ANUMOD VISHWAMBHARAN,TRIVANDRUM vs. ITO TDS WARD, TRIVANDRUM

Later through Finance Act, 2015 with effect from 01.06.2015, among other things, clause (c) was added, with other consequential changes. Now, with the amendment, the provision has this addition: “(c) the fee, if any, shall be computed in accordance with the provisions of Section 234E”

In fact, Section 234E affects the proceedings. Therefore, it prays to examine that provision as well. And it reads: "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 of fee, a sum of two hundred rupees for every day during which the failure continues (2) The amount of fee referred to in sub-section (1) shall not exceed the amount of tax deductible or collectible, as the case may be (3) The amount of fee referred to in sub-section (1) shall be paid before delivering or causing to be delivered a statement in accordance with sub-section (3) of section 200 or the proviso to sub-section (3) of section 206C.”

Interpreting Section 200A and Section 234E, the Karnataka High Court has held in Fatheraj that when the statute confers no express power under section 200A before 01.06.2015 on the authority either to compute and collect any fee under section 234E, the demand for the period before 01.06.2015 could not be sustained. Fatheraj in fact observes: 79/Coch/2023 A.Ys. 2013-14 & 2014-15 Anumod Vishwanbharan “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 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.

But the Gujarat High Court has taken a contrary stand in Rajesh Kourani. It has held: - “In plain terms, Section 200A 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 1.6.2015, this provision specifically provides for computing the fee payable under Section 234E. On the other hand, Section 234E is the 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. Section 200A does not create any charge in any manner. It only provides a mechanism for processing q 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 have been necessary to have another provision creating the same charge. Viewing Section 200A as creating a new charge would bring about, dichotomy. In plain terms, the provision 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”

There is cleavage in judicial opinion. But I am afraid, elaborate s the judgment may be in Rajesh Kourani, it does not seem to have considered the Circular No. 19 of 2015, which in para no. 47.3 clarifies: “47.3 Finance (No.2) Act, 2009 inserted section 200A in the Income-tax 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 Income-tax Act, the existing provisions of section 200A of the Income-tax Act did not provide for determination of fee payable under section 234E of the Income-tax Act at the time of processing of TDS statements. Therefore, the provisions of section 200A of the Income-tax Act has been amended so as to enable computation of fee payable under section 234E of the Income-tax 79/Coch/2023 A.Ys. 2013-14 & 2014-15 Anumod Vishwanbharan Act at the time of processing of TDS statement under section 200A of the Income- tax Act.”

Further, in para 47.20, the Circular has clearly emphasized that these amendments would take effect only from 1st June, 2015. Under those circumstances, I hold that the amendment is prospective and the demand under exts. P1 to P6 demand notices cannot be sustained. I, accordingly, set aside the Exts. P1 to P6 demand notices. NO order on costs.”

The Division Bench of the Hon’ble Kerala High Court affirmed the aforesaid ratio of the single bench in the case of M/s Olari Little Flower Kuries (P.) Ltd. v. UoI [2022] 440 ITR 26 (Ker), after reproducing paras 20 to 23 of the decision in Fatheraj Singhvi (supra), and concluding it’s findings, at para 6.1 of the Judgment, it expresses it’s agreement therewith at para 6.2 and held 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.” At Paras 21 & 22 of the decision in Fatheraj Singhvi (supra) Hon’ble High Court (Kar) specifically held that the amendment vide Finance Act, 2015, w.e.f. 01/6/2015 would not have a retroactive effect as it confers a substantive power on the AO, and is not merely a regulatory mechanism, as held by the Hon’ble Gujarat High Court in Rajesh Kourani (supra). We also extract the afore-referred para 6.2, as follows, for ready reference: “6.2 Firstly, we are convinced with the reasoning and basis for the view taken by the learned single judge in the judgment under appeal, and secondly, the view taken by the Karnataka High Court in the judgment referred to above is to the same effect. Keeping in view the grounds of challenge and the view taken by this court as well as the Karnataka High 79/Coch/2023 A.Ys. 2013-14 & 2014-15 Anumod Vishwanbharan Court in the judgment referred to above, we are of the view that the appeal at the instance of second respondent is without merit and is liable to be dismissed. Accordingly dismissed.”

Further, the Hon’ble Division Bench of the High Court (Ker) held as under: - “9.1 Stated briefly, the writ petitioner challenges the intimation received under section 200A from the respondent/Revenue calling upon the writ petitioner to pay late fee for delayed filing of quarterly statements of TDS. The periods for which the notices are issued are stated as prior to 1-6-2015. By following the judgment in W.P.(C) No. 37775/2018, as confirmed in W.A. No. 722/2019, the writ petition stands allowed and the intimations dealing with filing of belated statements prior to 1- 6-2015 are set aside. A return filed subsequent to 1-6-2015 is present, the respondents are given liberty to issue notice, hear the writ petitioner, and pass orders in accordance with law. The writ petition is allowed as indicated above.”

It thus stands clarified by the binding decision of jurisdictional High Court that no late filing fee could be levied for processing u/s. 200A(1) for any period prior to 01.6.2015. In the light of the aforesaid decision of the Hon’ble Jurisdictional High Court, we find in the instant appeals that the ‘late filing fee’ u/s 234E of the Act has been levied for Quarter-4 ending for FY. 2012-13 Rs.6,200/- (ITA. No.887/Coch/2022) and late filing ‘fee’ u/s 234E of the Act for Quarter-2 for FY. 2012-13 at Rs.9,153/- (ITA. No.888/Coch/2022) has been levied. We note that only after 1st June, 2015 while processing of 79/Coch/2023 A.Ys. 2013-14 & 2014-15 Anumod Vishwanbharan a TDS/TCS statement and issuance of intimation u/s 200A/206CB of the Act in respect thereof, an adjustment could have been made in respect of ‘fee’, if any shall be computed in accordance with the provisions of section 234E of the Act. Prior to 1st June, 2015, there was no enabling provision therein for raising a demand in respect of levy of fees u/s 234E of the Act. Therefore, no such levy could have been effected, [ Refer the decisions of the Hon’ble High Court in the case of (i) M/s. Olari Little Flower Kuries Pvt. Ltd. Vs. Union of India, (ii) M/s. Sarala Memorial Hospital Vs. Union of India, (iii) M/s. Mayi Industries Vs. Union of India, (iv) M/s. Anadiyil Hospital Vs. Union of India,] Ergo, we hold that the order levying late ‘fee’ u/s 234E of the Act is bad in law and therefore, cancelled. 6. Before we part, we note that that Ld. CIT(A) has not condoned the delay and dismissed the appeal of assessee, we note the assessee’s excuse was that delay caused since he filed rectification application before CPC (TDS) to rectify the mistake. Be that as it may, we note that when the assessee challenges the intimation received from CPC (TDS) calling upon the assessee to pay late fees for delayed filing of quarterly statements of TDS and the perusal for which the late fees u/s 234E of the Act has been imposed are prior to 1-6-2019, by following the ratio of the Hon’ble jurisdictional High Court M/s. Olari Little Flower Kuries Pvt. Ltd. (supra), the same cannot be legally sustained being prospective in nature from 01-6.2015 and not before, the levy of impugned fees is bad in law. 79/Coch/2023 A.Ys. 2013-14 & 2014-15 Anumod Vishwanbharan 7. In the light of the discussion (supra), the levy of late ‘fee’ u/s 234E of the Act being of Q3 and Q1 of AY. 2012-13 & AY 2013-14 being prior to 01.06.2015, are directed to be deleted.