MARBLE KINGDOM INDIA PVT. LTD. ,UDAIPUR vs. ITO,WARD-TDS, UDAIPUR

This is an appeal filed by the assessee against the order of ld. Commissioner of Income Tax (Appeals) (National Faceless Appeal Centre, Delhi) under section 250 of Income Tax Act, 1961 for A.Y. 2013-14 emanating from order under section 154 of the Income Tax Act dated 31.12.2019 passed by Income Tax Officer (TDS), Udaipur.

The assessee has filed an application under section 154 of the Act against the order under section 200A. Assessee requested the ITO to rectify the levy of fee charged under section 234E of the Act. The ld. ITO rejected the application on the ground that it is not a mistake apparent from record as it is a debatable issue. The relevant paragraph of the order is reproduced here as under:-

The ld. CIT(A) upheld the order under section 154 of the Act. Aggrieved by the same, assessee has filed appeal before this Tribunal. None appeared for the assessee. However, assessee has filed written submission. As per the written submission, it is admitted by the assessee that quarterly TDS statements for F.Y. 2012-13 were belatedly filed on 23.07.2013 and 16.10.2013 for 2nd, 3rd & 4th quarter. The said statements were processed and order under section 200A of the Act was passed levying a late fee under section 234E of the Act of Rs. 1,33,400/-. Aggrieved by the said order passed under section 200A of the Act, assessee has filed the above mentioned rectification application before the ITO (TDS), Udaipur.

In the written submission, assessee has relied on various case laws to put forth the point that late fee under section 234E cannot be levied for the period prior to 1.6.2015. 2 Marble Kingdom India Pvt. Ltd. 5. It is observed that the assessee has filed an appeal before ld. Commissioner of Income Tax (Appeals) against the order under section 154 of the Act. 5.1 We will discuss each ground of appeal

In this context, we may notice that section 200A which pertains to processing of statements of tax deducted at source provides for the procedure once a statement of deduction of tax at source is filed by the person responsible to do so and authorizes the Assessing Officer to make certain adjustments which are prima-facie or arithmetical 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 sub-section (1), the new clause-c permits the authority to compute the fee, if any, payable by the assessee under section 234E of the Act and by virtue of clause-d, adjust the said sum against the amount paid under the various provisions of the Act.

In plain terms, section 200A of the Act is a machinery provision providing mechanism for processing a statement of deduction of tax at source and for making adjustments, which are, as noted earlier, 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 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 5 Marble Kingdom India Pvt. Ltd. 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.

Even in absence of section 200A of the Act with introduction of section 234E, it was always open for the Revenue to demand and collect the fee for late filing of the statements. Section 200A would merely regulate the manner in which the computation of such fee would 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 sub-section (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 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. This would have one direct effect. An order passed under section 200A of the Act is rectifiable under section 154 of the Act and is also appealable under section 246A. In absence of the power of authority to make such adjustment under section 200A of the Act, any calculation of the fee would not partake the character of the intimation under said provision 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 6 Marble Kingdom India Pvt. Ltd. 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 opinion that section 234E of the Act was in the nature of privilege to the defaulter if he fails to pay fees then he would be rid of rigor of the penal provision of section 271H of the Act. With both these propositions, with respect, we are unable to concur. Section 200A is not a source of substantive power. Substantive power to levy fee can be traced to section 234E of the Act. Further the fee under section 234E of the Act is not in lieu of the penalty of section 271H of the Act. Both are independent levies. Section 271H only provides that such penalty would not be levy if certain conditions are fulfilled. One of the conditions is that the tax with fee and interest is paid. The additional condition being that the statement is filed latest within one year from the due date.

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 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. 7 Marble Kingdom India Pvt. Ltd.

In the result, petition fails and is dismissed.”

Thus, the two Hon’ble High Courts have expressed the different views regarding the question whether late fee under section 234E can be levied for the period prior to 1.6.2015.

In this facts and circumstances, this question is a debatable question. 11. The order passed under section 200A cannot be rectified on the issue which is a debatable issue. Provisions of section 154 cannot be invoked for debatable issue. In this case, levy of late fee under section 234E is a debatable issue as discussed in earlier para. It is not a clear cut mistake apparent from record. Therefore, the order under section 200A cannot be rectified under section 154 of the Act. 12. The Hon’ble Supreme Court in the case of CIT vs. South India Bank Ltd 249 ITR 304 (SC) has held as under:- 8 Marble Kingdom India Pvt. Ltd. “4. Having regard to the difference of opinion among the learned Judges of the High Court on the principal question, it is clear that there was a debatable question and error on the face of the record which could not (sic) be corrected by invocation of the provisions of section 154. On that ground alone, the appeals must fail. 5. We make it clear that we are expressing no opinion in regard to the principal issue.”

Thus, respectfully following the Hon’ble Supreme Court since the issue involved in this case was a debatable issue, we agree with ld. Assessing Officer that no order under section 154 can be passed on debatable issue. Accordingly, we upheld the order of the ld. Assessing Officer passed under section 154 of the Act. Ground No. 3 14. Ground no.3 is general in nature. The assessee has not amended, modified or added any ground. Therefore, ground no. 3 is dismissed. Accordingly, the appeal of the assessee is dismissed. 15. In the result, the appeal of the assessee is dismissed. Order pronounced on 18th August, 2023.