Case Law Details
Adabala Manmohan Vs ITO (ITAT Visakhapatnam)
Reasonable time limit for issue of notice u/s 201(1)/201(1A) is 4 years
In this case the admitted facts are that the assessee has purchased a property during the FY 2010-11 relevant to the AY 2011-12 on 7/3/2011. The assessee has paid a sum of Rs. 54,22,000/- out of which Rs. 50,39,500/- was paid to the NRI. As per the provisions of section 195 of the Act, the assessee is required to deduct tax at source on payments made to non-residents. In the instant case, the assessee required to deduct the tax at source on the sums chargeable to capital gains. The assessee has failed to deduct the tax at source, therefore the assessee is liable for payment tax and interest U/s. 201(1)/201(1A) of the Act. The Ld. AO passed order U/s. 201(1)/201(1A) on 27/03/2018 which is after a lapse of five years from the end of the relevant assessment year. There is no time limit provided under the Act for treating the assessee as an assessee in default in respect of payment made to non-resident. As per section 201(3), as rightly pointed out by the Ld. AR it applies to residents and not to non-residents. The identical issue has come up before this Tribunal in the case of Bheemarasetty Sunitha cited supra and this Tribunal after considering the decisions of Hon’ble Delhi High Court in the case of Bharti Airtel Limited & Anr Vs. Union of India & Anr and the decision of NHK Japan Broadcasting Corporation [305 ITR 0137], the decision of Hon’ble Supreme Court in the case of GE India Technology Centre and the decision of Hon’ble Bombay High Court in the case of Mahindra & Mahindra Ltd. [365 ITR 0560 (Bom)] held that the reasonable time limit for issue of notice u/s 201(1)/201(1A) is 4 years. In cases, where the notice is issued beyond 4 years, the Coordinate Bench of ITAT held that the same is barred by limitation.
Assessee cannot be taxed for non-deduction of TDS U/s. 195 if non-resident has discharged his/her obligation with respect to payment of capital gains tax
In the instant case, Smt. Davuluri Sai Swapna has filed her return of income in response to the notice U/s. 148 of the Act for the AY 2012-13 admitting a total taxable income of Rs. 16,16,878/- and offered capital gains of Rs. 15,22,953/-. The AO of the non-resident ITO, Ward-12(2), Hyderabad passed the assessment order U/s. 143(3) r.w.s 147 of the Act on 12/6/2019 accepting the return filed by the NRI Smt. Davuluri Sai Swapna. Since the non-resident has discharged her obligation with respect to payment of capital gains tax, the assessee cannot be taxed once again for non-deduction of TDS U/s. 195 of the Act. It is also observed that the seller Smt. Davuluri Sai Swapna is a non-resident from the assessment order passed by AO, Ward-12(2), Hyderabad. Similarly it is also noticed that the AO erred in not adopting the SRO value as prescribed U/s. 50C of the Act while concluding the assessment of the Non-Resident. The reliance placed by the Ld. DR in ITO vs. Shri Rang Infrastructure (P) Ltd (supra) is distinguishable on the fact that the extension of the period of time limit U/s. 201(3) applies only to residents and not to NRIs and hence reliance cannot be placed for the instant case. Respectfully following the judicial precedents as discussed in the earlier paras, we are of the considered view that treating the assessee as an assessee in default U/s. 201 of the Act is not valid in law.
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