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Income Tax Appellate Tribunal, ‘C’ BENCH, BANGALORE
Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAO
This is an appeal filed by the assessee directed against the order of the ld. CIT(A)-II, Bangalore, dated 23/12/2011 for the assessment year 2003-04.
Page 2 of 6 2. The assessee raised the following grounds of appeal:
1) The Orders of the learned authorities below is contrary to law and facts. 2) The learned authorities below erred in concluding that the amounts paid to Shri Chinnaswamy Raju ("the payee") is a commission covered by section 194-H of the Income-tax Act, 1961 when no such conclusion was possible from the sale deeds concluded between the appellant and the payee. 3) The learned Commissioner of Income-tax (Appeals) having given a finding that the payee has signed the sale deeds as confirmed party erred in concluding that the payee had no interest in the land and that he was a mere mediator facilitating the sale. 4) The learned authorities below erred in determining the nature of the consideration as commission covered by section 194-H of the Act by placing reliance on how the payee has shown the receipt in his tax return. Without prejudice, the learned authorities below overlooked the "No objection Certificate" issued to the payee under Chapter XX-C of the Act. 5) The learned authorities below erred in relying on the evidences produced by the payee without extending an opportunity of cross-examining the payee, though the same was prayed for. 6) The learned Commissioner of Income-tax erred in not addressing the question whether the order could be passed for failure to deduct tax at source under section 194-H when the appellant was required to show-cause that the amounts paid were not for any "work done". 7) The learned Commissioner of Income-tax (Appeals) erred in not cancelling the order of the AO as being barred by limitation.
Page 3 of 6 8) The learned authorities below erred in confirming the Interest levied u/s 201(1A), when there is no requirement to deduct tax at source and the assessee was not in default. 9) All the grounds are without prejudice to each other. 10) For the above and other grounds and reasons which may be submitted during the course of hearing of this appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered.
Briefly facts of the case are that the appellant is a company duly incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of developing software. During the financial year 2002-03, the assessee- company purchased lands belonging to the following eight persons through one Mr.Chinnaswamy Raju : i. Shri T.Ramachandra ii. Shri H.V.Nagendrappa iii. Shri B.C.Mannoji Rao iv. Smt. N.Sujatha v. Shri N.Jaganatha Rao vi. Shri Srinivasa Rao vii. Shri Sudhakar Rao viii. Shri N.Venkobarao Deputy Commissioner of Income-tax (TDS) [DCIT(TDS] noticed from the agreement between Shri Chinnaswamy Raju and Shri Mannoji Rao, owner of land admeasuring 2 acres 20 odd guntas that Shri Chinnaswamy Raju was only a middleman facilitating the transaction. Therefore, DCIT(TDS) was of the Page 4 of 6 opinion that payments made by the assessee-company to Shri Chinnawamy Raju are only in the nature of brokerage or commission coming within the ambit of sec.194H of the IT Act,1961 and held the assessee-company as in default for not deduction of tax at source on such payments and passed an order dated 25/05/2009 raising a demand of Rs.15,45,155/- and interest of Rs.11,43,414/-.
Being aggrieved, an appeal was filed before the CIT(A), who vide impugned order, held that the payments made to Shri Chinnaswamy Raju are in the nature of commission and covered by sec.194H of the Act. However, he observed that since the amount was shown as commission in the hands of Shri Chinnaswamy Raju and paid tax thereon, no steps should be taken for recovery of the same from the assessee-company. However, he upheld the levy of interest u/s 201(1A) of the Act.
Being aggrieved by this order of the CIT(A), assessee- company is before us in the present appeal.
Learned AR of the assessee-company submitted that without going into merits of the issue, the proceedings initiated by the DCIT(TDS) are barred by limitation. Learned AR of the assessee has drawn our attention to ground No.7 raised by the assessee-company. On the other hand, learned Departmental Representative relied upon the orders of the lower authorities.
Page 5 of 6 7. We heard the rival submissions and perused material on record. The issue in appeal is to be adjudicated, whether the proceedings initiated by the DCIT(TDS) are barred by limitation or not? The provisions of section 201(3) of the Act as they stood at the relevant point of time are as under:
“(3) No order shall be mad 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, 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:” Thus, the statute prescribes that the proceedings u/s 201 can be initiated by the TDS office within the period of 2 years from the end of the financial year in which statement referred to in sec.200 is filed or in cases where no statement is filed, within the period of 6 years from the end of the relevant financial year. In this case, the financial year involved is 2002-03 and no statements u/s 200 were filed. Therefore, the order u/s 201 should have been passed on or before 31/3/2009. In this case, order u/s 201(1) was passed on 28/5/2009. Thus the proceedings are barred by limitation. It is trite law that orders passed after the period of limitation cannot be sustained in the eyes of law. Accordingly, we hold that the order passed by the DCIT(TDS) is barred by limitation and cannot be sustained in the eyes of law.
Page 6 of 6 8. In the result, the appeal filed by the assessee-company is allowed.