UNITED METALS vs. THE INCOME TAX OFFICER (TDS) KOCHI (2)

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WP(C)/28378/2021HC KeralaKLHC01070952202110 December 2021Author: HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS5 pages
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What did the High Court hold?

The High Court held that the demand for late fee under Section 234E for the period from 2011-12 till 01.06.2015 is bereft of authority and cannot be legally sustained. The reasoning is based on the petitioner's submission, supported by the decision in M/s. Sarala Memorial Hospital v. Union of India and Another, which established that the amendment to Section 200A, enabling the computation of late fees under Section 234E, took effect only from 1st June 2015 and was prospective. Consequently, the Court quashed the notice (Ext.P1) to the extent it demands fee under Section 234E for the period from 2011-12 till 01.06.2015. The operative direction is to quash the impugned notice for the specified period. No issue was expressly left undecided.

What were the facts?

The petitioner, M/s. United Metals, received a notice (Ext.P1) dated 02.02.2021, demanding late filing fees under Section 234E of the Income Tax Act, 1961. The demand amounts to Rs. 3,26,760/- for the periods from 2011-12 to 2019-20. The petitioner contends that Section 234E, though introduced by the Finance Act, 2012, became enforceable for computing late fees only with effect from 01.06.2015, when Section 200A(1) of the Act was amended to include clauses (c) to (f), specifically referring to Section 200A(1)(e) for fee computation. The petitioner argues that no liability for late fees under Section 234E can be imposed for periods prior to 01.06.2015.

What were the issues?

1. Whether the late fee under Section 234E of the Income Tax Act, 1961, can be demanded for periods prior to 01.06.2015, considering the amendments to Section 200A of the Act? (Question of law). Assessee's contentions: The petitioner argues that Section 234E, while introduced in 2012, only became operational for computing late fees from 01.06.2015, as per the amendments to Section 200A. They rely on the decision in M/s. Sarala Memorial Hospital v. Union of India and Another (W.P.(C) No.37775 of 2018), which held that the amendment is prospective and binding. Therefore, the demand for periods before 01.06.2015 is unsustainable. Revenue's contentions: The judgment records arguments from the Standing Counsel for the first respondent and the Assistant Solicitor General of India for the second respondent, but their specific contentions are not detailed.

Which sections of the Income-tax Act were involved?

Section 234E,Section 200A,Section 200

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Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS FRIDAY, THE 10TH DAY OF DECEMBER 2021 / 19TH AGRAHAYANA, 1943 WP(C) NO. 28378 OF 2021 PETITIONER : M/S.UNITED METALS PALAKUZHA, KARIMPANA, MUVATTUPUZHA, ERNAKULAM - 686662, REPRESENTED BY ITS MANAGING PARTNER, MR. SAJEEV MATHEW. BY ADVS. S.K.DEVI M.RAJ MOHAN P.K.MAYA DEVI SHANMUGHAM D. JAYAN RESPONDENTS : 1 THE INCOME TAX OFFICER (TDS) KOCHI (2), INCOME TAX BUILDINGS, I.S. PRESS ROAD, ERNAKULAM - 682018. 2 THE UNION OF INDIA MINISTRY OF FINANCE, DIRECT TAXES DEPARTMENT, REPRESENTED BY ITS SECRETARY, NEW DELHI - 110001. SRI.CHRISTOPHER ABRAHAM, SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 10.12.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C) No.28378 of 2021 2 BECHU KURIAN THOMAS, J. =-=-=-=-=-=-=-=-=-=-=-=-=-= W.P.(C) No.28378 of 2021 =-=-=-=-=-=-=-=-=-=-=-=-=-= Dated this the 10th day of December, 2021

JUDGMENT By Ext.P1 notice dated 02.02.2021, petitioner has been called upon to pay the late filing fee under section 234E of the Income Tax Act, 1961 (for short,'the Act').

2.

As per the aforesaid demand notice, an amount of Rs.3,26,760/- is demanded for the periods from 2011-12 to 2019-20 on the basis of the provisions in section 234E of the Act, which is as follows: “234E-Fee for default in furnishing statements:- (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.”

3.

Though section 234E of the Act was introduced by the Finance Act, 2012 with effect from 1st July, 2012, since petitioner is being demanded by Ext.P1 late fee for not filing the statement of tax deduction at source, it is necessary to refer to section 200A of the Act. Section 200A(1) incorporated clause (c) to clause (f) with effect from 01.06.2015. Sub-clause to section 200A (1) refers to the fee if any to be computed in accordance with the provisions of section 200A(1)(e). It is the claim of the petitioner that till 01.06.2015 petitioner cannot be mulcted with any liability to pay late fee for non filing of any statement of tax deduction at source.

4.

I have heard Smt.S.K.Devi, learned counsel for the petitioner, Sri.Christopher Abraham, learned Standing Counsel for the first respondent as well as Sri.S.Manu, learned Assistant Solicitor General of India for the second respondent.

5.

Learned counsel for the petitioner brought to my attention the decision in M/s.Sarala Memorial Hospital v. Union of India and Another (W.P.(C) No.37775 of 2018) wherein an identical question arose for consideration. After considering the statutory provisions and the implications of the amendment brought in to the Act, it was held that the amendment would take effect only with effect from 1st June, 2015 and is thus prospective in nature. It is submitted that the aforesaid judgment has become final and is binding upon the authorities.

6.

In view of the above, the demand in Ext.P1 for the period from 2011-12 to the first quarter of 2015-16 is bereft of authority and cannot be legally sustainable.

7.

Accordingly, I quash Ext.P1 notice to the extent it demands fee under section 234E for the period from 2011-12 till 01.06.2015. The writ petition is therefore allowed in part. BECHU KURIAN THOMAS, JUDGE RKM

Appendix — schedule of exhibits
APPENDIX OF WP(C) 28378/2021 PETITIONER'S EXHIBITS : Exhibit P1 TRUE COPY OF THE NOTICE ITBA/COM/F/17/2020- 2021/1030284671(1) DATED 02.02.2021.

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