REEBOK INDIA COMPANY,GURUGRAM vs. JCIT (OSD), NEW DELHI
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Income Tax Appellate Tribunal, DELHI ‘H’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI KUL BHARAT
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
This appeal by the assessee is preferred against the order of the
ld. CIT(A) – 38, New Delhi dated 29.01.2020 pertaining to A.Y. 2011-12.
Grievances of the assessee read as under:
“1. On the facts and in the circumstances of the case and in law, the Hon’ble Commissioner of Income Tax (Appeals) - 38 (‘CIT(A)’) erred in upholding the addition made by the the Assistant Commissioner of Income-tax, Circle 78(1), Delhi (‘the Ld. AO’) which is bad in law, contrary to the facts and must be quashed.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in ignoring that the Ld. AO passed an order after the expiry of 2 years from the end of financial year in which the TDS statement was filed. The Ld. AO has erred in given retrospective effect to the amendment in sub-section (3) of Section 201 of the Act which extended the time-limit to 7 years with effect from October 01, 2014.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in interpreting the amended provisions sub-section (3) of Section 201 of the Act as per which 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.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in alleging that the payment for maintenance of common area of a mall is in the nature of rent and thereby subject to TDS under section 194I of the Act.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has ignored the judgement of the Hon’ble Mumbai High Court wherein the common area maintenance charges were held to be business receipts and not in the nature of rental income.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the assessee to be in default for deduction of tax at a lower rate and ignoring the fact that the primary liability to pay the taxes is on the recipient.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in ignoring that the Ld. AO revisited the order passed u/s addendum with additional demand on account of common area maintenance charges paid iu other parties.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in upholding that the Ld. AO held the assessee as assessee in default and incorrectly charging interest u/s 20i(iA) of the Act.
Without prejudice to the above, the assessment made is highly excessive and contrary to facts, law and principles of natural justice and fair play.
The above grounds are without prejudice to each other.
That the Appellant reserves its right to add, alter, amend or withdraw any ground of appeal either before or at the time of hearing of this appeal.”
Briefly stated, the facts of the case are that the assessee is
engaged in the business of distribution of foot wear and apparels and
sells its merchandise in India directly to independent retailers, often
under distribution or franchise agreement.
As a consequence of the survey proceedings conducted u/s 133A
of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] on
the Ambience Group who are the owners and operators of malls where
assessee’s stores are situated.
It came to the notice of the Assessing Officer that the mall
owners have collected/recovered expenses in the form of Common
Area Maintenance charges on which the deductors/tenants have
deducted tax at source @ 2% considering the same to be covered under
the provisions of Section 194C of the Act.
The Assessing Officer was of the firm belief that these
collections/payments are directly relatable to and being a part of
rental activity, tax should have been deducted as per the provisions of
section 194I of the Act @ 10% as against 2% being made by the
deductor/tenant. Based on this view, order u/s 201(1)/1A of the Act
was framed on 30.03.2018 and accordingly, the assessee was directed
to pay TDS amount of Rs. 26,76,475/– and interest thereon amounting
to Rs. 23,96,645/–.
Order was challenged before the ld. CIT(A) on the ground that
the impugned order is barred by limitation. It was strongly contended
that the assessee has filed form 26Q for 4 quarters as under:
Sl. Type Date of Acknowledgment FY ending Limitation of filing for passing No. no Form an order
1 26Q1 19.07.2010 020010200121085 31.03.2011 31.03.2013 2 26Q2 20.10.2010 050910100318722 31.03.2011 31.03.2013 3 26Q3 19.01.2011 050910300075036 31.03.2011 31.03.2013 4 26Q4 18.05.2011 00010200157592 31.03.2012 31.03.2014
In light of the above, it was strongly contended that the period of
limitation for framing the assessment order expired on 31.03.2014
whereas the order was framed on 30.03.2018. The ld. CIT(A) was not
convinced with the explanation of the assessee who was of the firm
belief that amendment brought by Finance Act 2014 w.e.f 1.10.2014
has a retrospective effect and referring to the memorandum to the
Finance Bill explaining the amendment, the ld. CIT(A) concluded that
the assessment order is not barred by limitation.
Before us, the ld. counsel for the assessee reiterated what has
been stated before the ld. CIT(A) and once again drew our attention to
the relevant provisions of section 201 read with several amendments
made therein and once again contended that the assessment order
dated 30.03.2018 is barred by limitation in light of quarterly TDS
returns filed in form 26Q.
Per contra, the ld. DR strongly supported the findings of the ld.
CIT(A) and read the operative part.
We have given thoughtful consideration to the orders of the
authorities below. The moot question which needs adjudication is
whether amendment in section 201(3) by the Finance Act 2014 is not
made expressly w.r.e. but as per plain language of amended section, it
was to take effect from 01.10.2014 and if the answer to this question
is YES, then whether the increased limitation period of 7 years u/s
201(3) as amended by the Finance (No. 2) Act, 2014 w.e.f 01.10.2014
shall not apply retrospectively to orders which had become time
barred under old-time limit set by unamended section 201(3) of the
Act and no order u/s 201(1) deeming deductor to be assessee in
default could have been passed if limitation had already expired as on
01.10.2014.
In so far as quarterly TDS return in Form 26Q is concerned, there
is no dispute. 26Q1 was filed on 19.07.2010, 26Q2 was filed on
20.10.2010, 26Q3 was filed on 19.01.2011 and 26Q4 was filed on
18.05.2011. As per unamended provisions of the Act where the TDS
has been filed, period of limitation was two years from the end of FY
in which the TDS return has been filed and 26Q4 falls in FY 2011–12.
Therefore, order u/s 201(3) of the Act should have been passed on or
before 31.03.2014 whereas the impugned assessment order is dated
30.03.2018.
It would be pertinent to understand the provisions of section
201(3) of the Act.
At this stage, it is required to be noted that subsection (3)(i) of
section 201 came to be introduced by Finance Act No.2 of 2009 which
provided that such order for a financial year commencing on or before
the 1st day of April 2007 may be passed at any time on or before 31st
day of March, 2011. As per Memorandum of Finance Bill No.2 of 2009,
in respect F.Y.2007-08 and earlier years only proceedings that were
pending could be completed by 31/3/2011 and as such no fresh
proceedings could be commenced for the said period.
The reasons for amendment so stated in the memorandum to the
Finance Bill No.2 of 2009 reads as under:
“Providing time limits for passing of orders u/s. 201(1) holding a
person to be an assessee in default.
Currently, the Income Tax Act does not provide for any limitation
of time for passing an order u/s. 201(1) holding a person to be an
assessee in default. In the absence of such a time limit, disputes
arise when these proceedings are taken up or completed after
substantial time has elapsed.
In order to bring certainty on this issue, it is proposed to provide
for express time limits in the Act within which specified order
u/s. 201 (1) will be passed.
It is proposed that an order u/s 201(1) for failure to deduct the
whole or any part of the tax as required under this Act, if the
deductee is a resident taxpayer shall be passed within two years
from the end of the financial year in which the statement of tax
deduction at source is filed by the deductor. Where no such
statement is filed, such order can be passed up till four years
from the end of the financial year in which the payment is made
or credit is given. To provide sufficient time for pending cases, it
is proposed to provide that such proceedings for a financial year
beginning from 1st April, 2007 and earlier years can be
completed by the 31st March, 2011.
However, no time-limits have been prescribed for order under
subsection (1) of section 201 where-
(a) the deductor has deducted but not deposited the tax
deducted at source, as this would be a case of defalcation of
government dues;
(b) the employer has failed to pay the tax wholly or partly, under
sub-section (1A) of section 192, as the employee would not have
paid tax on such perquisites;
(c) the deductee is a non-resident as it may not be
administratively possible to recover the tax from the non-
resident.
It is proposed to make these amendments effective from 1st
April, 2010. Accordingly it will apply to such orders passed on or after
the 1st April, 20I0. From the aforesaid chronological events, it appears
that section 201(3)(ii) of the Act came to be further amended by
Finance Act of 2012, however, with retrospective effect from 1/4/2010
whereby in sub-section (3) in clause (ii), further words “four years”
came to be substituted by words “six years”. Thus, period for passing
order in respect of cases where statement referred to in section 200 of
the Act were not filed, was extended from four years to six years.
It is also required to be noted that other provisions of section
201(3) clause (1) and proviso thereof remain same including last date
for passing order for F.Y. 2007-08. At this stage, it is required to be
noted that 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. 12.11. That
thereafter, 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.
By Finance Act No.2 of 2012, even distinction between the cases,
statement has been filed and where such statement was not filed also
has been removed and the amendment prescribes a common period of
limitation i.e. seven years from the end of the financial year in which
payment was made.
The reasons for amendment in section 201(3) so stated in the
memorandum to the Finance Bill No.2 of 2014 reads as under:
“Tax Deduction at Source :
Under Chapter X VII-B of the Act, a person is required to deduct tax on certain specified payments at the specified rates if the payment exceeds specified threshold. The person deducting tax (“the detductor”) is required to ‘file a quarterly statement of tax deduction at source (TDS) containing the prescribed details of deduction of tax made during the quarter by the prescribed due date.
Currently, a deductor is allowed to file correction statement for rectification / updation of the information furnished in the original TDS statement as per the Centralized Processing of Statements of Tax Deducted at Source Scheme, 2013 notified vide Notification No.03/2013 dated 15th January, 2013. However, there does not exist any express provision in the Act for enabling a deductor to file correction statement. In order to bring clarity in the matter relating to filing of correction statement, it is proposed to amend section 200 of the Act to allow the deductor to file correction statements. Consequently, it is also proposed to amend provisions of section 200A of the Act for enabling processing of correction statement filed.
The existing provisions of section 201(1) of the Act provide for passing of an order deeming a payer as assessee in default if he does not deduct or does not pay or after deduction fails to pay the whole or part of the tax as per the provisions of Chapter XVII-B of the Act. Section 201 (3) of the Act provides for time limit for passing of order under section 201(1) of the Act for deeming a payer as assessee in default for failure to deduct tax from payments made to a resident. Clause 201(3) of the Act provides that no order under section 201(1) of the Act shall be passed after expiry of two years from the end of the financial year in which TDS statement has been filed.
Currently, the processing of TDS statement is done in the computerized environment and mainly focuses on the transactions reported in the TDS statement filed by the deductor. Therefore, there is no rationale for not treating the deductor as assessee in default in respect of the TDS default after two years only on the basis that the deductor has filed TDS statement as TDS defaults are generally in respect of the transaction not reported in the TDS statement. It is, therefore, proposed to omit clause (i) of sub- section (3) of section 201 of the Act which provides time limit of two years for passing order under section 201(1) of the Act for cases in which TDS statement have been/filed.
Currently, clause (ii) of section 201(3) of the Act provides a time limit of six years from the end of the financial year in which payment / credit is made for passing of order under section 201(1) of the Act for cases in which TDS statement has not been filed.
However, notice under section 148 of the Act may be issued for reassessment up to 6 years from the end of the assessment year for which the income has escaped assessment. Therefore, section 148 of the Act allows reopening of cases of one more preceding previous year than specified under section 201(3)(ii) of the Act.
Due to this, order under section 201(1) of the Act cannot be passed in respect of defaults relating to TDS which comes to the notice during search/reassessment proceeding in respect of previous year which is not covered under section 201(3)(ii) of the Act for passing order under section 201(1) of the Act shall be extended by one more year.
The existing provisions of section 271H of the Act provides for levy of penalty for failure to furnish TDS/TCS statements in certain cases or furnishing of incorrect information in TDS/ TCS statements. The existing provisions of section 271H of the Act do not specify the authority which would be competent to levy the penalty under the said section. Therefore, provisions of section 271H are proposed to be amended to provide that the penalty under section 271H of the Act shall be levied by the Assessing officer.”
At this stage, it is required to be noted that earlier section 201(3)
of the Act as amended by Finance Act, 2012 amended on 28/5/2012
was specifically made applicable retrospectively w.e.f. 1/14/2012,
whereby limitation period was substituted from four years to six years
for passing orders where TDS Statement had not been filed. However,
section 201(3) of the Act as amended by Finance Act No.2 of 2014, as
mentioned in the memorandum of the Finance Bill No.2 of 2014 is
stated to have effect from 1st October, 2014.
Thus, wherever the Parliament / Legislature wanted to make
provisions applicable retrospectively, it has been so provided. 12.15.
At this stage, it is required to be noted that 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.
On the other-hand, it is specifically stated that the said
amendment will take effect from 1/10/2014. As observed hereinabove,
in the present cases, limitations provided for passing order under
section 201(1) of the Act for A.Y. 2011-12 had already been expired on
31/3/2014 i.e. prior to section 201(3) came to be amended by Finance
Act No.2 of 2014.
Similar view was taken by the Hon'ble High Court of Gujarat in
the case of Tata Teleservices Vs. Union of India 385 ITR 497 and also by
the Hon'ble High Court of Delhi in Oracle India Private Limited Vs.
Deputy CIT 376 ITR 411 against which SLP filed before the Hon'ble
Supreme Court was dismissed in 41 Taxmann.com 311.
Considering the facts of the case in light of the discussion
hereinabove, we have no hesitation to hold that the assessment order
dated 30.03.2018 is barred by limitation. Since we have held that the
assessment order is barred by limitation, we do not find it necessary to
dwell into the merits of the case.
In the result, the appeal of the assessee in ITA No. 319/DEL/2021
is allowed.
The order is pronounced in the open court on 15.11.2022.
Sd/- Sd/-
[KUL BHARAT] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 15th November, 2022.
VL/
