SOCIAL WORK & RESEARCH CENTRE,AJMER vs. ASSISTANT COMMISSIONER OF INCOME TAX, CPC (TDS), GHAZIABAD

PER VIJAY PAL RAO, JM :

This appeal by the assessee is directed against the order dated 21st

September, 2017 of ld. CIT (A), Ajmer arising from the order of processing

statements under section 200A/206 CB of the Act for the assessment year 2015-16 (27Q, 1st Qtr.). The assessee has raised the following grounds :-

“1. The ld.CIT (Appeals) has erred in law as well as on facts iof the case by confirming demand of late fee u/s 234E of Rs. 1,85,800/-.

The appellant craves leave to add, amend, alter, delete or modify any of the above grounds of appeal before or at the time of hearing.”

2 ITA No. 67/JP/2018 Social Work & Research Centre, Jaipur.

period April, to June, 2014 and deducted TDS under section 195 of the IT Act on the

said payments. The assessee also deposited the TDS so deducted within the stipulated time period on 5th May, 2014. However, the assessee did not submit the

quarter TDS statement in Form No. 27Q within the time prescribed on or before 15.07.2014 but the same were filed belatedly on 29th January, 2017. The AO while

processing the statement in Form No. 27Q has levied the fee of Rs. 1,85,500/- under

section 234E @ Rs. 200/- per day for the period from 16.07.2014 to 29.01.2017 total

929 days and issued intimation under section 200A of the Act. The assessee

challenged the said order/intimation issued by the AO under section 200A before the

ld. CIT (A) and submitted that the levy of fee under section 234E for the relevant

quarter is beyond the scope of intimation under section 200A as the same has been

included in the section by the Finance Act 2014 with effect from 01.06.2015. The

assessee relied upon the decision of Hon’ble Karnataka High Court in the case of

Fatheraj Singhvi vs. Union of India, 289 CTR 602 on this point that the amendment

in section 200A by Finance Act 2015 authorizing levy of fee under section 234E is

prospective in nature with effect from 01.06.2015. The ld. CIT (A) did not accept

the contention of the assessee and confirmed the levy of fee under section 234E

while issuing the intimation under section 200A.

in question was to the non-residents and TDS was deducted under section 195 of

the Act and, therefore, when the amount in question was not assessable to tax in

the hands of the recipient non-residents, then the question of any revenue loss to

3 ITA No. 67/JP/2018 Social Work & Research Centre, Jaipur.

the department does not arise only because the assessee did not file the quarterly

statement of TDS. He has further contended that the assessee deducted the TDS in

time and also deposited the same with the Government account which is not in

dispute and, therefore, the levy of fee under section 234E is not warranted. He has

further submitted that the provisions of section 200A were amended by Finance Act,

2014 with effect from 01.06.2015 whereby the levy of fee under section 234E was

included while processing the statements filed in Form No. 27Q. In support of his

contention he has relied upon the decision of Hon’ble Karnataka High Court in case

of Fatheraj Singhvi vs. Union of India (supra). Hence the ld. A/R has submitted that

when the provision is applicable prospectively, then the same cannot be applied in

the case of the assessee as the quarterly statement pertained to the period April to

June, 2014 whereas the said amendment was brought in the Statute with effect

from 01.06.2015. Alternatively, the ld. A/R has submitted that the non submission

of the statement is due to bonafide mistake and assessee realized the same only

when the Internal Audit party has pointed out the same. Therefore, when the

assessee has already deducted the TDS and deposited the same in the Government

account within the period of limitation, then merely because the assessee has failed

to submit the quarterly statement due to inadvertence and bonafide mistake where

the recipient is a non resident then the levy of fee under section 234E is not

warranted.

3.1. On the other hand, the ld. D/R has submitted that the provisions of section

234E are mandatory and the AO has no discretion but to levy the penalty @ Rs.

200/- per day default in filing the statement. He has further submitted that when the

4 ITA No. 67/JP/2018 Social Work & Research Centre, Jaipur.

default is continuous in nature and remain even after the amendment brought into

the Statute with effect from 01.06.2015, then the provisions of section 200A as well

as section 234E are applicable in the case of the assessee. He has relied upon the

orders of the authorities below.

record. There is no dispute that the assessee made the payment to the non-

residents and deducted TDS under section 195 of the IT Act which was also deposited with the Government account on 5th May, 2014. The payment pertains to the 1st quarter from April, to June, 2014 and, therefore, the last date of filing the quarter TDS statement in Form No. 27Q was 15th July, 2014. However, despite the

TDS deducted and deposited in the Government account within the period of

limitation, the assessee did not file the Statement and finally the statement was filed on 29th January, 2017. The question of applicability of the provisions of section

234E with prospective effect from 01.06.2015 has been considered the Hon’ble

Karnataka High Court in case of Fatheraj Singhvi vs. Union of India (supra). The

Hon’ble High Court has held in para 23 to 27 as under :-

“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

5 ITA No. 67/JP/2018 Social Work & Research Centre, Jaipur.

be having prospective effect, no computation of fee for the demand or the intimation for the fee under Section 234E could be made for the TDS deducted for the respective assessment year prior to 1.6.2015. Hence, the demand notices under Section 200A by the respondent-authority for intimation for payment of fee under Section 234E can be said as without any authority of law and the same are quashed and set aside to that extent. 25. As such, as recorded earlier, it is on account of the intimation received under Section 200A for making computation and demand of fees under Section 234E, the same has necessitated the appellant to challenge the constitutional validity of Section 234E. When the intimation of the demand notices under Section 200A is held to be without authority of law so far as it relates to computation and demand of fee under Section 234E, we find that the question of further scrutiny for testing the constitutional validity of Section 234E would be rendered as an academic exercise because there would not be any cause on the part of the petitioners to continue to maintain the challenge to constitutional validity under Section 234E of the Act. At this stage, we may also record that the learned counsels appearing for the appellant had also declared that if the impugned notices under Section 200A are set aside, so far as it relates to computation and intimation for payment of fee under Section 234E, the appellant-petitioners would not press the challenge to the constitutional validity of Section 234E of the Act. But, they submitted that the question of constitutional validity of Section 234E may be kept open to be considered by the Division Bench and the Judgment of the learned Single Judge may not conclude the constitutional validity of Section 234E of the Act. 26. Under these circumstances, we find that no further discussion would be required for examining the constitutional validity of Section 234E of the Act. Save and except to observe that the question of constitutional validity of Section 234E of the Act before the Division Bench of this Court shall remain open and shall not be treated as concluded. 27. In view of the aforesaid observations and discussion, the impugned notices under Section 200A of the Act for computation and intimation for payment of fee under Section 234E as they relate to for the period of the tax deducted prior to 1.6.2015 are set aside. It is clarified that the present judgment would not be interpreted 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.”

Thus the Hon’ble High Court has held that the amendment made under section 200A

of the Act came into effect from 01.06.2015 and is prospective in nature, therefore,

no computation of fee for demand or intimation under section 234E could be made

6 ITA No. 67/JP/2018 Social Work & Research Centre, Jaipur.

for TDS deducted for the respective assessment year prior to 01.06.2015. There is

no quarrel on the point that the delay in filing the statement upto 01.06.2015 would

not attract the provisions of section 234E as the amendment in section 200A enable

the AO to levy the fee under section 234E with effect from 01.06.2015 and,

therefore, the AO was having no jurisdiction or authority to levy the fee for the delay

of period prior to 01.06.2015. However, we find force and merits in the contention

of ld. D/R that since the delay is continuous and perpetual and permeates to the

succeeding years upto 29.01.2017 and, therefore, once the provisions of section

234E are applicable from 01.06.2015, the delay from that date onwards will attract

the levy of fee. Undisputedly the default in submitting the TDS statement in Form

No. 27Q is a continuous and not a single incidence of default. Further, the levy of

fee is also not based on the single default but it is based on day to day default @ Rs.

200/- per day. Thus the provisions of section 234E envisage the levy of fee for a

continuous default till it is end. However, the Hon’ble Karnataka High Court has held

that AO has no authority to levy the fee u/s 234E while issuing the intimation u/s

200A so far as they are for the period prior to 01.06.2015. In the present case the

assessee has also raised an alternative plea that the payment was made to the non-

resident and TDS was deducted under section 195 of the Act, therefore, until and

unless it is determined that the said amount in the hands of the non-residents is

taxable in India, the non-filing of TDS statement would be inconsequential and there

would be no possible loss of revenue. Hence in view of the above facts and

circumstances of the case and following the decision of Hon’ble Karnataka High

7 ITA No. 67/JP/2018 Social Work & Research Centre, Jaipur.

Court in the case of Fatheraj Singhvi vs. Union of India (supra), we delete the levy

of fee under section 234E of the Act.

Order is pronounced in the open court on 14/08/2018.

Sd/- Sd/- (foØe flag ;kno) (fot; iky jkWo ½ (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Jaipur Dated:- 14/08/2018. Das/

आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

8 ITA No. 67/JP/2018 Social Work & Research Centre, Jaipur.