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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 31ST DAY OF JANUARY 2022 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE SURAJ GOVINDARAJ I.T.A. NO.150 OF 2019 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX 4TH FLOOR, HMT BHAVAN NO.59, BELLARY ROAD GANGANAGAR BENGALURU-560032. 2. THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE-1(1), 4TH FLOOR HMT BHAVAN, NO.59, BELLARY ROAD GANGANAGAR, BENGALURU-560032. .... APPELLANTS (BY MR. K.V. ARAVIND, ADVOCATE) AND: M/S. ACER INDIA PVT. LTD., NO.13, 6TH FLOOR EMBASSY HEIGHTS MARGATH ROAD NEXT TO HOSMAT HOSPITAL BENGALURU-560025 PAN:BLRAO 1844D. ... RESPONDENT (BY MR. SURYANARAYANA, SR. COUNSEL FOR MS. MANASA ANANTHAN, ADVOCATE)
2 THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 14.09.2018 PASSED IN ITA NO.2570/BANG/2017 FOR THE ASSESSMENT YEAR 2009- 10, PRAYING TO: (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO.2570/BANG/2017 DATED 14.09.2018 FOR ASSESSMENT YEAR 2009-10 ANNEXURE-C AND CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER CONFIRM THE ORDER PASSED BY THE ASST. COMMISSIONER OF INCOME TAX (TDS), CIRCLE-1(1), BENGALURU & ETC. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’, for short) has been filed by the revenue. The subject matter of the appeal pertains to the Assessment Year 2009-10. The appeal was admitted by a Bench of this Court on the following substantial questions of law:
1.Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in law in holding that the provisions of Section 194H are not attracted in the case of assessee with regard to payments towards supply of manpower and non- deduction of taxes on payments made to distributors towards price protection and
3 special price clearance discounts even when the assessing authority rightly held that assessee was liable to deduct tax on such activities as it attracted Section 194H of the Act?
Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in confirming the order of the CIT(A) cancelling the order passed under Section 201(1) and 201(1A) of the Act by erroneously holding that the said orders are barred by limitation even though the period of limitation applicable is 7 years and not 2 years as held by the Tribunal?
Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in law in confirming the order of the CIT(A) cancelling the order passed under Section 201(1) and 201(1A) of the Act by erroneously holding that said orders are barred by limitation holding that as per law it prevailed prior to amendment to Section 201(3) by Finance Act No.2 of 2014 is considered?"
4 2. Facts leading to filing of this appeal briefly stated are that assessee is a company engaged in the business of providing Information Technology related services. A survey under Section 133A of the Act was conducted by the Revenue in the business premises of the assessee on 17.06.2015 to verify the compliance by the assessee with regard to various tax deduction at source under the Act. The Assessing Officer initiated proceeding under Section 201 of the Act and issued a notice on 08.02.2016 to the assessee, for delay on the part of the assessee to deduct tax at source on provisions for expenses made in the end of the year, short deduction of tax at source towards supply of manpower and non deduction of tax at source on payments made to the distributors towards price protection and special price clearance discounts. The assessee objected to the proceeding on the ground that limitation for passing an order under Section 201(1) and 201 (1A) of the Act would be two years from the end of relevant financial year as per Section 201(3) of the Act as the statement referred to Section 200 of the Act was filed by the assessee. The Assessing Officer by an order dated 30.03.2016 rejected the aforesaid contention and held that
5 Section 201(3) of the Act was substituted by Finance Act, 2013 with effect from 01.10.2014 and therefore, the limitation of seven years from the end of the relevant financial year is applicable. 3. The assessee, thereafter, filed an appeal before the Commissioner of Income Tax (Appeals), who by an order dated 28.09.2017 allowed the appeal preferred by the assessee and inter alia held that limitation prescribed under Section 201(3) of the Act as it existed prior to amendment vide Finance Act No.2/2014 apply to the case of the assessee and the limitation to pass the orders under Section 201 of the Act expired prior to coming into force the Amendment. It was further held that amendment Act No.2/2014 was prospective in nature and therefore, proceeding under Section 201 of the Act was barred by limitation. The Revenue, thereupon, preferred an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The Tribunal by an order dated 14.09.2018 dismissed the appeal preferred by the Revenue.
6 In the aforesaid factual background, this appeal has been filed. 4. Learned counsel for the revenue submitted that the case of the assessee before the authority was that the assessee is not liable to deduct tax at source at all and therefore, the question of filing the statement as required under Section 200 of the Act did not arise. It is further submitted that the statement under Section 200 of the Act has to be filed in prescribed form. It is further submitted that if the limitation is alive the same is can be extended. It is further submitted that Section 201(1A)(3)(ii) of the Act applies to the case of the assessee and therefore, the period of limitation for initiating the proceeding under Section 201 of the Act is 7 years. However, the Tribunal as well as the Commissioner of Income Tax have failed to appreciate the aforesaid aspect of the matter. In support of aforesaid submissions, reliance has been placed on decision in 'THE ASSISTANT
COMMISSIONER OF INCOME TAX, CHENNAI VS. M/S A.R.ENTERPRISES', (2013) 3 SCC 196.
7 5. On the other hand, learned Senior counsel for the assessee submitted that admittedly the assessee in the instant case had filed the statement under Section 201(3) of the Act. Therefore, the limitation to pass an order under Section 201 of the Act expired prior to coming into force of Amendment Act No.2/2014. It is further submitted that order passed under Section 201 of the Act on 30.03.2016 in respect of assessment year 2008-09 is clearly barred by limitation. 6. We have considered the submissions made on both sides and have perused the record. Section 201(1A)(3) of the Act as it stood prior to its substitution by Finance Act No.2/2014 with effect from 01.10.2014 reads as under: (3) No order shall be made under sub-Section (1) deeming a person to be an assesee 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 referred to in Section 200 has been filed.
8 (ii) six years from the end of the financial year in which payment is made or credit is given, in any other case. The aforesaid provision was amended with effect from 01.10.2014 by Finance Act No.2/2014. 7. The issue, which arises for consideration in this appeal is whether in the facts of the case, Section 201(1A)(3)(i) or (ii) of the Act would apply to the case of the assessee. It is well settled in law that limitation prescribed under the Act is not a mere period of limitation but the same imposes a fetter on the power of the assessing officer to take action under the said provision. [See: 'S.S.GADGIL VS. LAL & CO. (1964) 53 ITR 231 and 'K.M.SHARMA VS. ITO', (2002) 254 ITR 772]. In the instant case, admittedly, the statement referred to under Section 200 of the Act has been filed. A finding of fact in this regard has been recorded by the Commissioner of Income Tax (Appeals) as well as by the Tribunal. The limitation of 2 years as prescribed in Section 201(1A)(3) of the Act as it existed prior to its substitution by Act No.2/2014 applies to the facts of the case. The limitation to pass an order under Section 201(1A) of the Act expired
9 prior to Finance Act No.2/2014, which came into force with effect from 01.10.2014. Thus, a right accrued to the assessee and the subsequent amendment therefore, could not have revived the period of limitation and take away the vested right accrued to the assessee. Therefore, it is evident that the order passed under Section 201 of the Act dated 30.03.2016 is clearly barred by limitation. 8. The first substantial question of law does not arise for consideration in this case. For the aforementioned reasons, second and third substantial questions of law are answered in favour of the assessee and against the revenue. In the result, we do not find any merit in this appeal, the same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE ss