The Patna High Court while dismissing the appeal against Indian Oil Corporation Ltd, has held that four years is a reasonable time of limitation in the absence of limitation provided in statute for an order under section 201 of the Income Tax Act, 1961.
The Revenue challenged the impugned orders of the Tribunal in favour of the respondent-assessee. The question was whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal (‘Tribunal’) was justified in setting aside the order passed by the Assessing Officer finding it to be beyond four years; deeming that to be a reasonable time, when there was no limitation provided under Sections 201(1) and 201(1A) of the Income Tax Act, 1961?
The assessment orders, under Sections 201(1) and 201(1A) of the Act, were passed on 27.04.2007. It is admitted that there was no limitation provided in the statute for an order to be passed under Section 201, deeming an assessee to be in default in respect of such tax, which is not deducted or paid or after deduction failed to pay such tax, as an employer, due from the employee.
The orders were passed under Section 201 on 27.04.2007. The Tribunal found that the assessment orders were passed after four years from the financial years 2001-2002 and 2002-03; beyond a reasonable period as discernible from the various provisions of the Act. The Revenue relied on the decisions of the Calcutta High Court and the Punjab & Haryana High Court,which held that the period of limitation is not applicable as far as the tax deducted at source (TDS) is concerned.
The Supreme Court has held that “it is trite that when no period of limitation is prescribed by a statute, even then the Department cannot pass orders after the expiry of a reasonable period.”
It has also been held in various decisions that the reasonable period can be understood from the provisions of the subject statute, disclosing the scheme of the statute, where limitation is provided with respect to other actions by the Department.
The established principle is that, if the Revenue has not challenged a declaration of law laid down by a High Court and accepted it in the case of one assessee, then it is not open to the Revenue to challenge its correctness in the case of other assessees, without just cause.
Chief Justice K Vinod Chandran and Justice Partha Sarthy answered the question of law against the revenue and in favour of the assessee and reject the appeals filed by the Revenue.
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