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Before: SMT. PRASHANTHI M SANJEEV
IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 10TH DAY OF APRIL, 2018 BEFORE: THE HON’BLE MRS. JUSTICE S.SUJATHA WRIT PETITION No.850/2017 & WRIT PETITION Nos.15603-15613/2018 (T – IT) BETWEEN: M/S. PIXEL PICTURES PVT LTD COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956 HAVING OFFICE AT No.561, 1ST FLOOR, 3RD MAIN, 11TH CROSS, WEST OF CHORD ROAD 2ND STAGE, MAHALAKSHMIPURAM BENGALURU-560086 REPRESENTED BY ITS DIRECTOR SMT. PRASHANTHI M SANJEEV AGED 32 YEARS.
…PETITIONER
[BY SMT VANI.H, ADV.]
AND: 1. UNION OF INDIA REP BY ITS SECRETARY MINISTRY OF FINANCE SOUTH BLOCK NEW DELHI NEW DELHI-110001.
THE COMMISSIONER OF INCOME TAX CENTRAL REVENUE BUILDING QUEENS ROAD, BENGALURU-560 001
THE DEPUTY COMMISSIONER OF INCOME TAX TDS RECONCILIATION ANALYSIS AND CORRECTION ENABLING SYSTEM
- 2 - TDS CPC, AAYKAR BHAWAN SECTOR-3, VAISHALI GHAZIABAD, UTTAR PRADESH-201010.
…RESPONDENTS
[BY SRI K.V.ARAVIND, ADV.)
THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO DECLARE THE NEWLY INSERTED SECTION 234E TO INCOME TAX ACT, 1961 BY FINANCE ACT, 2012 AS VIOLATIVE OF ARTICLES 14 AND 19 AND THUS ULTRA VIRES THE CONSTITUTION OF INDIA IN SO FAR AS THE PETITIONER IS CONCERNED AND ETC.
THESE PETITIONS COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:-
O R D E R
The petitioner has challenged the constitutional validity of Section 234E of the Income Tax Act, 1961 [‘Act’ for short] inserted by Finance Act, 2012, interalia challenging the orders/communications dated 20.12.2014 vide Annexure-A, even dated 13.10.2015 vide Annexures-B, C, D & E, even dated 22.07.2016 vide Annexures-F & G, even dated 17.12.2015 vide Annexure-H relating to the periods prior to 01.06.2015 as well as the orders/communications dated 17.12.2015 vide Annexure-J, even dated 13.07.2016
- 3 - vide Annexures-K & L and dated 28.03.2016 vide Annexure-M relating to the periods post 01.06.2015 issued by the respondent No.3 under Section 200A of the Act.
Learned counsel appearing for the parties submit that the issue relating to the Constitutional Validity of Section 234E of the Act is squarely covered by the Division Bench judgment of this Court in the case of FATHERAJ SINGHVI & OTHERS V/S. UNION OF INDIA AND OTHERS, reported in (2016) 142 DTR (Kar) 281. The relevant paragraphs 14, 21, 23, 24 and 27 reads thus: “14. We may now deal with the contentions raised by the learned counsel for the appellants. The first contention for assailing the legality and validity of the intimation under Section 200A was that, the provision of Section 200A(1)(c)d) and (f) have come into force only with effect from 1.6.2015 and hence, there was no authority or competence
- 4 - or jurisdiction on the part of the concerned Officer or the Department to compute and determine the fee under Section 234E in respect of the assessment year of the earlier period and the return filed for the said respective assessment years namely all assessment years and the returns prior to 1.6.2015. It was submitted that, when no express authority was conferred by the statute under Section 200A prior to 1.6.2015 for computation of any fee under Section 234E nor the determination thereof, the demand or the intimation for the previous period or previous year prior to 1.6.2015 could not have been made.
However, if Section 234E providing for fee was brought on the statute 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
- 5 - 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 the time when the fee was provided under Section 234E, the Parliament also
- 6 - 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.
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.
- 7 -
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
- 8 - law and the same are quashed and set aside to that extent.
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 31 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.
- 9 -
Learned counsel Smt.Vani.H appearing for the petitioner would submit that the orders/communications at Annexures-A, B, C, D, E, F, G and H relating to the periods prior to 01.06.2015 issued by the third respondent under Section 200A of the Act deserve to be quashed. However, the learned counsel fairly submit that in as much as the orders/communications at Annexures-J, K, L and M relating to the periods post 01.06.2015, petitioner shall avail the alternative remedy of appeal provided under the Act. Learned counsel further placing reliance on the Co-ordinate Bench decision of this Court in the case of SREE AYYAPPA EDUCATIONAL CHARITABLE TRUST V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, in W.P.No.618/2015 and connected matters (DD 12.12.2017) submitted that that the Co-ordinate Bench of this Court following the Division Bench judgment of this Court in FATHERAJ SINGHVI supra, allowed the writ petitions, setting aside the impugned
- 10 - orders/communications issued under Section 200A of the Act.
On the other hand, learned counsel Sri.K.V.Aravind appearing for the respondents do not dispute the same.
Accordingly, following the judgment referred to above, the writ petitions are allowed and the impugned orders/communications at Annexures – A, B, C, D, E, F, G and H (relating to the periods prior to 01.06.2015) issued under Section 200A of the Act are set aside. The matters are remanded to the Assessing Authority to pass fresh orders in accordance with law, after giving an opportunity of hearing to the petitioner/assessee, in terms of the judgment of the Division Bench referred to above.
As regards the orders/communications at Annexures-J, K, L and M relating to the periods post
- 11 - 01.06.2015, the petitioner shall avail the alternative and efficacious remedy of appeal available under the Act.
If such an appeal is preferred within a period of 30 days from today, the Appellate Authority shall consider the case on merits without objecting to the aspect of limitation and shall decide the matter(s) on merits in accordance with law as expeditiously as possible.
With the aforesaid observations, writ petitions stand disposed of.
Sd/- JUDGE
NC.