TMI Blog2022 (5) TMI 1006X X X X Extracts X X X X X X X X Extracts X X X X ..... peal of assessee allowed. - I.T.A. No. 575/Kol/2021 - - - Dated:- 18-5-2022 - Shri Sanjay Garg, Judicial Member And Shri Girish Agrawal, Accountant Member For the Appellant : Shri Subash Agarwal, Advocate For the Respondent : Smt. Ranu Biswas, Addl. CIT, DR ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER : This is an appeal preferred by the assessee against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi dated 27.10.2021 for AY 2013-14 vide order No. ITBA/NFAC/S/250/2021-22/1036592114(1) against the assessment order passed by DCIT-CPC-TDS u/s. 200A of the Income-tax Act, 1961 (hereinafter referred to as the Act ) dated 25.01.2019. 2. The sole ground of appeal of the assessee is against the order of the Ld. CIT(A) in confirming the action of the AO of levying the fee u/s. 234E of Rs.73,000/- as the same is beyond the scope of permissible adjustment contemplated u/s. 200A of the Act. According to Ld. CIT(A), section 234E of the Act prescribes a fine of Rs.200/- for every day from date of default till it continues. According to Ld. CIT(A), a default summary which consists of various defaults identified while processing the statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 234E of the Act can be levied even without a regulatory provision being found in section 200A for computation of fee. The Ld. CIT(A) heavily relied on the said decision of Hon ble Gujarat High Court in Rajesh Kourani (supra) wherein it was held that in the appellant s/assessee s case fee levied u/s. 234E of the Act is legal and correct. According to him, the fee levied by AO (TDS) u/s. 234E of the Act is sustainable and confirmed it. Aggrieved, assessee is in appeal before us. 4. We have heard rival submissions and gone through the facts and circumstances of the case. We find that the issue is no longer res integra. The Hon ble Karnataka High Court in the case of Fatehraj Singhvi Vs. UOI (73 Taxmann.com 252 dated 26.08.2016) has held that the amendment in section 200A by way of insertion of clause (c) is only with effect from (w.e.f.) 01.06.2015 and therefore no fees would be payable by the assessee for any period prior to 01.06.2015. We find that the reliance by the Ld. Counsel for the assessee on the decision of Hon ble Karnataka High Court (supra) covers the issue involved in this case in favour of the assessee which was dealt in the order of coordinate bench of this tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/Mum/2018 for AY 2013-14 dated 10.12.2019 the assessee favour decision may be followed while deciding this appeals. 4. Per contra, the Ld. DR for the Revenue submitted that since the Hon ble Gujarat High Court has categorically held that section 234E of the Act is a charging provision for the levy of fees for defaults in filing of TDS statement, the same could have been levied and, therefore, the action of the authorities below should not be disturbed. We note that the issue is no longer res integra and since there is favourable order of the Hon ble Karnataka High court in favour of the assessee in the case of Fatehraj Singhvi (supra) and following that ratio, the Mumbai Tribunal as well as the Pune Bench has decided the issue in favour of assessee in the light of the decision of the Hon ble Supreme Court in Vegetable Products (supra). We note that the Hon ble Karnataka High Court in Shri Ayappa Educational Charitable Trust (supra) has held on this issue as under: 6. We have heard learned Senior Counsel Mr.Kumar and Mr.A.Shankar, appearing for the appellants and Mr.K.V.Aravind, learned counsel appearing for Income Tax Department. 7. We may at the outset record that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore delivering or causing to be delivered a statement in accordance with sub-section (3) of section 200 or the proviso to sub-section (3) of section 206C. (4) The provisions of this section shall apply to a statement referred to in sub- section (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 may be, on or after the 1st day of July, 2012. 11. Similarly, Section 271H was inserted with effect from 1.7.2012 providing for imposition of penalty for default in filing TDS statement and also for furnishing of incorrect information in such TDS statement. The proviso was inserted in Section 272A providing for no penalty under the said section will be imposed after 1.7.2012 for failure to file TDS statement on time possibly because a separate Section 271H was inserted in the Act. Section 271H will be relevant for our purpose and same for ready reference is reproduced and it reads as under: Penalty for failure to furnish statements, etc. 271H. (1) Without prejudice to the provisions of the Act, [the Assessing Officer may direct that a person shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 basis of the sums deductible as computed in the statement; (c) the fee, if any, shall be computed in accordance with the provisions of section 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 206C (3) of the Act. Section 234E can be said as a charging Section generating the liability to pay the fee therefore, irrespective of a fact or the aspect that sub-sections (1c), (1d), 1(e) (1f) were inserted by way of substitution in Section 200A, when the fee was payable the aforesaid insertion of the aforesaid clause and Section 200A (1) (c), (d), (e) and (f) would not result into nullifying the liability to pay fee under Section 234E of the Act. Hence, in his submission, it cannot be said that the demand or the intimation by way of computation of the fee under Section 234E is invalid or unwarranted or is without jurisdiction. 17. The examination of the aforesaid contentions show that, Section 234E has come into force on 1.7.2012. Therefore, one may at the first blush say that, since Section 234E is a charging section for fee, the liability was generated or had accrued, if there was failure to deliver or cause to be delivered the statement/s of TDS within the prescribed time. But, in our view, Section 234E cannot be read in isolation and is required to be read with the mechanism and the mode provided for its enforcement. As observed by us hereinabove, when Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 176; or (c) to furnish in due time any of the returns, statements or particulars mentioned in section 133 or section 206 or section 206C or section 285B; or (d) to allow inspection of any register referred to in section 134 or of any entry in such register or to allow copies of such register or of any entry therein to be taken; or (e) to furnish the return of income which he is required to furnish under sub-section (4A) or sub-section (4C) of section 139 or to furnish it within the time allowed and in the manner required under those sub-sections; or (f) to deliver or cause to be delivered in due time a copy of the declaration mentioned in section 197A; or (g) to furnish a certificate as required by section 203 or section 206C; or (h) to deduct and pay tax as required by sub-section (2) of section 226; (i) to furnish a statement as required by sub-section (2C) of section 192; (j) to deliver or cause to be delivered in due time a copy of the declaration referred to in sub-section (1A) of section 206C; (k) to deliver or cause to be delivered a copy of the statement within the time specified in sub-section (3) of section 200 or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rivilege to the defaulter if he pays the fee and hence, when a privilege is given for a particular purpose which in the present case is to come out from rigors of penal provision of Section 271H(1)(a), it cannot be said that the provisions of fee since creates a counter benefit or reciprocal benefit in favour of the defaulter in the rigors of the penal provision, the provisions of Section 234E would meet with the test of quid pro quo. 21. However, if Section 234E providing for fee was brought on the state book, keeping in view the aforesaid purpose and the intention then, the other mechanism provided for computation of fee and failure for payment of fee under Section 200A which has been brought about with effect from 1.6.2015 cannot be said as only by way of a regulatory mode or a regulatory mechanism but it can rather be termed as conferring substantive power upon the authority. It is true that, a regulatory mechanism by insertion of any provision made in the statute book, may have a ITA No.4902/Mum/2018 Assessment Year :2013-14 National Laminate Corporation retroactive character but, whether such provision provides for a mere regulatory mechanism or confers substantive power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment under protest. 23. In view of the aforesaid observation and discussion, since the impugned intimation given by the respondent-Department against all the appellants under Section 200A are so far as they are for the period prior to 1.6.2015 can be said as without any authority under law. Hence, the same can be said as illegal and invalid. 24. If the facts of the present cases are examined in light of the aforesaid observation and discussion, it appears that in all matters, the intimation given in purported exercise of power under Section 200A are in respect of fees under Section 234E for the period prior to 1.6.2015. As such, it is on account of the intimation given making demand of the fees in purported exercise of power under Section 200A, the same has necessitated the appellant-original petitioner to challenge the validity of Section 234E of the Act. In view of the reasons recorded by us hereinabove, when the amendment made under Section 200A of the Act which has come into effect on 1.6.2015 is held to be having prospective effect, no computation of fee for the demand or the intimation for the fee under Section 234E ITA No.4902/Mum/2018 Assessment Year :2013-14 Nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reted to mean that even if the payment of the fees under Section 234E already made as per demand/intimation under Section 200A of the Act for the TDS for the period prior to 01.04.2015 is permitted to be reopened for claiming refund. The judgment will have prospective effect accordingly. It is further observed that the question of constitutional validity of Section 234E shall remain open to be considered by the Division Bench and shall not get concluded by the order of the learned Single Judge. 28. The appeals are partly allowed to the aforesaid extent. 5. For the purpose of completeness, we would like to reproduce the order passed by the Hon ble Gujarat High Court rendered in the case of Rajesh Kourani (supra) which was held in favour of the revenue and the Ld. CIT(A) has followed the same while passing the impugned order : 2. Brief facts are as under. 3. The petitioner is a proprietor of one M/s Sai Baba Textiles which is engaged in the manufacture and trading of ladies garments. In course of the business, the petitioner would make payments to individuals and agencies, many of which would require deducting tax at source. The provisions under the Act would fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 sub-section (1) of section 200A, counsel submitted that prior to such amendment, there was no mechanism provided under the Act for collection of fee under section 234E of the Act. The Assessing Officer therefore could not have adjusted such fee in terms of section 200A of the Act. Counsel drew our attention to an intimation sent by the Assessing Officer, purported to be under section 200A of the Act, in which, he had adjusted a sum of Rs.33,123/- by way of late filing fee under section 234E of the Act. Counsel relied on a decision of Pune Bench of ITAT in case of Gajanan Constructions v. Dy, CIT [2016] 73 taxmann.com 380/161 ITD 313 (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 Karnat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of this section prior to 01.06.2015 and the changes made therein by virtue of Finance Act, 2015, with effect from 01.06.2015. Further, we would take note of provisions of section 234E of the Act. For the time being, we may notice that section 200A provides for a mechanism for processing a ITA No.4902/Mum/2018 Assessment Year :2013-14 National Laminate Corporation 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 statements. 234E.(1) Without prejudice to the provisions of the Act, where a person fails to deliver or cause to be delivered a statement within the time prescribed in sub- section (3) of section 200 or the proviso to sub-section (3) of section 206C, he shall be liable to pay, by way of fee, a sum of two hundred rupees for every day during which the failure continues. (2) The amount of fee referred to in sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner, 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 basis of the sums deductible as computed in the statement; (c) the sum payable by, or the amount of refund due to, the deductor shall be determined after adjustment of amount computed under clause (b) against any amount paid under section 200 and section 201, and any amount paid otherwise by way of tax or interest; (d) 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 (c); and (e) amount of refund due to the deductor in pursuance of the determination under clause (c) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sub-section, an incorrect claim apparent from any information in the statement shall mean a claim, on the basis of an entry, in the statement-- (i) of an item, which is inconsistent 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 sub-section (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 sub-section. 15. In view of such statutory provisions, we may consider the petitioner's two challenges. Coming to the question of discriminatory nature of rule 31A of the Rules, it can be seen that sub-rule (1) of rule 31A of the Rules provides for filing of the statements in prescribed forms as required under sub-section (3) of section 200. ITA No.4902/Mum/2018 Assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 stages, in our opinion, the same ITA No.4902/Mum/2018 Assessment Year :2013-14 National Laminate Corporation was perfectly legitimate. Looking to the differences between the Government agencies and private assessees in the context of providing the last date for filing the statements, do not form a homogeneous class which cannot be further bifurcated. 16. We now come to the petitioner's central challenge viz. of non permissibility to levy fee under section 234E of the Act till section 200A of the Act was amended with effect from 01.06.2015. We have noticed the relevant statutory 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 pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier, arithmetical or prima-facie in nature. With effect from 01.06.2015, this provision specifically provides for computing the fee payable under section 234E of the Act. On the other hand, section 234E is a charging provision creating a charge for levying fee for certain defaults in filing the statements. Under no circumstances a machinery 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 ITA No.4902/Mum/2018 Assessment Year :2013-14 National Laminate Corporation 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 dichotomy. In plain terms, the provision in our understanding is a machinery provision and at best provides for a mechanism for processing and computing besides other, fee payable under section 234E for late filing of the statements. 20. Even in absence of section 200A of the Act wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The additional condition being that the statement is filed latest within one year from the due date. 21. Counsel for the petitioner however, referred to the decision of Supreme Court in case of CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294/5 Taxman 1 (SC), to contend that when a machinery provision is not provided, the levy itself would fail. The decision of Supreme Court in case of B C Srinivasa Setty (supra) 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 ITA No.4902/Mum/2018 Assessment Year :2013-14 National Laminate Corporation asset in the acquisition of which no cost can be conceived. In such a case, the asset is sold and the consideration is brought to tax, what is charged is a capital value of the asset and not any profit or gain. This decision therefore would not apply in the present case. 22. In the result, petition fails and is dismissed. 6. We note that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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