prpri Subsequent amendment in limitation cannot revive time barred action Subsequent amendment in limitation cannot revive time barred action

Case Law Details

Case Name : Bank of India – Kirkee Branch Vs ITO (ITAT Pune)
Appeal Number : ITA No. 893/PUN/2019
Date of Judgement/Order : 30/06/2021
Related Assessment Year : 2010-11

Bank of India – Kirkee Branch Vs ITO (ITAT Pune)

Conclusion: In present facts of the case, it was held by the Hon’ble Tribunal that expired time limit does not get revived with the extended time limit inserted later on.

Held: In present facts of the case, the assessee-bank accepted deposits from its customers, on which tax was deductible at source u/s 194A of the Act. The assessee furnished TDS statements in respect of the four quarters ending on 30.6.2009, 30.9.2009, 31.12.2009 and 31.3.2010 on 21.7.2009, 29.10.2009, 15.01.2010 and 3.5.2010 respectively. The AO found certain anomalies therein and observed that in some cases there was no deduction of tax, whilst in others there was short deduction of tax on interest payments. The order herein was passed in 2017 which was governed by the then existing time limit u/s 201(3) of the Act as amended by the Finance (No.2) Act, 2014.

The Hon’ble Tribunal while allowing the appeal that prior to the Finance Act, 2009, no time limit was provided for passing of an order u/s 201(1). It was for the first time that a time limit for passing of an order u/s 201(1) was inserted through sub-section (3) by the Finance (No.2) Act, 2009 w.e.f. 1.4.2010. A period of two years from the end of the F.Y. 2011-12 came to an end on 31.3.2014. As against that, the order was actually passed on 27.3.2017. Therefore, the order was clearly time barred.

Once the action of the AO got time barred w.r.t. the relevant provisions as applicable at the material time, such an expired time limit does not get revived with the extended time limit inserted later on. When the substituted provision came into force on 1.10.2014, the time available with the AO for passing of the order for the year under consideration had already expired. Even though limitation is a procedural law, but the subsequent amendment enlarging the scope of limitation prospectively, cannot give a new lease of life to an already time barred action.

FULL TEXT OF THE ITAT JUDGEMENT

This appeal by the assessee is directed against the order passed by the ld. CIT(A) on 05.12.2018 giving imprimatur to the order passed by Assessing Officer (AO) u/s. 201(1) read with section 201(1A) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) in relation to the A.Y. 2010-11.

2. This appeal is time barred by 101 days for which necessary condonation application has been filed. We are satisfied with the reasons for the delay. Such a delay is condoned and the appeal is admitted for disposal.

3. The factual matrix of the case is that assessee-bank accepted deposits from its customers, on which tax was deductible at source u/s 194A of the Act. The assessee furnished TDS statements in respect of the four quarters ending on 30.6.2009, 30.9.2009, 31.12.2009 and 31.3.2010 on 21.7.2009, 29.10.2009, 15.01.2010 and 3.5.2010 respectively. The AO found certain anomalies therein and observed that in some cases there was no deduction of tax, whilst in others there was short deduction of tax on interest payments. He passed the order dated 27.3.2017 u/s 201(1) read with section 201(1A) of the Act treating it as the assessee in default, raising demand of Rs.2,67,943. The assessee challenged such an order before the ld. CIT(A). It also raised an additional ground before the ld. first appellate authority to the effect that the order passed by the AO was time barred. The ld. CIT(A) admitted the additional ground but dismissed the same on merits by holding that the order passed in the year 2017 was governed by the then existing time limit u/s 201(3) of the Act as amended by the Finance (No.2) Act, 2014. Aggrieved thereby, the assessee has come up in appeal before the Tribunal.

4. We have heard both the sides through Virtual Court and gone through the relevant material on record. The admitted position is that the TDS Statements were filed by the assessee within time and the return for the last quarter was filed on 03.05.2010. The case of the assessee is that the order by the AO is barred by time in terms of the mandate of section 201(3) since it was passed after the expiry of two years from the end of the financial year. Au contraire, the Revenue has canvassed a view that the time limit was seven years from the end of the financial year as per the provision existing on the date of passing of the order by the AO.

5. The rival contentions can be better appreciated by having a look at the relevant provisions in this regard. Prior to the Finance Act, 2009, no time limit was provided for passing of an order u/s 201(1). It was for the first time that a time limit for passing of an order u/s 201(1) was inserted through sub-section (3) by the Finance (No.2) Act, 2009 w.e.f. 1.4.2010, reading as under:

`(3) No order shall be made 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, at 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)  ….

Provided that such order for a financial year commencing on or before the 1st day of April, 2007, may be passed at any time on or before the 31st day of March, 2011.’

6. The assessment year under consideration is 2010-11. Sub­section (3) to section 201 came to be inserted w.e.f. 2010-11 providing a time limit of two years under clause (i), with which we are concerned, for passing of an order u/s 201(1) of the Act from the end of the financial year in which the statement referred to in section 200 has been filed. Last of such statement was filed by the assessee on 3.5.2010. A period of two years from the end of the F.Y. 2011-12 came to an end on 31.3.2014. As against that, the order was actually passed on 27.3.2017. If we go with the 2009 insertion, the order was clearly time barred.

7. The Department has set up a case that since the order was passed in March, 2017, it is the law prevalent at that time, which is correctly applicable, being, sub-section (3) of section 201 as substituted by the Finance (No.2) Act, 2014 w.e.f. 1.10.2014 providing that : `No order shall be made 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, at any time after the expiry of seven years from the end of the financial year in which payment is made or credit is given.’ As the relevant financial year ended on 31.3.2010, the ld. DR contended that the period of seven years from the end of such financial year ended on 31.3.2017 and ergo the order was well within time.

8. There is a basic fallacy in the understanding of the law by the Department. We have noted above that as per the prevalent law relevant to the assessment year under consideration, only a period of two years from the end of the financial year in which the TDS Statement was filed, was available with the AO for passing of the order. Once the action of the AO got time barred w.r.t. the relevant provisions as applicable at the material time, such an expired time limit does not get revived with the extended time limit inserted later on. When the substituted provision came into force on 1.10.2014, the time available with the AO for passing of the order for the year under consideration had already expired. Even though limitation is a procedural law, but the subsequent amendment enlarging the scope of limitation prospectively, cannot give a new lease of life to an already time barred action.

9. The situation before us is not that when the amendment carried out by the Finance (No.2) Act, 2014 came into force, there was already some time left with the AO for passing of the order u/s 201(1) in respect of the TDS Statements filed by the assessee and such hitherto reduced period from two years came to be enlarged with the expanded period of seven years. This can be understood with the help of an example. An assessee files a TDS statement for the F.Y. 2012-13 and the time limit of two years for passing the order as per the 2009 insertion of section 201(3)(i) is still there and then comes the amendment of 2014 enhancing the time limit for passing of the order. Patently, such a situation is quite different from the one under consideration, where the time limit for the passing of an order for the F.Y. 2009-10 already came to an end before the substitution of section 201(3) of the Act by the 2014. Once the limitation already got set in before the amendment by the Finance (No.2) Act, 2014 making the AO functus officio, the later amendment cannot revive it. We want to clarify that we are concerned only with the F.Y. 2010-11. The effect of the amendment by the Finance Act, 2014 on the TDS statements filed for the F.Ys. 2012-13 or 2013-14 etc. is not there before us for adjudication. No observation in this order should be construed to have an impact on a decision for such years. The effect of the amendment for such years will be decided only when they come up for adjudication in a suitable case.

10. There is one more reason to fortify our conclusion that the time limit for the passing of the order is to be considered w.r.t. the law relevant when the TDS Statements for the financial year are filed and not as contended by the ld. DR that when the AO proceeds to pass the order. This is borne out from the proviso to section 201(3) of the Act as inserted w.e.f. 1.4.2010, which states that: `Provided that such order for a financial year commencing on or before the 1st day of April, 2007, may be passed at any time on or before the 31st day of March, 2011.’ It clearly emerges from a perusal of the proviso that an order for the financial year 2007-08 or an earlier year is obligated to be passed on or before 31.3.2011. The deadline for passing of an order has been linked with the relevant financial year and not when the AO takes up the proceedings. It is trite law that a proviso ordinarily makes exception to and takes something away from the main provision. When the proviso to section 201(3) is stipulating for passing of an order before 31.3.2011, which is a period of more than two years as per the sub­section (3), it naturally follows that the ordinary time limit for the passing of the order within the main provision is a period of two years from the end of the relevant financial year in which the TDS statement is filed and it has no relation with the time when the AO takes up the proceedings for passing of an order.

11. To sum up, we hold that the order u/s 201(1) of the Act was passed beyond the period of two years from the end of financial year in which the last TDS statement was filed. The same is hereby quashed as time barred. In view of our decision on the legal ground setting aside the order of the AO passed u/s 201(1), there is no point in considering the issue on merits as well.

12. In the result, the appeal is allowed.

Order pronounced in the Open Court on 30th June, 2021.

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