point of time, erstwhile sub-section (3) of section 201 was in force and as per section 201(3)(ii) condition of two years was applicable to the facts of assessee’s case and hence, no order under section 201(1)/201(1A) deeming the assessee as one in-default could be passed as limitation had already expired as on 1-10-2014.

Decision: In assessee’s favour.

Referred: Tata Teleservices v. Union of India (2016) 385 ITR 497 (Guj : 2016 TaxPub(DT) 1126 (Guj-HC).

 

IN THE ITAT, MUMBAI BENCH

MAHAVIR SINGH, J.M. & M. BALAGENSH, A.M.

Sodexo SVC India (P) Ltd. v. DCIT

ITA Nos. 619 & 620/Mum/2019

6 March, 2019

Appellant by: B.B. Rajendra Prasad, CIT (Departmental Representative)

Respondent by: F.B. Andhyarujina, Sr. Counsel/Gautam Thacker/Yazdi P. Jijina, ARs

ORDER

Mahavir Singh, J.M.

These appeals by the assessee are arising out of the orders of Commissioner (Appeals)-60, Mumbai [in short CIT(A)], in Appeal No. 60/IT-10160/DCIT/(TDS)-2(2)/2016-17 and No. 60/IT-10020/DCIT/(TDS)-2(2)/2016-17, dt. 28-12-2018. The Assessments were framed by the Dy. Commissioner of Income Tax (TDS)-2(2) dated 21-3-2016 under section 201(1)/201(1A) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

  1. The first common issue in these two appeals of the assessee is against the order of the Commissioner (Appeals) in holding that the order passed by the assessing officer under section 201(1)/201(1A) of the Act is within the time limit allowed under section 201(3) of the Act, For this, the assessee has raised the following three grounds for the assessment year 2010-11 :–

“1. The learned Commissioner (Appeals) erred in holding that the Order passed under section 201/201(1A) of Income Tax Act, 1961 (the “Act”) was within the time limit allowed under sub-section (3) to section 201 of the Act.

  1. On an identical position in facts and in law and in the circumstances, the learned Commissioner (Appeals) erred in not following the judgment of the ITAT, J Bench, Mumbai in case of the Appellant itself, for the assessment year 2012-13, holding that the impugned order under section 201(1)/201(1A) for the assessment year 2012-13, wartime barred.
  2. The learned Commissioner (Appeals), erred in law, by departing from the well-established principle of consistency particularly where, no demands have been raised and/or adverse orders have been passed on account of non-deduction of tax in respect of reimbursements made to the Appellant’s Affiliates under section 194C of the Act, since inception of the Appellant Company.”
  3. Similar are the grounds in assessment year 2011-12 and facts and circumstances are also identical. Hence, we take up the facts from the assessment year 2010-11 and the decision will apply to the assessment year 2011-12 also.
  4. Brief issue involved in this appeal of the assessee is, whether the assessee was required to deduct TDS under section 194C of the Act on the reimbursement of the meal vouchers to the affiliates (restaurants/eating joints etc) by the assessee, which used by the employees of the assessee’s customers for the purchase of food and non-alcoholic beverages. For this, the assessee has challenged the very order passed under section 201(1)/201(1A) of the Act as barred by limitation in view of section 201(3) of the Act.
  5. The assessee is a private limited company registered under the Companies Act, 1956 and is authorized by the Reserve Bank of India by section 7 of the Payment and Settlement Systems Act, 2007 to carry on the business of operating alternate payment settlement system where it can issue prepaid instruments to its clients. The assessee has been carrying on the aforesaid business since past several years. A survey under section 133(2A) of the Act was conducted by the DCIT(TDS)-2(2), Mumbai on 21-1-2016. The survey was conducted with the purpose to verify the compliance made by the assessee with respect to TDS. The survey party noted from the transaction carried out by the assessee in the course of business and a statement from the Chief Finance Officer of the assessee was also recorded under section 131 of the Act, wherein, he undertook to submit various details relating to reimbursement made to affiliates. Subsequently on 22-2-2016, the assessing officer issued show cause notice under section 201(1)/201(1A) of the Act asking the assessee to show cause as to why the assessee should not be treated as assessee in default for failure to deduct TDS under section 194C of the Act on the reimbursement of vouchers to various affiliates during the financial year 2010-11. In response to show cause notice, the assessee replied that the notice issued by assessing officer for financial year 2009-10 relevant to assessment year 2010-11 is barred by limitation but the assessing officer passed order under section 201(1)/201(1A) of the Act. Aggrieved, the assessee preferred appeal before the Commissioner (Appeals).
  6. Before the Commissioner (Appeals), the assessee claimed that the issue under appeal is squarely covered by the decision of the Tribunal in assessee’s own case for the assessment year 2012-13 inITA No. 980/Mum/2018 Order, dated 28-3-2018 : 2018 TaxPub(DT) 1773 (Mum-Trib) but the Commissioner (Appeals) noted that the assessee has filed correction statements even on 31-1-2018 and in view of the provisions of section 201(3), the time limit available with the assessing officer is seven years in terms of amendment carried out by the Finance Act (No. 2), 2014 with effect from 1-10-2014 under the provisions of section 201(3) of the Act. The Commissioner (Appeals) stated that the facts in assessment year 2012-13 and the relevant assessment year 2010-11 are different and distinguishable and hence, in such a situation, the reliance placed by the assessee on Tribunal’s decision in own case is misplaced. The Commissioner (Appeals) decided the issue against the assessee by observing in paras 6.1 to 6.8 as under :–

“6.1 I have gone through the facts of the case and the appellant’s contention. The appellant has submitted a factual details of its TDS statements filed under section 200(3). Section 200 of the Income Tax Act entails the duty of the person deducting tax. Section 200$) casts a onus on the deductor to prepare such statement and submit it on prescribed time. For clarification purposes, section 200(3) is reproduced below–

200. Duty of Person deducting tax

(3) Any person deducting any sum on or after the 1-4-2005 in accordance with the foregoing provisions of this Chapter or, as the case may be, any person being an employer referred to in sub-section (1A) of section 192 shall, after paying the tax deducted to the credit of the Central Government within the time, prepare such statements for such period as may be prescribed and deliver or cause to be delivered to the prescribed Income Tax Authority of the person by such authority such statement in such from and verified in such manner and setting forth such particulars and within such time as may be prescribed.

Provided that the person may also deliver to the prescribed authority a correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement delivered under this sub-section in such form and verified in such manner maybe specified by the authority.”

6.2 Thus, a correction statement is also a part of section 200(3) which provides that the person can file the correction statement for any year for rectification of any mistake or to add, delete, or update the information furnished in the statement delivered under this sub-section in such form and verified in such manner as may be specified by the authority To explain with an example, suppose in the first instance, the deductor has deducted only on rental payments made and has filed the statement under section 200(3). Later on it transpires that they were also supposed to deduct tax on professional services paid under section 194J. In that event, they can file a correction statement by virtue of proviso to section 200(3). The department will treat this statement for processing under section 200A and further scrutiny if required all the operational sections as per legal provisions will be applied de novo on this correction statement. Hence, for all purposes, the correction statement fled is as good as and equivalent to a statement filed under section 200(3) of the Act.

6.3 The appellant’s contention is that this proviso is effective from 1-10-2014 and thus does not apply to the return of the assessment year under consideration. It is the appellant’s case, since it is effective from 1-10-2014, no correction returns can be filed for the prior year’s However, it is seen that the appellant himself has filed not one but multiple correction returns for this year which was accepted by the CPC TDS and was also processed. The details of all such statements tiled under section 200(3) are as follows —

S.No. Financial Year Quarter Form Type Date of filing Remarks
1. 2009-10 Q1 26Q 15-7-2009 REGULAR
2. 2009-10 O2 26Q 14-10-2009 REGULAR
3. 2009-10 O3 26Q 13-1-2010 REGULAR
4. 2009-10 Q4 26O 11-7-2010 REGULAR
5. 2009-10 Q1 26O 24-4-2012 CORRECTION
6. 2009-10 01 26Q 24-4-2012 CORRECTION
7. 2009-10 Q1 26Q 15-3-2013 CORRECTION
8. 2009-10 Q1 26O 30-1-2018 CORRECTION
9. 2009-10 01 26Q 30-1-2018 CORRECTION
10. 2009-10 02 26Q 24-4-2012 CORRECTION
11. 2009-10 Q2 26Q 15-3-2013 CORRECTION
12. 2009-10 Q2 26Q 30-1-2018 CORRECTION
13. 2009-10 02 26Q 30-1-2018 CORRECTION
14. 2009-10 Q3 26Q 24-4-2012 CORRECTION
15. 2009-10 O4 26G 15-3-2013 CORRECTION
16. 2009-10 Q3 26O 30-1-2018 CORRECTION
17. 2009-10 Q3 26Q 30-1-2018 CORRECTION

6.4 Thus, it is seen that the appellant has been revising the original statement with correction statement on various dates. In fact, the last statement for the said year was filed on 30-1-2018. Once a correction statement is filed the inevitable effect is that, it partakes the character of statement filed under section 200(3). In all such cases the statements/correction statements are liable to be processed and scrutinized. In fact, all the proceedings on such correction statements filed will take place subsequently as is normally taken in cases where the original statement are filed.

6.5 On a comparative logic, the returns filed under section 139 is compared with statements filed under section 200(3) In case of returns of income filed under section 139, there is a definite period after which it cannot be revised/filed There is a time barring period presented for filing a return under section 139. After expiry of the prescribed date as per law, it is the responsibility of the assessing officer to issue a notice under section 146 calling for return of income. However, the situation is different in the case of filing of statements under section 200(3). Though there is a limitation lime for passing assessment orders on statements filed as per section 201(3). There is no bar on filing of correction statements under section 200(3). In that event, it is obvious that the lime available to finalize a Statement will be reckoned from the date on which the recent statement has been filed under section 200(3). The natural legal logic will be that when a correction statement is filed, the corresponding action statutory required will be as per the legal provisions of the Act from the date on which such correction statement was filed.

6.6 In order to further enlarge my argument, the Apex Court in the case of Hind Wire Industry Lid v. CIT (1995) 80 Taxman 79 (SC) : 1995 TaxPub(DT) 0976 (SC) has held that “The word order in the expression ‘from the date of the order sought to be amended in section 154(7) as it stood at the relevant assessment year had not been qualified in any way and it did not necessarily mean the original order. It could be any order including the amended or rectified order, therefore, the Tribunal was correct in holding that the second rectification application was well limitation.

6.7 Applied to the facts of the appeal at hand and on this analogy, the consequent statutory action pursuant to filing of the correction statement is pending and has to be done de novo. For this Financial Year, it is not disputed that last corrected statement was filed for the said year on 30-1-2018, which requires processing and is subject to verification as Appropriate.

6.8 These facts have been brought on record to distinguish that the order passed by the Hon’ble Tribunal for the assessment year 2012-13 did not have any occasion to consider this factual aspect in that appeal. The facts for assessment year 2012-13 (FY 2011-12) was as follows :–

S.No. F.Y. Form Type Date of filing Remarks
1. 2011-12 24Q 9-5-2012 Original
2. 2011-12 26Q 11-5-2012 Original
3. 2011-12 26Q 14-10-2011 Original
4. 2011-12 26Q 14-7-2011 Original
5. 2011-12 26Q 13-1-2012 Original
6. 2011-12 26Q 24-9-2012 Correction

Since, in assessment year 2012-13, the only correction statement was filed on 24-9-2012, the facts were different and distinguishable. In such a situation, the appellant’s argument that the impugned order for this year is covered by the order of the Hon’ble Tribunal is misplaced The assessee has last filed the last correction statement on 30-1-2016 and thus, the impugned Order, dated 21-3-2016 by the assessing officer is not time barred.”

Aggrieved, now the assessee is in appeal before the Tribunal.

  1. We have heard the rival contentions and gone through the facts and circumstances of the case. Before us, learned Counsel for the assessee Shri F.B. Andhyarujina, Sr. Counsel argued that the impugned proceedings initiated and consequent order passed under section 201(1)/201(1A) of the Act is time barred for the financial year 2009-10 relevant to assessment year 2010-11 in view of section 201(3) of the Act as it stood at the relevant time. Learned Sr. Counsel before us, explained that the assessee has been regularly filing TDS statements as provided under section 200(3) of the Act and for the financial year 2009-10 relevant to assessment year 2010-11 TDS statements under section 200(3) were filed on the following dates :–
F.Y. Quarter Date of filing
2010-11 Qr.1 15-7-2010
2010-11 Qr.2 13-10-2010
2010-11 Qr.3 13-10-2011
2010-11 Qr.4 3-5-2011
  1. Learned Counsel for the assessee stated that the impugned proceedings and consequent order passed is time barred for the assessment year 2010-11. For this, learned Counsel explained that the impugned order under section 201(1)/201(1A) of the Act for the assessment year 2010-11 was passed on 31-3-2016 and the same was passed in consequence to show cause notice issued dated 9-3-2016. Learned Counsel explained that show cause notice for the financial year 2009-10 has been issued in view of provisions of sub-section (3) of section 201 of the Act. He took us through the relevant provisions, which reads as under :–

201. Consequences of failure to deduct or pay

(3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of seven years from the end of financial year in which payment is made or credit is given.”

In this context, it may also be stated that the erstwhile sub-section (3) of section 201 was substituted by the Finance (No. 2) Act, 2014 with effect from 1-10-2014. Prior to its substitution, sub-section (3) as amended by the Finance Act, 2012 with effect from 1-4-2010 read as follows :–

“3. No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of —

(i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed.

(ii) six years from the end of the financial year in which payment is made or credit is given, in any other case:

Provided that such order for a financial year commencing on or before the 1-4-2007 may he passed at any lime on or before the 31-3-2011.

In the light of the aforesaid reasons, it is clearly established that the increased limitation period of seven (7) years under section 201(3), as amended by the Finance (No. 2) Act, 2014, with effect from 1-10-2014, shall not apply retrospectively to orders which had become lime-barred under the old lime limit (2 years/6 years) set by the un-amended section 201(3). Hence, no order under section 201(1) of the Act, deeming the tax-deductor to be assessee-in-default could be passed, if limitation had already expired as on 1-10-2014.

In the present case, Sodexo has been filing the requisite TDS statements referred to in section 200 of the Act Therefore, clause (i) of erstwhile section 201(3) will apply in the present case.”

  1. Learned Counsel for the assessee took us through the erstwhile sub-section (3) of section 201 which was substituted by the Finance (No. 2) Act 2014 with effect from 1-10-2014 and prior to this substitution sub-section (3) as amended by Finance (No. 2) Act, 2012 with effect from 1-4-2010 reads as under :–

“3. No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of —

(i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed.

(ii) six years from the end of the financial year in which payment is made or credit is given, in any other case:

Provided that such order for a financial year commencing on or before the 1-4-2007 may he passed at any lime on or before the 31-3-2011.”

  1. Learned Counsel for the assessee in view of above clear provisions stated that the increased period of limitation of seven years under section 201(3) of the Act as amended by Finance (No. 2) Act, 2014 with effect from 1-10-2014 shall not apply retrospectively to the orders which have become time barred under the old time limit, i.e., of two years/six years, as set out by the un-amended section 201(3) of the Act. In view of the clear provisions, he explained that no order under section 201(1) of the Act deeming the tax deductor to be assessee in default could be passed, if limitation had already expired as on 1-10-2014. Learned Counsel relied on the decision of Hon’ble Gujarat High Court in the case ofTata Teleservices v. Union of India (2016) 385 ITR 497 (Guj) : 2016 TaxPub(DT) 1126 (Guj-HC), wherein, it has been held that the increased limitation period of seven years under section 201(3) of the Act, as amended by the Finance (No. 2) Act, 2014, with effect from 1-10-2014 shall not apply retrospectively to orders which had become time-barred under the old time limit of 2 years/6 years as set out by the unamended section 201(3) of the Act. Hence, no order under section 201(1) of the Act, deeming tax-deductor to be assessee-in-default can be passed if limitation had already expired as on 1-10-2014. The relevant paragraph 15 & 16 of the decision of Hon’ble Gujarat High Court reads as under :–

“15. Considering the law laid down by the Hon’ble Supreme Court in the aforesaid decisions, to the facts of the case on hand and more particularly considering the fact that while amending section 201 by Finance Act, 2014, it has been specifically mentioned that the same shall be applicable with effect from 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. Under the circumstances, the impugned notices/summonses cannot be sustained and the same deserve to be quashed and set aside and writ of prohibition, as prayed for, deserves to be granted.

  1. In view of the above and for the reasons stated above, all these petitions succeed. 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. Rule is made absolute accordingly in each of the petitions. In the facts and circumstances of the case, there shall be no order as to costs.”
  2. In reply to same, learned CIT Departmental Representative first of all drew our attention to the order of the Commissioner (Appeals) at page 14 wherein the assessee has filed regular returns as well as correction statements and the relevant chart as brought to our notice, which is reproduced in para 6.3 of the Commissioner (Appeals)’s order as reproduced above at para 6. In view of above, learned CIT Departmental Representative stated that once the correction statements are filed, which is a continued proceedings and the assessing officer cannot foresee how the assessee will revise the statements and hence extended limitation period in view of the proviso to section 201(3) of the Act will apply and accordingly, the enlarged limitation of seven years will apply to the facts of the present case. For this, learned CIT Departmental Representative relied on the decision of Hon’ble Allahabad High Court in the case ofMass Awash (P) Ltd. v. CIT (International Taxation) (2017) 397 ITR 305 (All) : 2017 TaxPub(DT) 1885 (All-HC), wherein, it is held that revenue cannot be held guilty of undue and unreasonable delay of 10 years in initiating proceedings under section 201(1)/201(1A) of the Act on its own inasmuch as when factum of payee, being an NIR, came to its notice, it continuously prosecuted the matter and having failed to realize any amount of tax from her, power had been exercise under section 201(1)/201(1A) of the Act. In view of above decision of Hon’ble Allahabad High Court in the case of Mass Awash (P) Ltd. (supra), CIT Departmental Representative stated that the assessee’s case is not hit by any proviso rather the assessee’s case squarely falls under the amended proviso by Finance (No. 2) Act 2014 with effect from 1-10-2014, i.e., section 201(3) of the Act. Learned CIT(DR) also stated that the Commissioner (Appeals) has rightly brought into the light the corrected statements filed by the assessee which are statutorily to be filed by the assessee and acted upon by the assessing officer. In terms of above, the CIT Departmental Representative stated that the proceedings are not time barred or not hit by limitation.
  3. We find that the case laws relied on by the CIT Departmental Representative of the Hon’ble Allahabad High Court in the case ofMass Awash (P) Ltd. (supra) is prior to amendment and relates to assessment year 2006-07. Similarly, the decision relied on by learned CIT Departmental Representative of the Hon’ble Calcutta High Court in the case of Bhura Exports Ltd. v. ITO, (2011) 13 taxmann.com 162 (Calcutta) : 2014 TaxPub(DT) 2965 (Cal-HC) also relates to assessment year 2002-03 and also prior to amendment. We find that the first amendment bringing time limitation in the statute book was brought out by the Finance (No. 2) Act 2012 with effect from 1-4-2010 and that also the condition of two years or six years as per the provisions of section 201(3)(ii) of the Act. Subsequently, the erstwhile sub-section (3) of section 201 was substituted by Finance (No. 2) Act, 2014 with effect from 1-10-2014, wherein, sub-section (3) of section 201 was amended and time limitation of seven years from the end of the financial years in which the payment is made was brought in. The facts of the present case are that the assessee filed quarterly returns for F.Y. 2010-11 on 15-7-2010. For Qr. No. on 13-10-2010. At this point of time, the erstwhile sub-section (3) of section 201 of the Act was enforced and as per section 201(3)(ii) of the Act, the condition of two years was applicable to the facts of the present case and hence, on the date of amendment, i.e., amendment of sub-section (3) of section 201 by the Finance (No. 2) Act 2014 with effect from 1-10-2014 has already expired. In the light of the aforesaid reasons, it is clearly established that increased limitation of seven years under section 201(3) of the Act as amended by the Finance (No. 2) Act, 2014 with effect from 1-4-2014 shall not apply retrospectively to the orders which had become time barred under the old time limitation of two years as set out by the un amended section 201(3)(i) of the Act and hence no order under section 201(1)/201(1A) of the Act deeming the tax deductor to be assessee in default could be passed if limitation has already expired as on 1-10-2014.
  4. As regards correction statements, we noticed that the same has been filed only for rectification for very small and meager amount and/or added/deleted the update information furnished in the TDS statements like PAN of other party, the authorised signatory, the details of CFO of the assessee etc. The said changes have no bearing on the amount of tax deducted at source and/or deposited with the revenue. The amount of correction carried out is quite negligible. We also find that even the ITAT in assessee’s own case for the assessment year 2012-13 dated 28-3-2018 noted that the issue of correction of statements in para 7 and for the same we reproduce substantially from the order of the Tribunal, which reads as under :–

“7. We have heard rival submissions and perused materials available on record in the light of the decisions cited. So far as the factual aspect of the issue is concerned, there is no dispute that in terms of section 200(3), the assessee has filed statements of TDS before the Department within the prescribed time. In fact, in the submissions made by the assessee as reproduced in Para 5.2 of the impugned order of the learned Commissioner (Appeals), the fact of filing of TDS statements by the assessee has been clearly brought out. Therefore, we have to proceed on the basis that in assessee’s case, the statements of TDS have been filed. Keeping the aforesaid factual position in view it is necessary to examine the relevant statutory provisions. Section 201 which lays down the consequences of failure to deduct tax at source or having deducted not remitted to the Government account, in its original form, did not provide any time limit for passing the order under sub-section (1) of section 201. Looking at the dispute arising out of proceedings being taken up and completed after lapse of substantial time in the absence of a time limit, the legislature through Finance Act, 2009, introduced sub-section (3) to section 201 providing limitation period of two years for passing the order under section 201(1) from the end of the financial year in which statement of TDS is filed by the deductor and in a case where no statement is filed the limitation was extended to before expiry of four years from the end of financial year in which the payment was made or credit given. The aforesaid amendment was made effective from 1-4-2010. Subsequently, by Finance Act, 2012, sub-section (3) of section 201 was again amended with retrospective effect from 1-4-2010. The aforesaid amended provision reads as under :–

“(3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of —

(i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed;

(ii) six years from the end of the financial year in which payment is made or credit is given, in any other case:

Provided that such order for a financial year commencing on or before the 1-4-2007 may be passed at any time on or before the 31-3-2011.”

  1. As could be seen from a reading of the aforesaid provision, the only change which was effected from the earlier provision was the limitation period of four years in case of a deductor not filing TDS statement was extended to six years from four years. Whereas, in case of a person/deductor filing TDS statement, the limitation period of two years remained unchanged. The aforesaid sub-section (3) of section 201 was again amended by Finance Act, 2014, with effect from 1-10-2014 by substituting the earlier provision with the following :–

“(3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of seven years from the end of the financial year in which payment is made or credit is given.”

  1. Thus, as could be seen from the aforesaid amended provision a uniform limitation period of seven years from the end of relevant financial year wherein payments made or credit given was made applicable. The issue before us is, whether the un-amended sub-section (3) which existed before introduction of amended sub-section (3) by Finance Act, 2014, will apply to assessee’s case or not. It is the case of the assessee that, since, clause (i) of sub-section (3) of section 201 is applicable to the assessee and the limitation period of two years has expired by the time the provision was amended by Finance Act, 2014, the extended period of limitation of seven years as per the amended provision will not apply. Whereas, it is the case of the Department that the amended sub-section (3) brought into the statute by Finance Act, 2014, will apply retrospectively, hence, the impugned order passed by the assessing officer within the period of seven years is valid. It is a fact on record that by the time the amended provisions of sub-section (3) was introduced by Finance Act, 2014, the limitation period of two years as per clause (i) of sub-section (3) of section 201 (the un–amended provision) has already expired. The learned Commissioner (Appeals) has applied the amended provision of sub-section (3) of section 201 by referring to the objects for making such amendment and on the reasoning that the said provision being a machinery provision will apply retrospectively. However, on a careful perusal of the objects for introduction of the amended provision of sub-section (3), we do not find any material to hold that the legislature intended to bring such amendment with retrospective effect. If the legislature intended to apply the amended provision of sub-section (3) retrospectively it would definitely have provided such retrospective effect expressing in clear terms while making such amendment. This view gets support from the fact that while amending sub-section (3) of section 201 by Finance Act, 2012, by extending the period of limitation under sub-clause (ii) to six years, the legislature has given it retrospective effect from 1-4-2010. Since, no such retrospective effect was given by the legislature while amending sub-section (3) by Finance Act, 2014, it has to be construed that the legislature intended the amendment made to sub-section (3) to take effect from 1-10-2014, only and not prior to that. The Hon’ble Supreme Court inVatika Township Pvt. Ltd.(supra) while examining the principle concerning retrospectivity of an amendment brought to the statutory provisions has observed that unless a contrary intention appears, a legislation is presumed not to be intended to have retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. The Hon’ble Court observed, legislations which modified accrued rights or which impose obligations or imposes new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect. It was observed, if a provision is not for the benefit of a community, but, imposes some burden or liability the presumption would be it will apply prospectively. The rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Similar view has been expressed in the case of Reliance Jute and Industries Ltd. (supra) as well as Shah Sadiq & Sons (supra). In case of Tata Teleservices (supra), which is directly on the issue of retrospective application of the amended sub-section (3) of section 201, the Hon’ble Gujarat High Court, after extensively dealing on the issue of retrospective applicability of the provisions and applying the principles laid down by the Hon’ble Supreme Court in a number of cases, held as under :–

“15.00. Considering the law laid down by the Hon’ble Supreme Court in the aforesaid decisions, to the facts of the case on hand and more particularly considering the fact that while amending section 201 by Finance Act, 2014, it has been specifically mentioned that the same shall be applicable with effect from 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. Under the circumstances, the impugned notices/summonses cannot be sustained and the same deserve to be quashed and set aside and writ of prohibition, as prayed for, deserves to be granted.”

  1. Following the aforesaid decision of the Hon’ble Gujarat High Court inTroykaa Pharmaceuticals Ltd.(supra) again expressed the same view —

“7. Examining the facts of the present case in the light of the principles enunciated in the above decision, the present case relates to financial year 2008-09. The petitioner had filed statements as required under section 200 of the Act. The limitation for initiating proceedings under section 201(1) of the Act would, therefore, be governed by section 201(3)(i) of the Act as it stood at the relevant time which provided for a period of limitation of two years from the end of the financial year in which statement was filed in a case where the statement referred to in section 200 has been filed. The limitation for initiating action under section 201(1) of the Act, therefore, elapsed on 31-3-2012 whereas the amendment in section 201 of the Act as amended by Finance Act No. 2 of 2014 came into force with effect from 28-5-2012. The impugned notice, therefore, is clearly barred by limitation and, therefore, cannot be sustained. For the detailed reasons recorded in the judgment and Order, dated 5-2-2016 rendered in the case of Tata Teleservices v. Union of India (supra), this petition also deserves to be allowed.”

  1. No contrary decision has been brought to our notice by the learned Departmental Representative. Therefore, considering the principle laid down by the Hon’ble Supreme Court in the decisions as well as the ratio laid down by the Hon’ble Gujarat High Court in the decisions referred to above which are directly on the issue, we hold that the order passed under section 201(1) and 201(1A) having been passed after expiry of two years from the financial year wherein the TDS statements were filed by the assessee under section 200 of the Act, is barred by limitation, hence, has to be declared as null and void.”
  2. In view of the above facts and circumstances of the case as discussed above and the Tribunal decision in assessee’ own case, respectfully following the same, we hold that the proceedings initiated and consequent order under section 201(1)/201(1A) of the Act is barred by limitation.
  3. As we have adjudicated the issue of jurisdiction being order barred by limitation, we need not go into the merits of the case.
  4. In the result, both the appeals of the assessee are allowed.

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