INFINITY RETAIL LTD.,MUMBAI vs. CIT(TDS)-1, MUMBAI

आदेश / O R D E R PER PAVAN KUMAR GADALE - JM:

A. Validity of Order under section 263 of the Act: 1. Based on the facts and circumstances of the case and in law, the Ld. CIT erred in holding that the Retail Limited - 2 - order dated 23 March 2018 passed by the TDS Officer (‘TO’) under section 201(1)/201(1A) of the Act was erroneous and prejudicial to the interests of revenue and in revising the same.

2. Based on the facts and circumstances of the case and in law, the Ld. CIT has erred in passing the order dated 19 March 2020 under section 263 of the Act.

3. Based on the facts and circumstances of the case and in law, the Appellant submits that the order under section 201(1)/ 201(1A) of the Act passed by the TO was neither erroneous nor prejudicial to the interest of revenue and hence, revision of the same by the Pr. CIT is erroneous and bad in law.

4. Based on the facts and circumstances of the case and in law, the Ld. CIT has erred to not take into consideration that the order passed by the TO under Section 201(1)/ 201(1A) of the Act is bad in law, void, in excess of and/or in want of jurisdiction and otherwise illegal.

5. Based on the facts and circumstances of the case and in law, the ld. Pr. CIT has erred in applying Explanation 2 to Section 263 of the Act while passing the order under section 263 of the Act although the aforesaid explanation 2 is inserted with effect from 1 June 2015 i.e. not applicable to the financial year (‘FY’) under consideration viz. FY 201-11.

2. At the time of hearing, the Ld.AR submitted that there is a delay of 263 days in filing the appeal and the delay was due to the pandemic-19. The asssessee has filed the petition with the detailed explanations along with judicial decisions and prayed for condonation of delay. We find the facts mentioned in the petition are reasonable and the delay is not a wanton or willful act of the asssessee and the Ld.DR has no objections. Accordingly, the delay is condoned and the appeal is admitted and heard.

Mall Mulund and R Mall Thane. The Malls have various units/ shops that have been either sold or are rented on leave and license basis. The deductees being the Tenants of the units/ shops have been making payments to the Group for occupancy of the units/ shops in form of under the head Lease Rent, Amenity Charges or on revenue sharing basis. On random check basis, it is observed that the deductees/tenants have been deducting TDS at appropriate rates as per the provisions of section 194I. In addition to these payments, it has been observed that the Group i.e. mall owners have recovered/ collected other expenses being of the nature of A/c Maintenance, House Keeping, Security etc. from the occupants in the form of CAM (Common Area Maintenance) Charges. It is seen that the deductees/ tenants have been deducting TDS at 2% by considering the same to be covered under the provisions of section 194C. Since this collections/ payments is directly relatable to and being part and parcel of the rental activity should have been covered by the provisions of Section 194I calling for TDS at 10% as against deduction of TDS at 2% being made by the deductees/ tenants, thereby prima facie being assessee in default.

3. The following deductees/ tenants have made payments for occupying the units/ shops or utilizing space at R City Mall, Ghatkopar of R Mall Developers Pvt. Lid. having PAN: AADCR3444F & TAN: MUMR20468A.

Retail Limited - 5 - S. Name of the PAN TAN Total TAN AO No Tenant amount paid 1 Infiniti AACCV1726H MUMV13188A 27091195 TDS CIR-1(2) Retail Ltd. MUMBAI (Croma)

4. Since the jurisdiction over the above cases lies with your charge, this information is being forwarded to your office.

5. Subsequently, the CIT(TDS) on perusal of the records and Annexure-M to the Tax Audit Report found that the expenses covered by TDS under section 194C/194J/194I and 195 of the Act, aggregating to Rs. 3,23,15,376/- was allowed as deduction without making disallowance under section 40(a)(ia) of the Act. Whereas the A.O. has passed the order in respect of short deduction of TDS under section 201(1)/201(1A) of the Act. Therefore the A.O.order is erroneous and prejudicial to the interest of the revenue and issued notice u/sec263 of the Act. In compliance to notice, the ld. AR of the asssessee appeared and made the submissions on 02.03.2020 and 09.03.2020. The contentions raised by Ld.AR that the order passed under section 201(1)/201(1A) of the Act is barred by limitation on 31.03.2014 and the appeal before the CIT(A) is pending adjudication. But the CIT(TDS) has dealt on the provisions of section 263 and Explanation-2 and observed that the order passed by the DCIT-TDS under section 201(1) and 201(1A) of Retail Limited - 7 - the Act is erroneous and prejudicial to the interest of the revenue and was set-aside and directed the A.O. to pass fresh order under section 201(1)and201(1A) of the Act and passed the order under section 263 of the Act dated 19.03.2020. Aggrieved by the revision order, the asssessee has filed the appeal with the Honble Tribunal.

6. At the time of hearing, the Ld.AR submitted that the CIT-(TDS) has erred in set aside the order passed under section 201(1) and 201(1A) of the Act which is barred by limitation. Against the order under section 201(1) and 201(1A) of the Act dated 28.03.2018, the asssessee has filed an appeal before the CIT(A). And the CIT(A) has allowed the assessee’s appeal on the additional ground of appeal relating to validity of the order. The Ld.AR substantiated the submissions with the financial statements, order of the CIT(A) and Memorandum of Finance Act, 2014. Since, the original order under section 201(1) and 201(1A) was quashed by the CIT(A), therefore, the revision of the same order by the CIT-TDS is bad-in- law and prayed for allowing the appeal.

7. Contra, Ld.DR supported the order of the CIT- (TDS) and submitted that the Revenue has not filed Retail Limited - 8 - the appeal against that CIT(A)order due to low tax effect.

in respect of validity of passing the order and was allowed. We consider it appropriate to refer to the observations of the CIT(A)-59 Mumbai. The CIT(A) has dealt on the disputed issue at Page

2. Para 2 of the order dated14/05/2020, which is read as under: 2.0 ADDITIONAL GROUND 2.1 Vide letter filed in this office dated 17.01.2020, the appellant stated that this ground was directed against the illegality of the order under appeal as it was passed beyond the limitation period of two years the end of the financial year in which the statement was filed, Retail Limited - 9 - as provided in sub section (3) of section 201 of the Act which existed at the time when the TDS statements were filed. It is, therefore in the fitness of things that this technical challenge be considered first.

2.2 The Authorised Representative pointed out that the impugned order under section201(1)/201(1A) of the Act dated March 23, 2018, was passed after the expiry of two years from the financial year in which the regular TDS statements were filed. The appellant stated that the regular statement for the 4th quarter of the financial year 2010-11 was filed on21.06.2011 and the Order should have been passed on or before 31st March, 2014,whereas the Order was passed on 23/3/2018. Accordingly, he stated that the Order was time barred and, therefore, bad in law.

2.3 The additional ground raised on the issue of limitation goes to the very root of the matter and deals with the very jurisdiction of the TDS officer to pass the impugned order. Therefore, the same is admitted in view of the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd v. CIT (1998) reported in 229 ITR 383 and also the decision of the Hon'ble Supreme Court in the case of Union of India & Anr. VS. British India Corporation Ltd. &Ors. (2004) reported in 288 ITR 481. Further, the Id. Special Bench of Appellate Tribunal, Mumbai in Mahindra & Mahindra vs. DC/T reported in 30. SOT 374, has taken a similar view.

2.4 The matter was remanded to the Assessing Officer, DCIT(TDS)-1(2), Mumbai, vide this office letter dated 24.06.2019 for verification of the dates of filing of the TDS statements for the financial year under consideration as claimed by the appellant and also for comments thereon. The Remand report was received from Retail Limited - 10 - the Additional CIT(TDS)-Range 1(2) vide letter no. Add.CIT (TDS)- 1(2/CIT(A)/Remand/infinity/2019-20 dated 12.02.2020 forwarding the report dated 10.02.2020 of the TDS officer Therein, the particulars of filing of the TDS statements as per TRACES were confirmed as under:

Quarter Token No. Date of filing Q1 03610100208531 14.07.2010 Q2 021961000035730 15.10.2010 Q3 023610100295736 13.01.2011 Q4 023610100359366 10.05.2011 2.5 On the issue of limitation, the TDS officer stated that the assessee had never brought this ground before the Assessing Officer during the proceedings under section 201/201(1A)of the Act. Further as per the provisions of section 201(1) amended on 01.04.2010, the relevant portion of the same is reproduced hereunder:-

(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……..

The TDS Officer stated that the order passed by the AO is within the time limit provided by the law and this ground of the assessee may not be admitted.

2.6 The copy of the remand report was sent to the appellant for his counter comments and the appellant submitted its counter Retail Limited - 11 - comment vide letter dated 03.03.2020. The appellant stated that additional ground may be allowed as the order is time barred. The appellant relied on the decision of Hon'ble Gujarat High Court in the case of Tata Teleservices (2016] reported in 66 taxmann.com 157. Further vide email dated 12/05/2020received at 5:51:25 PM, the appellant wrote we request your honour to kindly pass the Order".

3.1 The matter has been considered. To decide the core issue of limitation, firstly, sub-section (3) of section 201 of the Act needs to be considered. The same, as it stands on date, reads as under:

"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 or two years from the end of the financial year in which the correction statement is delivered under the proviso to sub- section (3) of section 200.whichever is later.

3.2 The extension of limitation period to seven years from the end of the financial year was provided by the Finance Act No. 2, 2014. Prior to it, section 201(3) of the Act, applicable from 01.04.2010 read 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 - Retail Limited - 12 -

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 HC-NIC Page 62 of 64 Created On Tue Mar 22 01:53:00 IST 2016 62 of 64 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 Retail Limited - 13 - 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.

3.4 The above was followed by the Hon'ble Gujarat High Court in the cases of Eris Life Sciences(P) Ltd vs. Dy.CIT (2016] reported in 68 taxmann.com 229 and Troikaa Pharmaceuticals Ltd vs Union of India (2016] reported in 68 taxmann.com 229, where the aforementioned paragraph was cited.

3.5 The Id. Appellate Tribunal, Mumbai, in Sodexo SVC India Pvt. Ltd. vs. DCIT (ITAno.980/Mum./2018] held as under (emphasis supplied):

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 Retail Limited - 14 - 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 & 620/Mum/2019 Assessment Year 2 010-11 & 2011-2012 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 1st April 2010. 11 Sodexo SVC India Pvt. Ltd. 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 1st October 2014, only and not prior to that. The Hon'ble Supreme Court in Vatika Township Pvt. Ltd. (supra) while examining the principle Retail Limited - 15 - 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).

3.6 The position that clearly emerges is that as per the pre- amended provision of sub-section (3) of section 201 of the Act, the order under section 201 has to be passed before expiry of two years from the end of relevant financial year wherein the relevant statement was filed. In such a case, the deductor will be covered by clause (i) of subsection(3) of section 201 of the Act as it existed prior to its amendment by Finance Act (2), 2014. In terms of the amendment to sub-section (3) of section 201 by Finance Act (2), Retail Limited - 16 - 2014, the earlier provisions as contained under sub-section (3) was from the end of financial year in which the payments were made. However, the amended sub-section (3) of section 201 of the Act was made effective only from 1st October 2014. 3.7 In the remand report, the TDS Officer has erroneously mentioned that the amendment extending the limitation to seven years has come into effect from 01.04.2010,However, the amendment has actually come into effect from 01.10.2014 as per the finance(No.2) Act, 2014.

4.0 Applying the decisions of the Hon 'ble Gujarat High Court (supra) and that of the ld. jurisdictional Tribunal (supra) to the appeal under consideration, it is noted that the matter relates to the financial year 2010-2011. It is also not disputed that the TDS statement for last quarter was filed on 10.05.2011. Given the fact to which the aforesaid ratio is applied leads to the conclusion that the order under section 201(1) of the Act ought to have been passed latest by 31.03.2014 i.e., within two years from the end of the financial year in which the statement was filed. On the other hand, the impugned order has been passed on 23.03.2018by which time, the limitation period as per the pre-amended provisions had already expired. As far as the argument of the TDS officer mentioned in his remand report is concerned, the same has been explicitly disapproved by the Id. Appellate Tribunal, Mumbai, as aforesaid Before parting, it is to be mentioned that the amendment made by the Finance Act,2019, incorporating the aspect of the date of filing correction statements and extending the period of limitation to two years from the end of the financial year in which such correction statement is filed, has been made applicable from 01.09.2019. Ex Retail Limited - 17 - consequently, the same would have no application to the instant appeal. 4.2 In respectful compliance to the three decisions of the Hon'ble Gujarat High Court and that of the Id. Jurisdictional Tribunal, it is held that the impugned order is hit by limitation. The same is, therefore, cancelled. The ground of appeal succeeds and is, therefore, allowed. Since the appeal has been decided on the issue of limitation alone, the other grounds of appeal are not required to be adjudicated upon.

5.0 In the result, the appeal is allowed. Order passed under section 250 read with section 251 of the Act.”

Order pronounced in the open court on 21.02.2022.