TDS Orders Beyond Four-Year Limit is Invalid: ITAT quashes CIT(A)'s Order [Read Order]

The Nagpur Bench of Income Tax Appellate Tribunal ( ITAT ) quashed the Commissioner of Income Tax (Appeals) [CIT(A)]'s order regarding Tax Deducted at Source ( TDS ) demands, stating that TDS orders issued beyond the four-year limit are invalid.

Indoworth India Ltd.,the appellant-assessee,challenged the CIT(A)'s orders dated 20/03/2023 for A.Y. 2012–13 and 2013–14 regarding TDS demand under section 201(1A). The assessee argued that the demand was time-barred under section 201(3) and contested the non-deduction of TDS on share application money of Rs. 55,89,527.

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The tribunal noted a 218-day delay in filing the appeal. The assessee cited the A.R.'s ill health and heart surgery as the cause. Despite objections from the Departmental Representative, the tribunal condoned the delay, finding it justified, and admitted the appeal for hearing.

The Authorised Representative (AR) submitted that the assessee, a Private Limited Company engaged in the textile industry, had filed its return of income for Assessment Year(AY) 2013-14, declaring nil taxable income and claiming a TDS refund of Rs.10,63,979. The assessee had collected Rs.4,65,79,390 as advance share application money and made a provision for interest of Rs.55,89,527 at 12% per annum from F.Y. 2012-13 to F.Y. 2018-19.

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This interest provision was treated as a contingent liability and was not claimed in the income tax returns, resulting in no TDS being deducted. The AR further stated that the assessee reversed the interest provision and corrected the omission in F.Y. 2019-20. Although the provision was not disallowed for F.Y. 2012-13 and F.Y. 2013-14 due to clerical errors, this was later rectified. The AR contended that the contingent provision for expenses was not liable for TDS, and there would be no impact on tax liability due to the assessee's substantial losses.

The Tribunal referenced GE India Technology Centre v. CIT and Mahindra & Mahindra Ltd., which established a four-year limit for notices under sections 201(1) and 201(1A) of the Income Tax Act. It quashed the order since the notice was issued beyond this limit, deeming the proceedings from a December 9, 2019, survey as belated and unsustainable.

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The two member bench comprising V. Durga Rao (Judicial Member) and K.M.Roy (Accountant Member) agreed with the AR, found the order against non-residents time-barred, noted a non-materialized credit of income to a resident, and ultimately ruled in favor of the assessee for the assessment year 2012-13, stating the assessee was not in default.

To Read the full text of the Order CLICK HERE

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