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RAJESH KOURANI Versus UNION OF INDIA And 4

Non permissibility to levy fee under section 234E till section 200A of the Act was amended with effect from 01.06.2015 - Fee for default in furnishing statements - Held that:- When section 234E has already created a charge for levying fee that would thereafter not been necessary to have yet another provision creating the same charge. Viewing section 200A as creating a new charge would bring about a dichotomy. In plain terms, the provision in our understanding is a machinery provision and at best .....

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ificatory amendment. Even in absence of such provision, as noted, it was always open for the Revenue to charge the fee in terms of section 234E of the Act. By amendment, this adjustment was brought within the fold of section 200A of the Act. Upon introduction of the recasted clause (c), this situation also would be obviated. Even prior to 01.06.2015, it was always open for the Revenue to calculate fee in terms of section 234E of the Act - Section 200A is not a source of substantive power. Su .....

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me Court in case of B C Srinivasa Setty (1981 (2)1 - SUPREME Court) was rendered in entirely different background. Issue involved was of charging capital gain on transfer of a capital asset. In case on hand, the asset was in the nature of goodwill. The Supreme Court referring to various provisions concerning charging and computing capital gain observed that none of these provisions suggest that they include an asset in the acquisition of which no cost can be conceived. In such a case, the asset .....

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, Advocate ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. This petition is filed by an individual. He has challenged the vires of section 234E of the Income Tax Act, 1961 ('the Act' for short) and has also challenged the demand of fee in terms of the said provision raised under section 200A of the Act. The petitioner has also challenged the validity of rule 31A of the Income Tax Rules, 1961 ('the Rules' for short). 2. Brief facts are as under. 3. The petitioner is a .....

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d in the Act for levying fee for default in furnishing the statement of tax deducted or collected at source. As per rule 31A of the Rules, the person responsible for deduction of tax in terms of subsection (3) of section 200 would have to file quarterly statements in prescribed form. Subrule (2) of rule 31A prescribed dates by which such statements would have to be filed. 4. Section 200A of the Act pertains to processing of statements of tax deducted at source. This provision provides for proces .....

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overnment to file the statements as compared to the other assessees is discriminatory and arbitrary and therefore unconstitutional. III. Prior to 01.06.2015, section 200A did not authorize the Assessing Officer to make adjustment of the fee to be levied under section 234E of the Act. This provision introduced with effect from 01.03.2016 is not retrospective and therefore, for the period between 01.07.2002 i.e. when section 234E was introduced in the Act and 01.06.2015 when proper mechanism was p .....

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espect to the other two grievances of the petitioner. Regarding rule 31A of the Rules, he pointed out that the legislature has prescribed different time limits for filing statements for the Government and the rest of the assessees. The special concession to the Government agencies was wholly unnecessary and not based on any rational. The same difficulties and complexities which are faced by Government agencies would also be faced by the individual assessees. 7. With respect to the amendment in s .....

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the Act. Counsel relied on a decision of Pune Bench of ITAT in case of Gajanan Constructions v. Deputy Commissioner of Incometax, CPC (TDS), Ghaziabad, reported in [2016] 73 taxmann.com 380 (Pune - Trib.), in which, the Tribunal held that prior to 01.06.2015, the Assessing Officer was not empowered to charge fee under section 234E of the Act. Counsel also relied on a decision of Division Bench of Karnataka High Court in case of Fatheraj Singhvi v. Union of India, reported in [2016] 73 taxmann.co .....

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t to grant 15 days additional time to the Government agencies to file the statements. This is therefore not a case of discrimination, but a case of reasonable classification. 9. With respect to the amendment in section 200A, counsel submitted that the charging provision is section 200E of the Act. Section 200A merely provides a mechanism. Such a provision cannot govern the charging provision. Even in absence of amendment in section 200A, the Assessing Officer was always authorized to levy fee in .....

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l contentions, we may take a closer look at the statutory provisions applicable. Section 200 of the Act pertains to duty of the person deducting tax and imposes a duty on a person deducting tax in accordance with the foregoing provisions of chapterXVII to pay such sum to the credit of the Central Government within the time prescribed. Subsection (3) of section 200 requires such a person to prepare such statements for the prescribed periods and to file the same within the prescribed time. Section .....

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ction 234E of the Act. For the time being, we may notice that section 200A provides for a mechanism for processing a statement filed under section 200 of the Act and enables the Assessing Officer to make some adjustments and to intimate the final outcome to the assessee. 12. Section 234E which pertains to fee for default in furnishing the statements was introduced for the first time by the Finance Act, 2012, with effect from 01.07.2015. Section 234E reads as under: Fee for default in furnishing .....

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. (3) The amount of fee referred to in subsection (1) shall be paid before delivering or causing to be delivered a statement in accordance with subsection (3) of section 200 or the proviso to subsection (3) of section 206C. (4) The provisions of this section shall apply to a statement referred to in subsection( 3) of section 200 or the proviso to subsection (3) of section 206C which is to be delivered or caused to be delivered for tax deducted at source or tax collected at source, as the case ma .....

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er subsection (3) of section 271H however, such penalty would be avoided if the assessee proves that he had paid the tax deducted or collected alongwith interest and he had filed the necessary statement within one year from the time prescribed for filing such statements. We may also record that clause (k) of subsection (2) of section 272A provides for penalty for failure to deliver the statement within the time specified in subsection (3) of section 200 or the proviso to subsection (3) of sectio .....

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source [or a correction statement] has been made by a person deducting any sum (hereafter referred to in this section as deductor) under section 200, such statement shall be processed in the following manner, namely:- (a)the sums deductible under this Chapter shall be computed after making the following adjustments, namely:- (i)any arithmetical error in the statement; or (ii)an incorrect claim, apparent from any information in the statement; (b)the interest, if any, shall be computed on the basi .....

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of refund due to the deductor in pursuance of the determination under clause © shall be granted to the deductor: (f) the amount of refund due to the deductor in pursuance of the determination under clause (d) shall be granted to the deductor:] Provided that no intimation under this subsection shall be sent after the expiry of one year from the end of the financial year in which the statement is filed. Explanation.-For the purposes of this subsection, "an incorrect claim apparent from .....

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to expeditiously determine the tax payable by, or the refund due to, the deductor as required under the said subsection. With effect from 01.06.2015, subsection (1) of section 200A was amended. In the amended form, the same provision reads as under: Section 200A(1) Processing of statements of tax deducted at source. 200A. (1) Where a statement of tax deduction at source [or a correction statement] has been made by a person deducting any sum (hereafter referred to in this section as deductor) und .....

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ion 234E; (d)the sum payable by, or the amount of refund due to, the deductor shall be determined after adjustment of the amount computed under clause (b) and clause (c) against any amount paid under section 200 or section 201 or section 234E and any amount paid otherwise by way of tax or interest or fee; (e)an intimation shall be prepared or generated and sent to the deductor specifying the sum determined to be payable by, or the amount of refund due to, him under clause (d); and (f) the amount .....

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sistent with another entry of the same or some other item in such statement; (ii)in respect of rate of deduction of tax at source, where such rate is not in accordance with the provisions of this Act; (2) For the purposes of processing of statements under subsection (1), the Board may make a scheme for centralised processing of statements of tax deducted at source to expeditiously determine the tax payable by, or the refund due to, the deductor as required under the said subsection. 15. In view .....

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cial year ending with the date specified in column (2) of the Table below shall be furnished by( i) the due date specified in the corresponding entry in column (3) of the said Table, if the deductor is an office of Government; and (ii) the due date specified in the corresponding entry in column (4) of the said Table, if the deductor is a person other than the person referred to in clause (i) TABLE Sl. No. Date of ending of quarter of financial year Due date Due date (1) (2) (3) (4) 1 30th June 3 .....

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date by which such statements should be filed, draws two categories; in case of deductor is an office of government and in case of a deductor is a person other than the office of the government. Consistently, the office of the government is granted 15 days extra time as compared to the other deductors. For example, the statement for the date of the quarter ending on 30th June, an ordinary deductor would have to file a statement latest by 15th July of the same year, whereas for the Government off .....

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refore cannot be compared with the private individuals or business houses. We do not found that the extra time of 15 days for the Government to file a return of deduction of tax at source is in any manner either unreasonable or discriminatory. If the legislature found it appropriate to grant slightly longer period to the government agencies looking to the complex nature of transactions involved, the volume and turnover of such transactions and filtering necessary statements required at many stag .....

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tatutory provisions. The picture that emerges is that prior to 01.07.2012, the Act contained a single provision in section 272A providing for penalty in case of default in filing the statements in terms of section 200 or proviso to section 206C. Such penalty was prescribed at the rate of ₹ 100 for every day during which the failure continued. With effect from 01.06.2012, three major changes were introduced in the Act. Section 234E as introduced for the first time to provide for charging of .....

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of the due date. With addition to these two provisions prescribing fee and penalty respectively, clause (k) of subsection (2) of section 272A became redundant and by adding a proviso to the said section, this effect was therefore limited upto 01.07.2012. 17. In essence, section 234E thus prescribed for the first time charging of a fee for every day of default in filing of statement under subsection (3) of section 200 or any proviso to subsection (3) of section 206C. This provision was apparentl .....

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ical in nature. The officer would then send an intimation of a statement to the assessee. Prior to 01.06.2015, this provision did not include any reference to the fee payable under section 234E of the Act. By recasting subsection (1), the new clausec permits the authority to compute the fee, if any, payable by the assessee under section 234E of the Act and by virtue of claused, adjust the said sum against the amount paid under the various provisions of the Act. 19. In plain terms, section 200A o .....

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inery provision can override or overrule a charging provision. We are unable to see that section 200A of the Act creates any charge in any manner. It only provides a mechanism for processing a statement for tax deduction and the method in which the same would be done. When section 234E has already created a charge for levying fee that would thereafter not been necessary to have yet another provision creating the same charge. Viewing section 200A as creating a new charge would bring about a dicho .....

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be made and demand raised. In other words, we cannot subscribe to the view that without a regulatory provision being found for section 200A for computation of fee, the fee prescribed under section 234E cannot be levied. Any such view would amount to a charging section yielding to the machinery provision. If at all, the recasted clause (c) of subsection (1) of section 200A would be in nature of clarificatory amendment. Even in absence of such provision, as noted, it was always open for the Revenu .....

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and it could be argued that such an order would not be open to any rectification or appeal. Upon introduction of the recasted clause (c), this situation also would be obviated. Even prior to 01.06.2015, it was always open for the Revenue to calculate fee in terms of section 234E of the Act. The Karnataka High Court in case of Fatheraj Singhvi (supra) held that section 200A was not merely a regulatory provision, but was conferring substantive power on the authority. The Court was also of the opi .....

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