M/S SONALAC PAINTS AND COATINGS LIMITED,CHANDIGARH vs. DCIT, CPC (TDS), VAISHALI JURISDICTION AT ITO, TDS-1, CHANDIGARH

PER BENCH

These appeals by the assessee’s are directed against the orders

of the CIT(A)-1 Chandigarh dated 31/03/2017 pertaining to 2013-14,

assessment year.

involved in all the appeals was identical, relating to levy of fees u/s

234E of the Income Tax Act, for delay in filing TDS returns. Therefore

all the appeals were heard together and are being disposed of by way

of this common order.

that an intimation u/s 200A of the Act was made to the assessees on

processing TDS returns filed by them, levying thereunder fees u/s

234E for late filing of the TDS returns. The details of the said

intimations passed in each of the above cases is as under :

S.NO. ITA No. Name of the assessee Date of Fees levied Intimation u/s 234E u/s 200A (Rs.)

assessees, appeal was filed before the CIT(A) who dismissed all the

above appeals holding them to be non maintainable for the reason that

no appeal lay against levy of fees u/s 234E. The ld. CIT(A) relied upon

the decisions of the Hon'ble Bombay High Court in the case of

Rashmikant Kundalia Vs Union of India 373 ITR 268 and the Hon'ble

Rajasthan High Court in the case of Dundlod Shikshan Sansthan v.

Union of India [2015] 63 taxmann.com 243 in this regard. Aggrieved

by the same, the assessee has come up in appeal before us raising the

following common grounds in both the appeals:

filing of TDS statement by passing intimation u/s 200A even when there was reasonable cause which prevented the appellant from filing the TDS statement in time.

assessee stated that the fees in the present case was levied while

processing the TDS returns u/s 200A of the Act, prior to 01.06.2015,

and that as per the provisions of Section 200A of the Act, which

existed on the date when the above returns were processed, no

adjustment on account of fees u/s 234E could be made while

processing the said returns u/s 200A of the Act. The ld. counsel for

the assessee pointed out that the mandate to make such adjustment

was provided by the Statute only w.e.f. 01.06.2015 by way of an

amendment made to Section 200A by the Finance Act, 2015. The ld.

counsel for the assessee, therefore, stated that the adjustment made

in the present case of levying fees u/s 234E while processing the TDS

return u/s 200A of the Act was bad in law. The ld. counsel for the

assessee pointed out that the ITAT in a number of cases had deleted

fees levied in identical circumstances holding that prior to 01.06.2015,

fees u/s 234E could not be charged by way of making adjustment

while processing TDS return u/s 200A of the Act. Our attention was

drawn to the following case laws in support of the above proposition :

High Court in the case of Rajesh Kourani Vs UOI reported in 83

Taxman.com 137/ 297 CTR 502 had held that the amendment made

to Section 200A authorizing the AO to make adjustment of the fees to

be levied u/s 234E while processing TDS returns, w.e.f. 01-06-2015,

was retrospective in nature. Copy of the order was placed before us.

Ld. DR, therefore, stated that the fees in the present case had been

rightly charged by way of adjustment made while processing return

u/s 200A of the Act.

Karnataka High Court in the case of Fatheraj Singhvi & ors. Vs Union

of India & Ors.289 CTR 602 (Kar) had ruled in favour of the assessee,

that prior to 01.06.2015, no adjustment on account of fees u/s 234E

could be made by the AO while processing returns u/s 200A of the

Act. The ld. counsel for the assessee further stated that as per the

established principles of interpretation of Statute, where two views

were possible on an issue, the view favourable to the assessee was to

be taken. In this regard, ld. counsel for the assessee relied upon the

decision of Apex Court in the case of CIT Vs Poddar Cement Pvt. Ltd.

(1997) 226 ITR 625 and CIT Vs Vegetable Products Ltd. 88 ITR 192

(1973).

The ld. counsel for the assessee further stated that the CIT(A) had

erred in dismissing the appeal stating that it is non-maintainable. Ld.

counsel for the assessee pointed out that intimation made u/s 200A

are appealable to the CIT(A) as per provisions of Section 246A of the

Act, which outlines the appealable orders before the Commissioner

(Appeals) and it is against this intimation that the assessee had filed

appeal to the CIT(A).

authorities below and also gone through the documents and orders

referred to before us by both the parties. The issue in the present

appeal pertains to levy of fees u/s 234E on account of late filing of

TDS returns. The facts on record are that the said fees were levied

while processing the TDS returns filed by the assessee as per the

provisions of Section 200A of the Act and further that fees in all the

above cases was levied prior to 01.06.2015. Further, we have noted

that the provisions of Section 234E for levy of fees on account of late

filing of TDS returns was brought on the Statute vide Finance Act,

2012 w.e.f. 01.07.2012 and also that Section 200A, which deals with

the processing of TDS returns, gave no mandate to make adjustments

on account of levy of fees u/s 234E prior to 01.06.2015 and that the

same was brought on the Statute only vide Finance Act, 2015 w.e.f.

01.06.2015. The other relevant Section taken note of is the provisions

of Section 246A which lists the orders against which appeal lies to the

CIT(A) and which we find that the same includes intimations passed

u/s 200A of the Income Tax Act for the relevant assessment year.

to adjudicate the issue before us. The ld. CIT(A), as we find, dismissed

assessees’ appeal holding them to be non maintainable and the reason

for the same was the observations in the orders passed by the Hon'ble

Bombay High Court and the Hon'ble Rajasthan High Court that no

appeal lies against levy of fees u/s 234E. We are not in agreement

with the ld. CIT(A) on this issue. As pointed out above, the fees u/s

234E in the present case was levied in the intimations made u/s 200A

of the Act. Such intimations are appealable before the CIT(A) as per

the provisions of Section 246A of the Act and in the present case, the

assessee had filed appeals against these intimations made u/s 200A.

Therefore, all the appeals were maintainable and the ld. CIT(A) had

wrongly dismissed the assessees’ appeals holding them to be non-

maintainable. As for the reliance placed by the CIT(A) on the orders

passed by the Hon'ble Bombay High Court and Hon'ble Rajasthan

High Court, we find that the said judgements have been mis-

interpreted by the CIT(A). In both these cases, the constitutional

validity of Section 234E was challenged before the Hon'ble High Courts

and one of the pleas taken by the counsels of the assessees against the

introduction of the said Section in the Statute was that there was no

provision for filing appeals against the orders passed levying fees u/s

234E. It was in this context that the Hon'ble High Court held that

even if no appeal lay against levy of fees u/s 234E, the remedy of writ

still remained with the aggrieved parties and therefore, the

constitutional validity of the said Section could not be challenged on

this ground. It may be noted that the observation of the Hon'ble High

Courts was in the context of no appeal lying against the levy of fees

u/s 234E per-se, but where fees are levied by way of adjustment made

in intimations u/s 200A, the said intimations are appealable as per

the Statute before the CIT(A). In such cases, the levy of fees is

challenged by way of filing appeals against the intimations passed

against Section 200A and this is the distinguishing fact between the

observations made by the Hon'ble Courts where they observed that no

appeal lay against levy of fees u/s 234E. The Hon'ble High Courts,

obviously were not seized with the adjustment of levy of fees u/s 234E

in intimations made u/s 200A and therefore, this observation of the

Hon'ble High Court cannot be read to be in the context of adjustment

made on account of levy of fees u/s 234E in the intimations passed

u/s 200A which, otherwise, are appealable before the CIT(A). In view

of the above, the order passed by the ld. CIT(A), we hold, is not as per

law.

argument of the ld. counsel for the assessee that prior to 01.06.2015,

there was no mandate, as per the Statute, to make any adjustment on

account of levy of fees u/s 234E while processing TDS returns u/s

200A. We have taken note of the order of the Hon'ble Gujarat High

Court holding the amendment made to Section 200A w.e.f.

01.06.2015, giving power to make adjustment on account of fees u/s

234E while processing returns u/s 200A, to be retrospective in nature,

stating that this power given to the AO is a machinery provision while

the substantive provision of the power to levy fees u/s 234E was

always there on the Statute from 01.06.2012. But at the same time,

we note that the Hon'ble Karnataka High Court held that levy of fees

u/s 234E while processing returns, TDS u/s 200A prior to 01.06.2015

was without any authority of law. With two divergent views of the

Hon'ble High Courts on the issue and in the absence of any decision

by the jurisdictional High Court, we concur with the ld. counsel for the

assessee that as per the well accepted rule of construction if two

reasonable constructions of a statute are possible the construction

which favours the assessee must be adopted. In view of the same,

respectfully following the decision of the Karnataka High Court in the

case of Fatheraj Singhvi (supra), we hold that the fees levied in all the

present cases u/s 234E prior to 01.06.2015 in the intimations made

u/s 200A was without authority of law and the same is, therefore,

directed to be deleted. In view of the above, all the appeals of the

assessees stand allowed.

Order pronounced in the Open Court on 01.05. 2018.

Sd/- Sd/-

(DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER

‘Poonam’ Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR

Asstt. Registrar ITAT,Chandigarh.