Limitation period for passing order u/s 201 of IT Act in absence of any express provision in Act

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14.2 After considering the rival submissions in the light of the material placed before us and the precedents relied upon it is obvious that sub-sections (1) and (1A) of section 201 do not prescribe any time limit for the initiation of the proceedings or the passing of the order. We find that for the most of the actions under the Act, the particular time limit has been given for the commencement and completion of the proceedings. For example time limit for issuing of notice for the purposes of making assessment is laid down in section 143(2). Similarly time for issuing notice of reassessment has been set in section 149. Section 153 deals with the time provided for the completion of assessment and reassessments. Similarly time limit for rectification of order is given in section 154; for passing revising order under section 263 etc. etc. In such a scenario the question arises that if no time limit is provided, then can any time limit be artificially imported by the authorities. The Id. DR has contended that the tribunal is not competent to lay down any time limit. If this contention is brought to the logical conclusion it will mean that the unlimited time will be available to the Departmental authorities at their sweet will for taking action under this section. In our considered opinion this contention raised on behalf of the Revenue is bereft of any force for the simple reason that certainly is the hallmark of any proceedings. H is beyond our comprehension that how, in the absence of any time limitation provided in the section, the action can be taken in indefinite period. It is wholly impermissible to argue that unlimited time limit be granted to the Revenue for taking action under this section. The sword of taxing authorities cannot be allowed to hang, forever, over the head of the lax payers. If this proposition of the learned D.R. is accepted that will give license to the authorities to take action even after 30, 40 or 50 years. The canons of limitation are ordinarily provided expressly in the Act and in their absence, they are to be impliedly inferred by taking into consideration the scheme of the relevant provisions. The ld. DR has relied on some cases for suggesting that no lime limit be laid down by the tribunal for the purposes of passing order u/s 201(1) or (1A). In our opinion before applying the ratio of any judgment, it is imperative to look into text and the context in which it is rendered. It is equally important to bear in mind the relevant provision in the background of which such judgment was rendered. It is not permissible to pick up a case from one enactment and insist for the application of the ratio decidendi of that case to an altogether different legislation, which has no resemblance with the former. The Hon’ble Rajasthan High Court in Arihant Tiles & Marbles (P) Ltd. vs. ITO (2007) 295 ITR 148 (Raj) has held that the interpretation of any expression used in the context of one statute is not be automatically imported while interpreting similar expression in another statute. Similar view has been earlier expressed by the Hon’ble Supreme Court in CIT VS Venkateswara Hatcheries P. Ltd etc. (1999) 237 ITR 174 (SC).

14.4 If we look at the scheme of section 201(1) it is found that a duty has been cast upon the person responsible to make deduction of tax at source from any payment made on which tax is deductible. The failure to deduct or payment after deduction enables the authorities to treat him as assessee in default. This deduction of tax at source is only one mode of recovery. The deductee always remains responsible for the payment of tax on the amount which is paid to him with or without deduction of tax at source. Hence we do not find any match between the facts of the case of Hindustan Times Limited (supra) and others on similar lines, relied upon by the learned D.R. vis-a-vis the facts under consideration. On the contrary so many authorities have been cited on behalf of the assessee, some of which have been referred to above in which it has been categorically held that the statutory power should be exercised within a reasonable time even if no time limit is prescribed. The same opinion has been expressed by the Hon’ble Supreme Court in the case of Mohamad Kavi Mohamad Amin Vs. Fatmabai Ibrahim [(1997) 6 SCC 71]. In view of the foregoing discussion we are of the considered opinion that there is no merit in the contention of the learned D.R. that in the absence of time limit specified u/s.201, action can be taken at any point of time. It is naturally so for the reason that lime is the core of “every action under law. If the legislature is silent in prescribing a particular time limit then the action can be taken within a reasonable time. The Id. DR, during the course of subsequent arguments, was fair enough to concede that the time limit may be specified, but requested that it should not be kept rigid at four years as has been held in the case of Raymond Woolen Mills Ltd. Vs. HO 1(1996) 57ITD 536 (Bom.)]. Now the next question is that what can be the reasonable period for action u/s 201(1). There cannot be a particular time limit say two years or five years or ten years, which can be described as reasonable for all the actions under the Act, when no time limit is prescribed. The reasonable time for taking action under a particular section largely depends on host of factors, inter alia, the nature of proceedings, the character of the order etc. In order to determine the reasonable time for taking action u/s.201, it is important to have a look at such necessary factors.

17.9 Section 201(1) declares that where the person responsible for paying any sum chargeable to tax under the provisions of this Act fails to deduct or after deducting fails to pay the tax as per the provisions of this Act, he shall be deemed to be an assessee in default in respect of the tax. Further the Explanation to section 191, which will be discussed infra has direct impact on the liability of the person liable to deduct but failing to deduct or failing to pay after deduction of tax at source. On going through the Explanation to section 191 in juxtaposition to section 201(1) it is divulged that the person responsible for deducting or failing to pay tax deducted at source is to be deemed to be an assessee in default only if the payee of income has also failed to pay such tax directly. From the detailed discussion under the succeeding main head, we will also notice that where the payee is not liable to pay tax on the amount of income received by him without deduction of tax at source, then also the person responsible cannot be treated as assessee in default. To sum up the liability of the person responsible is dependent upon the deductee failing or otherwise to pay such tax directly. Thus the action u/s. 201(1) is dependent on the outcome of the assessment of the payee and the time limit for passing order u/s. 201 (1) has to be viewed in the light of the fate of the assessment in the hands of the recipient Logically the person responsible for paying sum chargeable lo lax can be treated as assessee in default at any time prior to the assessment of the payee or the time available for the making of the assessment of the payee. If the persons responsible is deemed to be an assessee in default after the assessment of the payee or the time available for making assessment has expired then such amount of tax will be incapable of adjustment against tax liability of the payee and would require return to such person who has been treated as assessee in default. Thus both the initiation of proceedings u/s. 201(1) as well as the completion of such proceedings by passing order have to be prior to the lime limit within which the tax can be determined in the hands of the payee. It cannot be beyond such period. There may be different situations in the assessment of the payee. If the payee has included the amount received from payer in his total income but the tax has not been paid in full or part then the payer can be treated as assessee in default lo the extent of the non-payment of tax on the sum paid to him provided the tax is! not recovered from the payee. If the payee has furnished the return of income without disclosing the sum paid by the payer on which tax was deductible as per the provisions of the Act then the tax deductible at source can be recovered from the payer by treating him as assessee in default if the income has not been assessed in the hands of the payee. Still in another situation where the payee has not at all filed his return of income again the person responsible can be treated as assessee in default in respect of the tax on the sum paid by him in violation of the provisions of this Chapter With this discussion there remains no difficulty in answering the question that how much time is available with the Revenue for treating the payer as assessee in default u/s. 201(1). The obvious answer is that the maximum time limit available for assessment of the payee is the maximum time limit within which the payer can be treated as assessee in default. With the expansion of the scope of section 147, also roping in the cases of assessment apart from reassessment, it is clear that the assessment of payee shall also include assessment made under 147. Thus the maximum time limit for initiating and completing the proceedings u/s. 201(1) has to be at par with the time limit available for initiating and completing the reassessment.

17.10 Proviso to section 143(3) states that no notice under clause (ii) shall be served on the assessee after expiry of 12 months from the end of the month in which the return is furnished. The time limit for completion of assessment u/s. 143 or 144 has been prescribed u/s. 153(1) as two years from the end of the assessment year in which the income was first asses sable. The time limit for notice of assessment or reassessment u/s.147 has been prescribed u/s.149. This section, in turn, provides that no notice u/s. 147 shall be issued for the relevant assessment year if four years have elapsed from the end of the relevant assessment year unless the case falls under clauses (b). Clause (b) further states that no notice u/s 147 shall be issued if four years but not more than six years have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupee or more for that year. The present two-fold time limit for issuing notice u/s.149 has clear cut demarcation of its applicability in one situation or the other. Where the income chargeable to tax which has escaped assessment, by reason or under-assessment or no assessment, amounts to or is likely to amount to one lakh rupees or more for that year then the extended period of six years is available but if the amount of such income is less than Rs. l lakh then the shorter period of four years is provided for. Section 153(2) deals with the time limit for the completion of assessment, reassessment or re-computation u/s. 147. It provides that “no order of assessment, reassessment or re-computation shall be made u/s. 147 after the expiry of one year from the end of the financial year in which notice u/s. 148 was served”. As we have held above that the order u/s 201(1) is akin to assessment and further the assessment includes reassessment, naturally the reasonable time limits for initiation and completion of action u/s 201(1) have to be similar to those available for assessment u/s 147. Accordingly we hold that proceedings u/s. 201(1) can be initiated in the extended period of six years from the end of the relevant assessment year if the income by virtue of sum paid without deduction of tax at source by the payer chargeable to lax in the hands of the payee is equal to or more than one lakh rupee. If on the other hand such amount is less than Rs. 1 lakh then the lower period of four years as prescribed u/s.l49(l)(a) from the end of the relevant assessment year is available for initiation of proceedings u/s.20](l). Going by the same logic and taking assistance from section 153(2), the completion of proceedings u/s.201(l), that is the passing of the order under this sub-section, has to be within one year from the end of the financial year in which proceedings under section 201(1) were initiated. Same time limits for initiation and passing of orders will be valid for the passing of order under section 201(1A) also. We hold accordingly.

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