TITLE: Section 201 TDS: Even if the statute does not lay down a time limit,
proceedings must be completed within a limited period
In the
context of a GDR/ Euro issue by the assessee, the department claimed that the
assessee ought to have deducted TDS u/s 195 on payment of fees to the fund
managers etc. The Special Bench (122 TTJ 577) allowed the assessee’s appeal
inter alia on the ground that a time limit for initiation and completion of
proceedings u/s 201 (1) & (1A) had to be read into the statute.
On appeal by the department to the High
Court HELD dismissing the appeal:
S. 201
of the Act does not prescribe any limitation period for the
assessee being declared as an assessee in default. If no period of limitation
is prescribed, a statutory authority must exercise its jurisdiction within a
reasonable period. What should be the reasonable period depends upon the nature
of the statute, rights and liabilities thereunder and other relevant factors.
Insofar as the IncomeTax Act is concerned,
s. 153(1)(a) prescribes the time limit for completing the assessment, which is
two years from the end of the assessment year in which the income was first
assessable. It is well known that the assessment year follows the previous year
and, therefore, the time limit would be three years from the end of the
financial year. This seems to be a reasonable
period as accepted u/s 153 of the Act, though for completion of assessment
proceedings. Even though the period of three years would be a reasonable period
as prescribed by s. 153 of the Act for completion of proceedings, the Income
Tax Appellate Tribunal has taken the view that four years would be a reasonable
period of time for initiating action, in a case where no limitation is
prescribed.
The rationale for this seems to be quite
clear if there is a time limit for completing the assessment, then the time
limit for initiating the proceedings must be the same, if not less.
Nevertheless, the Tribunal has given a
greater period for commencement or initiation of proceedings (NHK Japan
Broadcasting Corp 305 ITR 137 (Del) & Hutchison Essar Telecom 323 ITR 230
(Del) followed; Bhura Exports (Cal HC) dissented from)
