TO CUM PDO PANCHKULA,PANCHKULA vs. ITO TDS, KARNA

PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-

This appeal by the assessee is preferred against the order of the Addl. JCIT(A)-3 Mumbai/NFAC dated 21.03.2025 pertaining to A.Y. 2015-
16. ITA No. 3338/DEL/2025 [A.Y. 2015-16]
2. The sum and substance of the grievances of the assessee is that the ld. CIT(A) erred in treating the assessee in default within the provisions of section 201(1) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'.
3. None appeared on behalf of the assessee. We decided to proceed with the assistance of the ld DR and material on record.
4. Briefly stated, the facts of the case are that the assessee is a Government Organization under the name and style of Treasury Office Cum
PDO, Sector-1, Room No. 9, Mini Secretariat, Panchkula, Haryana. The assessee is fully Governed by Haryana Government and being a Treasury office of district Panchkula, salary and pension of district Govt. employees was disbursed from this office.
5. A survey/inspection u/s 133A(2A) of the Act was carried out at the office premises on 04.02.2020 by the Income Tax Department. Based on the inspection findings, the Assessing Officer passed an order dated
11.03.2022 u/s 201(1) and 201(1A) of the Act for A.Y 2016-17, raising a demand of Rs. 13,21,894/- comprising Rs. 7,49,749/- towards alleged short deduction of tax under Section 201(1) and 26,17,555/- as interest under Section 201(1A) of the Act.

ITA No. 3338/DEL/2025 [A.Y. 2015-16]
29.07.2022 erroneously reflecting the A.Y as 2015-16, although the appeal was filed for the assessment year 2016-17. The CIT(A), without affording proper opportunity of being heard to the assessee, disregarded the issuance of incorrect notices reflecting the wrong assessment year. This oversight was neither acknowledged nor rectified and stands in violation of the principles of natural justice. The assessee had duly submitted a written reply along with supporting evidentiary documents in response to the notice dated 15.08.2022. However, these submissions were not considered or examined by the ld. CIT(A). The ld. counsel for the assessee relied upon ITA No. 3338/DEL/2025 [A.Y. 2015-16]
the decision of the Hon'ble Supreme Court in the case of Hindustan Coca
Cola Beverage Pvt Ltd 293 ITR 226 [Supreme Court] for the proposition that when deductee has paid its tax, the deductor cannot be held to be in default.
11. Per contra, the ld. DR relied on the orders of the authorities below.
12. We have heard the ld DR, gone through the submissions of the assessee and have perused the relevant material on record. We find that the order u/s 201(1)/201(1A) of the Act was passed on 11.03.2022 for A.Y
2016-17. We note that the initiation of action u/s 201(1) of the Act is contrary to the decision of the Hon'ble Juri ictional High Court of Delhi in the case of NHK Japan Broadcasting Corporation reported in [2008] 172
taxmann.com 230 [Del] which held that the power to initiate Section 201
proceedings is drastic and therefore requires a reasonable time limit. The court established a four-year reasonable period for initiating such proceedings, a finding that was based on Supreme Court precedents like the State of Punjab v. Bhatinda District Co-op Milk Producers Union
Ltd case. This decision meant that any proceedings under Section 201 that were initiated more than four years after the default occurred were considered time-barred and could be set aside. The Hon’ble Delhi High

ITA No. 3338/DEL/2025 [A.Y. 2015-16]
13. In accordance with the above referred decision of the Hon'ble Delhi
High Court, any action u/s 201(1) of the Act should have been made within
4 years of the infringement of the provisions of section 201 of the Act.
In that view of the matter, the order u/s 201(1) of the Act is considered as passed beyond the limitation period as defined by the Hon'ble Delhi High Court, rendering the same as invalid and not permissible in law and is accordingly, set aside. The Assessing Officer is directed to delete the addition made. Grounds of appeal raised by the assessee are allowed.
14. In the result, appeal of the assessee in ITA No. 3338/DEL/2024 is allowed.
The order is pronounced in the open court on 19.11.2025. [CHALLA NAGENDRA PRASAD]

[NAVEEN CHANDRA]
JUDICIAL MEMBER

ACCOUNTANT MEMBER

Dated: 08th DECEMBER, 2025. VL/

ITA No. 3338/DEL/2025 [A.Y. 2015-16]
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