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Facts
This batch of 21 appeals by the Assessee (Agrawal Distilleries Pvt. Ltd.) pertains to Financial Years 2012-13, 2013-14, and 2014-15. The appeals challenge the levy of fee under Section 234E of the Income Tax Act, 1961, for the delay in furnishing TDS statements. A common issue across these appeals is the applicability of Section 234E for periods prior to June 1, 2015.
Held
The Tribunal held that the amendment to Section 200A of the Act, which enabled the computation of fee under Section 234E, was prospective and effective from June 1, 2015. Therefore, the levy of fee under Section 234E for periods prior to June 1, 2015, was not sustainable. The Tribunal condoned a delay of 57 days in filing one of the appeals.
Key Issues
Whether the levy of fee under Section 234E of the Income Tax Act, 1961, is applicable for periods prior to the amendment of Section 200A of the Act on June 1, 2015.
Sections Cited
Section 234E, Section 200, Section 200A, Section 154, Section 156, Section 206C
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Income Tax Appellate Tribunal, A BENCH, MUMBAI
-1185/Mum/2024 Assessment Years 2013-14, 2014-15 & 2015-16 Appearance For the Appellant/Assessee : None For the Respondent/Department : Shri Raj Singh Meel Date Conclusion of hearing : 12.06.2024 Pronouncement of order : 26.06.2024 O R D E R Per Bench: 1. This is batch of 21 appeals pertaining to Financial Year 2012-13, 2013-14, and 2014-15 preferred by the Assessee against 21 separate orders, each dated 30/10/2023, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’]. Since the appeals involve common issues the same were heard together and are being disposed by way of a common order.
When the appeal was taken up for hearing none was present for the Appellant. The Learned Departmental Representative submitted that the solitary common issue raised in the present batch of appeal pertained to the levy of fee under Section 234E of the Act for delay in furnishing statement under Section 200 of the Act within the prescribed time.
We have heard the Learned Departmental Representative and perused the material on record including the documents placed on record by the Appellant and have given thoughtful consideration to the submissions made on behalf of the Appellant as recorded in the order passed by the CIT(A) and the grounds of appeal filed before the Tribunal.
4. We would first take up [Financial Year 2012-13: Quarter 2/Form 27EQ] as the lead matter which has been preferred by the Assessee challenging the order, dated 2 ITA Nos. 1165-1185/Mum/2024 Assessment Years 2013-14, 2014-15 & 2015-16 30/10/2023, passed by the CIT(A), whereby the CIT(A) had dismissed the appeal of the Assessee against the intimation, dated 19/03/2023, issued under Section 154 [read with Section 200A] of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
5. We note that there is a delay of 57 days in filing the appeal. On perusal of application seeking condonation of delay in filing the appeal we are of the view that the Appellant had sufficient cause for not filing the appeal in the prescribed time. The Appellant had base in Indore, Madhya Pradesh and had difficulty in engaging the counsel and coordinating the filing of the appeals. Further, there was a sudden demise in the family of the tax consultant initially engaged and the Appellant had to approach another tax consultant to expedite the filing of appeals. In the aforesaid facts and circumstances, there was a delay of 57 days in filing the appeal. In view of the aforesaid explanation, we condone the delay of 57 days in filing the appeal and proceed to adjudicate the grounds raised in the appeal on merits. Since all the grounds raised pertain to common issue of levy of late fee under Section 234E of the Act the same are taken up together hereinafter.
6. The Appellant has challenged the levy of fee under Section 234E of the Act for delay in filing the statement under Section 200 of the Act. Section 234E of the Act provides that where a person fails to deliver or cause to be delivered a statement within the time prescribed in Section 200(3) or the proviso to sub-Section 206C(3) of the Act, such person shall be liable to pay, by way of fee, a sum of INR 200 for every day during which the failure continues. Section 200(3) of the Act cast obligation upon specified persons deducting tax at source to prepare and deliver to the specified authority a statement in the specified Form No. 24Q, 26B, 26Q, 27A and 27Q. Proviso to Section 200 of the Act enables the Assessment Years 2013-14, 2014-15 & 2015-16 aforesaid person to also file corrected statement for rectification of mistake or to add, delete or update the information furnished in the statement so delivered. Section 200A of the Act provides that manner in which statement/correction statement filed under Section 200A(3) and/or proviso to Section 200 shall be processed. Section 200A(1)(c) of the Act provides for computation of fee, if any, in accordance with the provisions of Section 234E of the Act.
7. In the present case the correction statement filed by the Appellant pertaining to Financial Year 2012-13 [Quarter 2: Form 27EQ] was processed under Section 200A of the Act; fee under Section 234E of the Act was computed; and intimation under Section 154 read with Section 200A of the Act was issued which is deemed to be notice of demand under Section 156 of the Act. The Appellant has challenged the levy of fee under Section 234E of the Act, inter alia, on the ground that the statement/correction statement pertained to period prior to 01/06/2015; the amendment to Section 200A providing for computation of fee under Section 234E came into effect from 01/06/2015 and therefore, no fee under Section 234E of the Act in the present case. The CIT(A) dismissed the appeal observing that since the Appellant had not challenged levy of fee at the time of issuance of original intimation issued under Section 200A of the Act the Appellant could not now challenge the levy of fee under Section 234E of the Act. While arriving at the aforesaid conclusion the CIT(A) had observed that there was no limitation to filing a correction statement, and that correction statement filed by Appellant in the present case was not valid/genuine. On perusal of the material on record we note that the correction statement filed by the Appellant was not rejected as being invalid. The aforesaid correction statement was processed and intimation dated 19/03/2023 issued under Section 154 of the Act was issued. On perusal of the same we find that fee under Section 234E of the Act ITA Nos. 1165-1185/Mum/2024 Assessment Years 2013-14, 2014-15 & 2015-16 has been computed at INR 80,400/- as per the mandate of Section 200A(1)(c) of the Act. We note that the aforesaid intimation issued under Section 154 of the Act is treated as notice of demand by the Revenue as per Section 156 of the Act. Thus, in our view, the Appellant had the right to challenge the computation in appeal before CIT(A). It is not the case of the Revenue that the intimation, dated 19/03/2023, issued under Section 154 of the Act is not appealable before CIT(A). The appeal before the CIT(A) has been filed within period of limitation when computed form the date of issuance of the aforesaid intimation. Given the facts and circumstances of the present case, we are not inclined to accept the approach adopted by the CIT(A). We note that the CIT(A) has not disputed the contention of the Appellant that no fee/penalty under Section 234E of the Act could have been levied for the period prior to 01/06/2015.
8. The Appellant has placed reliance on Circular Number 19 of 2015 [F.NO.142/14/2015-TPL], dated 27/11/2015 issued by Central Board of Direct Taxes containing the Explanatory Notes to the provisions of the Finance Act, 2015 as well as the Memorandum to Finance Bill, 2015. On perusal of the same we find that both state that the prior to 01/06/2015, the Assessing Officer was not empowered to charge fee under Section 234E of the Act as there was no corresponding provisions in Section 200A of the Act relating to computation of fee and the same was introduced by Finance Act, 2015 by way of substitution of Clause (c) to (e) of Section 200A(1) by new Clause (c) to (f) of Section 200A(1). The relevant extract of the Memorandum to Finance Bill, 2015 reads as under: “Rationalisation of provisions relating to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) Under Chapter XVII-B of the Act, a person is required to deduct tax on certain specified payment at the specified rate if the payment Assessment Years 2013-14, 2014-15 & 2015-16 exceeds the specified threshold. The person deducting tax ('the deductor') is required to file a quarterly Tax Deduction at Source (TDS) statement containing the details of deduction of tax made during the quarter by the prescribed due date. Similarly, under Chapter XVII-BB of the Act, a person is required to collect tax on certain specified receipts at the specified rates. The person collecting tax ('the collector') also is required to file a quarterly Tax Collection at Source (TCS) statement containing the details of collection of tax made during the quarter by the prescribed due date.
In order to provide effective deterrence against delay in furnishing of TDS/TCS statement, the Finance Act, 2012 inserted section 234E in the Act to provide for levy of fee for late furnishing of TDS/TCS statement. The levy of fee under section 234E of the Act has proved to be an effective tool in improving the compliance in respect of timely submission of TDS/TCS statement by the deductor or collector.
Finance (No.2) Act, 2009 inserted section 200A in the Act which provides for processing of TDS statements for determining the amount payable or refundable to the deductor. However, as section 243E was inserted after the insertion of section 200A in the Act, the existing provisions of section 200A of the Act does not provide for determination of fee payable under section 234E of the Act at the time of processing of TDS statements. It is, therefore, proposed to amend the provisions of section 200A of the Act so as to enable computation of fee payable under section 234E of the Act at the time of processing of TDS statement under section 200A of the Act.
Currently, the provisions of sub-section (3) of section 200 of the Act enable the deductor to furnish TDS correction statement and consequently, section 200A of the Act allows processing of the TDS correction statement. However, currently, there does not exist any provision for allowing a collector to file correction statement in respect of TCS statement which has been furnished. It is, therefore, proposed to amend the provisions of section 206C of the Act so as to allow the collector to furnish TCS correction statement.
Currently, there does not exist any provision in the Act to enable processing of the TCS statement filed by the collector as available for processing of TDS statement. As the mechanism of TCS statement is similar to TDS statement, it is proposed to insert a provision in the Act for processing of TCS statements on the line of existing provisions for processing of TDS statement contained in section 200A of the Act. The proposed provision shall also incorporate the mechanism for computation of fee payable under section 234E of the Act.” -1185/Mum/2024 Assessment Years 2013-14, 2014-15 & 2015-16 xx These amendments will take effect from 1st June, 2015. [Clauses 37, 38, 40, 48, 50, 51, 53, 54, 55, 62, 73, 74 & 75]” (Emphasis Supplied)
The Hon’ble Karnataka High Court had in the case of Fatheraj Singhvi Vs. Union of India [2016] 73 taxmann.com 252 (Karnataka)/[2016] 289 CTR 602 (Karnataka)[26-08-2016] had quashed the intimation issued under Section 200A of the Act, being demand notices pertaining to payment of fee under Section 234E, as being without any authority of law holding as under: “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 retroactive character but, whether such provision provides for a mere regulatory mechanism or confers substantive power upon the authority would also be a aspect which may be required to be considered before such provisions is held to be retroactive in nature. Further, when any provision is inserted for liability to pay any tax or the fee by way of compensatory in nature or fee independently simultaneously mode and the manner of its enforceability is also required to be considered and examined. Not only that, but, if the mode and the manner is not expressly prescribed, the provisions may also be vulnerable. All such aspects will be required to be considered before one considers regulatory mechanism or provision for regulating the mode and the manner of recovery and its enforceability as retroactive. If at Assessment Years 2013-14, 2014-15 & 2015-16 the time when the fee was provided under Section 234E, the Parliament also provided for its utility for giving privilege under Section 271H(3) that too by expressly put bar for penalty under Section 272A by insertion of proviso to Section 272A(2), it can be said that a particular set up for imposition and the payment of fee under Section 234E was provided but, it did not provide for making of demand of such fee under Section 200A payable under Section 234E. Hence, considering the aforesaid peculiar facts and circumstances, we are unable to accept the contention of the learned counsel for respondent-Revenue that insertion of clause (c) to (f) under Section 200A(1) should be treated as retroactive in character and not prospective.
It is hardly required to be stated that, as per the well established principles of interpretation of statute, unless it is expressly provided or impliedly demonstrated, any provision of statute is to be read as having prospective effect and not retrospective effect. Under the circumstances, we find that substitution made by clause (c) to (f) of sub-section (1) of Section 200A can be read as having prospective effect and not having retroactive character or effect. Resultantly, the demand under Section 200A for computation and intimation for the payment of fee under Section 234E could not be made in purported exercise of power under Section 200A by the respondent for the period of the respective assessment year prior to 1.6.2015. However, we make it clear that, if any deductor has already paid the fee after intimation received under Section 200A, the aforesaid view will not permit the deductor to reopen the said question unless he has made payment under protest.
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. 8 -1185/Mum/2024 Assessment Years 2013-14, 2014-15 & 2015-16 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 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.” (Emphasis Supplied) 10. By following the above judgment of the Hon’ble Karnataka High Court in the case of Medical Superintendent Rural Hospital Vs. DCIT, CPC (TDS), Ghaziabad [ITA No. 651 to 661 and 1018 to 1028 (Pune) of 2018, Pronounced on 25.10.2018] the Pune Bench of the Tribunal had held as under:
“15. In other words, the Hon’ble High Court of Karnataka explained the position of charging of late filing fees under section 234E of the Act and the mechanism provided for computation of fees and failure for payment of fees under section 200A of the Act which was brought on Statute w.e.f. 01.06.2015. The said amendment was held to be prospective in nature and hence, notices issued under section 200A of the Act for computation and intimation for payment of late filing fees under section 234E of the Act relating to the period of tax deduction prior to 01.06.2015 were not maintainable Assessment Years 2013-14, 2014-15 & 2015-16 and were set aside by the Hon’ble High Court. In view of said proposition being laid down by the Hon’ble High Court of Karnataka (supra), there is no merit in observations of CIT(A) that in the present case, where the returns of TDS were filed for each of the quarters after 1 st day of June, 2015 and even the order charging late filing fees was passed after June, 2015, then the same are maintainable, since the amendment had come into effect. The CIT(A) has overlooked the fact that notices under section 200A of the Act were issued for computing and charging late filing fees under section 234E of the Act for the period of tax deducted prior to 1st day of June, 2015. The same cannot be charged by issue of notices after 1st day of June, 2015 even where the returns were filed belatedly by the deductor after 1st June, 2015, where it clearly related to the period prior to 01.06.2015.
We hold that the issue raised in the present bunch of appeals is identical to the issue raised before the Tribunal in different bunches of appeals and since the amendment to section 200A of the Act was prospective in nature, the Assessing Officer while processing TDS returns / statements for the period prior to 01.06.2015 was not empowered to charge late filing fees under section 234E of the Act, even in cases where such TDS returns were filed belatedly after June, 2015 and even in cases where the Assessing Officer processed the said TDS returns after June, 2015. Accordingly, we hold that intimation issued by Assessing Officer under section 200A of the Act in all the appeals does not stand and the demand raised by charging late filing fees under section 234E of the Act is not valid and the same is deleted.
Before parting, we may also refer to the order of CIT(A) in relying on the decision of Hon’ble High Court of Gujarat in Rajesh Kourani Vs. Union of India (supra). On the other hand, the learned Authorized Representative for the assessee has pointed out that the issue is settled in favour of assessee by the Hon’ble High Court of Karnataka in the case of Fatheraj Singhvi Vs. Union of India Assessment Years 2013-14, 2014-15 & 2015-16 (supra). Since we have already relied on the said ratio laid down by the Hon’ble High Court of Karnataka, the CIT(A) has mis-referred to both decisions of Hon’ble High Court of Karnataka and Hon’ble High Court of Gujarat; but the CIT(A) has failed to take into consideration the settled law that where there is difference of opinion between different High Courts on an issue, then the one in favour of assessee needs to be followed as held by the Hon'ble Supreme Court in CIT Vs. M/s. Vegetable Products Ltd. (supra), in the absence of any decision rendered by the jurisdictional High Court. The Hon’ble Bombay High Court in Rashmikant Kundalia Vs. Union of India (2015) 54 taxmann.com 200 (Bom) had decided the constitutional validity of provisions of section 234E of the Act and had held them not to be ultra vires but had not decided the second issue of amendment brought to section 200A of the Act w.e.f. 01.06.2015. In view thereof, respectfully following the ratio laid down by the Hon’ble High Court of Karnataka and Pune Bench of Tribunal in series of cases, we delete the late filing fees charged under section 234E of the Act for the TDS returns for the period prior to 01.06.2015.
Further before parting, we may also refer to the order of CIT(A) in the case of Junagade Healthcare Pvt. Ltd., where the CIT(A) had dismissed appeals of assessee being delayed for period of December, 2013 and July, 2014. The CIT(A) while computing delay had taken the date of intimation under section 200A of the Act as the basis, whereas the assessee had filed appeals before CIT(A) against the order passed under section 154 of the Act. The CIT(A) had noted that rectification application was filed in February, 2018 which was rejected by CPC on the same day. The CIT(A) was of the view that there was no merit in condonation of delay, wherein appeals were filed beyond the period prescribed. The assessee had filed appeals against the order passed under section 154 of the Act, hence the time period of appeals filed by assessee before the CIT(A) have to be computed from the date of order passed 11 ITA Nos. 1165-1185/Mum/2024 Assessment Years 2013-14, 2014-15 & 2015-16 under section 154 of the Act and not from the date of issue of intimation. Thus, there is no merit in the order of CIT(A) in dismissing the appeals of assessee on this issue.” (Emphasis Supplied)
The above judicial precedents are applicable to the facts of the present case and in view of the same, we hold that levy of fee under Section 234E of the Act in the present case cannot be sustained since the same pertains to Quarter 2 of Financial Year 2012-13 falling in period prior to 01/06/2015. Accordingly, the demand of INR 80,400/- being fee levied under Section 234E of the Act for Financial Year 2012-13 [Quarter 2: Form 27EQ] is deleted. In terms of the aforesaid Ground No. 1 to 5 raised by the Appellant are allowed.
Since the grounds raised in all the other appeals are identical, and there is no material change in the relevant facts and circumstances, the above reasoning/adjudication in relation to [Financial Year 2012-13 : Quarter 2/Form 27EQ] shall apply mutatis mutandis to the other appeals. Therefore, the delay in filing the appeal(s) is condoned. We have already concluded hereinabove that the levy of fee under Section 234E of the Act for the period prior to 01/06/2015 cannot be sustained. As regards fee charged under Section 234E of the Act for the period commencing on or after 01/06/2015 we do not find any infirmity in the levy of fee under Section 234E of the Act. Accordingly, fee charged under Section 234E of the Act:
(a) for Quarter 2, & 3 of Financial Year 2012-13, Quarter 1, 2, & 3 of Financial Year 2013-14 and Quarter 1 of Financial Year 2014-15 cannot be sustained and the same is deleted.
(b) for Quarter 2 of Financial Year 2014-15, the fee charged -1185/Mum/2024 Assessment Years 2013-14, 2014-15 & 2015-16 under Section 234E of the Act for period commencing from 01/04/2015 to 31/05/2015 cannot be sustained and the same is deleted. Whereas the fee charged under Section 234E of the Act for period commencing from 01/6/2015 to 30/06/2015 and the same is confirmed.
(c) for Quarter 3 of Financial Year 2014-15 we do not find any infirmity and the same is confirmed.
In result:
13.1. In terms of paragraph 11 and 12(a) above, the following appeal are allowed:
Financial Year 2012-13 [Quarter 2] i. [Form 27EQ], ii. ITA No. 1183/Mum/2024 [Form 26Q], iii. ITA No. 1184/Mum/2024 [Form 24Q], Financial Year 2012-13 [Quarter 3] iv. ITA No. 1172/Mum/2024 [Form 24Q], Financial Year 2013-14 [Quarter 1] v. ITA No. 1181/Mum/2024 [Form 27EQ], vi. ITA No. 1182/Mum/2024 [Form 24Q], Financial Year 2013-14 [Quarter 2] vii. ITA No. 1179/Mum/2024 [Form 27EQ], viii. ITA No. 1171/Mum/2024 [Form 26Q], ix. ITA No. 1180/Mum/2024 [Form 24Q], Financial Year 2013-14 [Quarter 3] x. ITA No. 1169/Mum/2024 [Form 27EQ], xi. ITA No. 1177/Mum/2024 [Form 26Q], xii. ITA No. 1170/Mum/2024 [Form 24Q], Financial Year 2014-15 [Quarter 1] xiii. ITA No. 1175/Mum/2024 [Form 27EQ], xiv. ITA No. 1176/Mum/2024 [Form 26Q], xv. ITA No. 1178/Mum/2024 [Form 24Q], ITA Nos. 1165-1185/Mum/2024 Assessment Years 2013-14, 2014-15 & 2015-16 13.2. In terms of paragraph 11 and 12(b) above, the following appeal are partly allowed:
Financial Year 2014-15 [Quarter 2] xvi. [Form 27EQ], xvii. ITA No. 1166/Mum/2024 [Form 26Q], xviii. ITA No. 1174/Mum/2024 [Form 24Q], 13.3. In terms of paragraph 11 and 12(c) above, the following appeal are dismissed:
Financial Year 2014-15 [Quarter 3] xix. [Form 27EQ], xx. ITA No. 1165/Mum/2024 [Form 26Q], xxi. ITA No. 1168/Mum/2024 [Form 24Q],