Gajanan Constructions vs. DCIT (ITAT Pune)

The Tribunal had to consider whether the AO has jurisdiction to charge fees payable under section 234E of the Act prior to amendment to section 200A(1)(c) of the Act vide Finance Act, 2015 w.e.f. 01.06.2015 while processing the TDS returns. The assessee argued that the Legislature had inserted clause (c) to section 200A(1) of the Act specifically w.e.f. 01.06.2015 and where there is nothing to suggest that the said amendment was clarificatory or retrospective in nature, hence in respect of TDS statements filed for the period prior to 01.06.2015, late fees charged under section 234E of the Act could not be levied in the intimation issued under section 200A of the Act. HELD by the Tribunal upholding the plea:

(i) Looking at various provisions of the Act, the issue needs to be adjudicated in the case of assessee, wherein admittedly, TDS returns which were deemed to be filed by the assessee were filed after delay and the question was whether the Assessing Officer which processing the intimation under section 200A of the Act could charge late fee under the provisions of section 234E of the Act. The assessee claims that the Assessing Officer at best could charge the difference in tax deducted and not paid in Treasury from the deductor and / or any interest payable on such deduction of tax at 20 source. However, till substitution of clause (c) to section 200A(1) of the Act by the Finance Act, 2015 w.e.f. 01.06.2015, the Assessing Officer was not empowered to charge fees under section 234E of the Act. The case of Revenue on the other hand, was that it was the duty of deductor while furnishing the statement under section 200(3) of the Act to deposit the fees referred to in section 234E(1) of the Act. The learned DR stressed that fees referred to in sub-section (1) had to be paid while delivering or causing to deliver the statement in accordance with provisions of section 200(3) of the Act or the proviso to section 206C(3) of the Act. However, various regulations and the statutory provisions in this regard point out that undoubtedly, the responsibility of the deductor was to deposit the tax deducted at source in time and if not so, then with interest and consequently, where the tax was not paid in time and interest was not paid in time and then, where the statement of tax deducted at source could not be filed before the prescribed authority within stipulated time, the assessee was liable to levy of fees under section 234E of the Act. However, in case any default occurs due to the nonpayment of fees by the assessee in this regard, then the provisions which has to be considered is section 200A(1)(c) of the Act. The power to charge / collect fees as per provisions of section 234E of the Act was vested with the prescribed authority under the Act only on substitution of earlier clause (c) to section 200A of the Act by the Finance Act, 2015 w.e.f. 01.06.2015. Once any provision of the Act has been made applicable from a respective date, then the requirement of the statute is to apply the said provisions from the said date.

(ii) It is clear that the prescribed authority has been vested with the power to charge fees under section 234E of the Act only with regard to levy of fees by the substitution made by Finance (No.2) Act, 2015 w.e.f. 01.06.2015. Once the power has been given, under which any levy has to be imposed upon tax payer, then such power comes into effect from the date of substitution and cannot be applied retrospectively. The said exercise of power has been provided by the statute to be from 01.06.2015 and hence, is to be applied prospectively. There is no merit in the claim of Revenue that even without insertion of clause (c) under section 200A(1) of the Act, it was incumbent upon the assessee to pay fees, in case there is default in furnishing the statement of tax deducted at source. Admittedly, the onus was upon the assessee to prepare statements and deliver the same within prescribed time before the prescribed authority, but the power to collect the fees by the prescribed authority vested in such authority only by way of substitution of clause (c) to section 200A(1) of the Act by the Finance Act, 2015 w.e.f. 01.06.2015. Prior to said substation, the Assessing Officer had no authority to charge the fees under section 234E of the Act while issuing intimation under section 200A of the Act. Before exercising the authority of charging any sum from any deductor or the assessee, the prescribed authority should have necessary power vested in it and before vesting of such power, no order can be passed by the prescribed authority in charging of such fees under section 234E of the Act, while exercising jurisdiction under section 200A of the Act. Thus, in the absence of enabling provisions, under which the prescribed authority is empowered to charge the fees, the Assessing Officer while processing the returns filed by the deductor in respect of tax deducted at source can raise the demand on account of taxes, if any, not deposited and charge interest. However, prior to 01.06.2015, the Assessing Officer does not have the power to charge fees under section 234E of the Act while processing TDS returns. In the absence of enabling provisions, levy of fees could not be effected in the course of intimation issued under section 200A of the Act prior to 01.06.2015.

(iii) The Amritsar Bench of Tribunal in Sibia Healthcare (P) Ltd. Vs. DCIT (2015) 121 DTR 81 (Asr) (Trib) had held that the adjustment in respect of levy of fees under section 234E of the Act was indeed beyond the scope of 22 permissible adjustments contemplated under section 200A of the Act. Such a levy could not be effected in the course of intimation under section 200A of the Act and in the absence of any other provisions enabling the demand in respect of this levy having been pointed out, no such levy could be effected. The said proposition has been applied in various decisions of different Benches of Tribunal. Reference was made to the decisions of Chennai Bench of Tribunal in G. Indirani Vs. DCIT (supra), Ahmedabad Bench of Tribunal in M/s. Globe Ecologistics Ltd. Vs. DCIT in ITA Nos.2689- 2691/Ahd/2015, ITA No.2692/Ahd/2015, relating to assessment year 2014- 15, ITA No.2693/Ahd/2015, relating to assessment year 2013-14 and ITA Nos.2694-2695/Ahd/2014, relating to assessment year 2013-14, vide consolidated order dated 26.11.2015 and Chandigarh Bench of Tribunal in M/s. Khanna Watches Ltd. Vs. DCIT in ITA Nos.731 to 735/CHD/2015, relating to assessment years 2014-15 & 2013-14, order dated 29.10.2015.

(iv) While deciding the present bunch of appeals, the Revenue had placed reliance on the ratio laid down by the Hon’ble Bombay High Court in Rashmikant Kundalia Vs. Union of India (supra) wherein, the constitutional validity of section 234E of the Act was challenged. The Hon’ble High Court noted the fact that where the deductor was required to furnish periodical quarterly statements containing the details of deduction of tax made during the quarter, by the prescribed due date and the delay in furnishing such TDS returns would have cascading effect. It was further observed by the Hon’ble High Court that under the Income-tax Act, where there is an obligation on the Income-tax Department to process the income-tax returns within specified period from the date of filing, the returns could not be accurately processed of such person on whose behalf tax has been deducted i.e. deductee, until information of such deductions is furnished by the deductor within the prescribed time. Since the substantial number of deductors were not filing their TDS returns / statements within prescribed time frame, then it lead to an additional work burden upon the Department due to the fault of the deductor and in this light and to compensate for additional work burden forced upon the Department, fees was sought to be levied under section 234E of the Act. The Hon’ble High Court held that looking at this from this perspective, section 234E of the Act was not punitive in nature but a fee which was a fixed charge for the extra service which the Department had to provide due to the late filing of TDS statements. It was further held by the Hon’ble High Court that late filing of TDS returns / statements was regularized by payment of fees as set out in section 234E of the Act. Therefore, the findings of Hon’ble High Court were thus, that the fees sought to be levied under section 234E of the Act was not in the guise of tax sought to be levied on the deductor. The provisions of section 234E of the Act were held to be not onerous on the ground that section does not empower the Assessing Officer to condone the delay in late filing the income tax returns or that no appeal is provided from arbitrary order passed under section 234E of the Act. The Hon’ble High Court held that the right to appeal was not a matter of right but was creature of statute and if the Legislature deems fit not to provide remedy of appeal, so be it. The Hon’ble High Court further held that a person can always approach the court in extraordinary equitable jurisdiction under Article 226/227 of the Constitution as the case may be. The Hon’ble High Court therefore, observed that simply because no remedy of appeal was provided for the provisions of section 234E of the Act, the same cannot be said to be onerous and section 234E of the Act was held to be constitutionally valid. The constitutional validity of provisions of section 234E of the Act has also been upheld by the Hon’ble Rajasthan High Court in M/s. Dundlod Shikshan Sansthan & Anr. Vs. Union of India and Ors (supra).

(v) In view of the above said ratio laid down by the Hon’ble Bombay High Court, the case of the learned DR before us was that there is no merit in the present set of appeals filed by the assessee as the Hon’ble High court has laid down that no appeal is provided from an order passed under section 234E of the Act and the same merits to be dismissed at the outset. In this regard, he has raised two issues that (a) the appeal filed by the assessee is not maintainable and also (b) there is no merit in the claim of the assessee that the Assessing Officer is not empowered to charge fees under section 234E of the Act before insertion of clause (c) to section 200A(1) of the Act by the Finance Act, 2015 w.e.f. 01.06.2015. The learned Authorized Representative for the assessee on the other hand, drew our attention to the Memorandum to the Finance Bill, 2015 while introducing the said clause (c) to section 200A(1) of the Act. The Finance Bill took note of the provisions of Chapter XVIIB, under which the person deducting tax i.e. deductor was required to file quarterly tax deduction at source statement containing the details of deduction of tax made during the quarter by the prescribed due dates. Similar responsibility is on a person required to collect tax of certain specified receipts under section 206C of the Act. In order to provide effective deterrence against the delay in furnishing TDS / TCS statements, the Finance Act, 2012 inserted section 234E of the Act to provide for levy of fees on late furnishing of TDS / TCS statements. The Memo further took note of the fact that the Finance (No.2) Act, 2009 inserted section 200A in the Act, which provided for furnishing of TDS statements for determining the amount payable or refundable to the deductor. It further took note that however, as section 234E of the Act 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 fees payable under section 234E of the Act at the time of processing of TDS statements. It was thus, proposed to amend the provisions of section 200A of the Act so as to enable the computation of fees payable under section 234E of the Act at the time of processing of TDS statements under section 200A of the Act. The Memo explaining the Finance Bill, 2015 very categorically held that currently there does not exist any provision in the Act to enable the processing of TCS returns and hence, a proposal was made to insert a provision in this regard and also the post provision shall incorporate the mechanism for computation of fees payable under section 234E of the Act. The Finance Bill further refers to the existing provisions of the Act i.e. after processing of TDS statement, intimation is generated specifying the amount payable or refundable. This intimation generated after processing of TDS statement is (i) subject to rectification under section 154 of the Act; (ii) appealable under section 246A of the Act; and (iii) deemed as notice of payment under section 156 of the Act. The Finance Bill further provided that intimation generated after the proposed processing of TCS statement shall be at par with the intimation generated after processing of TDS statement and also provided that failure to pay tax specified in the intimation shall attract levy of interest as per provisions of section 220(2) of the Act. Further, amendments were also made in respect of the scheme of payment of TDS / TCS by the Government, deductor / collector which are not relevant for deciding the issue in the present appeal and hence, the same are not being referred to. The Finance Bill further provided that the amendment would take effect from 01.06.2015.

(vi) The perusal of Memo explaining the provision relating to insertion of clause (c) to section 200A of the Act clarifies the intention of Legislature in inserting the said provision. The provisions of section 234E of the Act were inserted by the Finance Act, 2012, under which the provision was made for levy of fees for late furnishing TDS / TCS statements. Before insertion of section 234E of the Act, the Finance (No.2) Act, 2009 had inserted section 200A in the Act, under the said section, mechanism was provided for processing of TDS statements for determining the amount payable or refundable to the deductor, under which the provision was also made for charging of interest. However, since the provisions of section 234E of the Act were not on statute when the Finance (No.2) Act, 2009 was passed, no provision was made for determining the fees payable under section 234E of the Act at the time of processing the TDS statements. So, when section 234E of the Act was introduced, it provided that the person was responsible for furnishing the TDS returns / statements within stipulated period and in default, fees would be charged on such person. The said section itself provided that fees shall not exceed the amount of tax deducted at source or collected at source. It was further provided that the person responsible for furnishing the statements shall pay the said amount while furnishing the statements under section 200(3) of the Act. However, power enabling the Assessing Officer to charge / levy the fee under section 234E of the Act while processing the TDS returns / statements filed by a person did not exist when section 234E of the Act was inserted by the Finance Act, 2012. The power to charge fees under the provisions of section 234E of the Act while processing the TDS statements, was dwelled upon by the Legislature by way of insertion of clause (c) to section 200A(1) of the Act by the Finance Act, 2015 w.e.f. 01.06.2015. Accordingly, we hold that where the Assessing Officer has processed the TDS statements filed by the deductor, which admittedly, were filed belatedly but before insertion of clause (c) to section 200A(1) of the Act w.e.f. 01.06.2015, then in such cases, the Assessing Officer is not empowered to charge fees under section 234E of the Act while processing the TDS returns filed by the deductor.

(vii) The Hon’ble Bombay High Court in Rashmikant Kundalia Vs. Union of India (supra) has upheld the constitutional validity of said section introduced by the Finance Act, 2015 w.e.f. 01.06.2015 but was not abreast of the applicability of the said section 234E of the Act by the Assessing Officer while processing TDS statement filed by the deductor prior to 01.06.2015. In such scenario, we find no merit in the plea of learned CIT-DR that the Hon’ble Bombay High Court in Rashmikant Kundalia Vs. Union of India (supra) has laid down the proposition that fees under section 234E of the Act is chargeable in the case of present set of appeals, where the Assessing Officer had issued the intimation under section 200A of the Act prior to 01.06.2015.

(viii) Another aspect of the issue is whether the amendment brought in by the Finance Act, 2015 w.e.f. 01.06.2015 by way of insertion of clause (c) to section 200A(1) of the Act is clarificatory or is prospective in nature and is not applicable to the pending assessments. Undoubtedly, the provisions of section 234E of the Act were inserted by the Finance Act, 2012, under which the liability was imposed upon the deductor in such cases where TDS statements / returns were filed belatedly to pay the fees as per said section. However, in cases, where the assessee has failed to deposit the said fees, then in order to enable the Assessing Officer to collect the said fees chargeable under section 234E of the Act, it is incumbent upon the Legislature to provide mechanism for the Assessing Officer to charge and collect such fees. In the absence of enabling provisions, the Assessing Officer while processing the TDS statements, even if the said statements are belated, is not empowered to charge the fees under section 234E of the Act. The amendment was brought in by the Finance Act, 2015 w.e.f. 01.06.2015 and such an amendment where empowerment is given to the Assessing Officer to levy or charge the fees cannot be said to be clarificatory in nature and hence, applicable for pending assessments.

(ix) The Hon’ble Supreme Court in CIT Vs. Vatika Township Pvt. Ltd. (supra) has explained the general principle concerning retrospectivity and have held that “of the various rules guiding how a legislation has to be interpreted, one established rule is that unless contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. Idea behind the rule is that current law should govern current activities”. The Memo explaining the Finance Bill, 2015 very clearly also recognizes that and refers to the current provisions of sub-section (3) to section 200 of the Act, under which the deductor is to furnish TDS statements. However, as section 234E of the Act was inserted after insertion of section 200A in the Act, the existing provisions of section 200A of the Act did not provide for determination of fees payable under section 234E of the Act at the time of processing of TDS statements. In this regard, it was thus, proposed to amend the provisions of section 200A of the Act so as to enable the computation of fees payable under section 234E of the Act at the time of processing of TDS statements under section 200A of the Act. In other words, the Assessing Officer is empowered to charge fees payable under section 234E of the Act in the intimation issued after insertion of clause (c) to section 200A(1) of the Act w.e.f. 01.06.2015. The Legislature itself recognized that under the existing provisions of section 200A of the Act i.e. prior to 01.06.2015, the Assessing Officer at the time of processing the TDS statements did not have power to charge fees under section 234E of the Act and in order to cover up that, the amendment was made by way of insertion of clause (c) to section 200A of the Act. In such scenario, it cannot be said that insertion made by section 200A(1)(c) of the Act is retrospective in nature, where the Legislature was aware that the fees could be charged under section 234E of the Act as per Finance Act, 2012 and also the provisions of section 200A of the Act were inserted by Finance (No.2) Act, 2009, under which the machinery was provided for the Assessing Officer to process the TDS statements filed by the assessee. The insertion categorically being made w.e.f. 01.06.2015 lays down that the said amendment is prospective in nature and cannot be applied to processing of TDS returns / statements prior to 01.06.2015.

(x) We further find that in recent judgment dated 26.08.2016, the Hon’ble Karnataka High Court in Writ Appeal Nos.2663-2674/2015(T-IT) & Ors in Sri Fatheraj Singhvi & Ors Vs. Union of India & Ors has quashed the intimation issued under section 200A of the Act levying the fees for delayed filing the TDS statements under section 234E of the Act. The Hon’ble High Court notes that the Finance Act, 2015 had made amendments to section 200A of the Act enabling the Assessing Officer to make adjustments while levying fees under section 234E of the Act was applicable w.e.f. 01.06.2015 and has held that it has prospective effect. Accordingly, the Hon’ble High Court held that “intimation raising demand prior to 01.06.2015 under section 200A of the Act levying section 234E of the Act late fees is not valid”. However, the Hon’ble High Court kept open the issue on constitutional validity of section 234E of the Act. We have already referred to the decision of Hon’ble Bombay High Court in Rashmikant Kundalia Vs. Union of India (supra) in this regard, wherein the constitutional validity of section 234E of the Act has been upheld.

(xi) Accordingly, we hold that the amendment to section 200A(1) of the Act is procedural in nature and in view thereof, the Assessing Officer while processing the TDS statements / returns in the present set of appeals for the period prior to 01.06.2015, was not empowered to charge fees under section 234E of the Act. Hence, the intimation issued by the Assessing Officer under section 200A of the Act in all these appeals does not stand and the demand raised by way of charging the fees under section 234E of the Act is not valid and the same is deleted. The intimation issued by the Assessing Officer was beyond the scope of adjustment provided under section 200A of the Act and such adjustment could not stand in the eye of law.

(xii) Before parting we may refer to reliance placed upon by the learned DR on the ratio laid down by Chennai Bench of Tribunal in G. Indirani Vs. DCIT (supra) on another aspect wherein it was held that before 01.06.2015, whether the Assessing Officer had authority to pass a separate order under section 234E of the Act levying fees for delay in filing the TDS statements under section 200(3) of the Act; the Tribunal held ‘yes’ that the assessing authority had such power and after 01.06.2015, the Assessing Officer was within his limit to levy fees under section 234E of the Act even while processing the TDS statements under section 200A of the Act. In view of the present set of facts, where the Assessing Officer had charged fees under section 234E of the Act while processing the statements under section 200A of the Act before 01.06.2015, there is no merit in the reliance placed upon by the learned DR on the said proposition laid down by the Chennai Bench of Tribunal and we dismiss the same.

(xiii) Another reliance placed upon by the learned DR was in respect of amendment being retrospective or prospective and reliance was placed on the ratio laid down by Hon’ble Delhi High Court in CIT Vs. Naresh Kumar (supra). However, in view of our decision in the paras hereinabove, where power is being enshrined upon the Assessing Officer to levy or charge while processing the TDS returns w.e.f. 01.06.2015, such provision cannot have retrospective effect as it would be detrimental to the case of tax payer. The Hon’ble Delhi High Court was considering the application of amendment to section 40(a)(ia) of the Act by the Finance Act, 2010, under which certain relaxations were given to the application of said section and it was held that the same applies retrospectively to earlier years. However, in the present set of appeals, the issue is against the provision under which a new enabling power is being given to charge fees under section 234E of the Act while processing TDS returns / statements and such power is to be applied prospectively. In any case, the Parliament itself has recognized its operation to be prospective in nature while introducing clause (c) to section 200A(1) of the Act and hence, cannot be applied retrospectively. Similarly, reliance placed upon by the learned DR on the ratio laid down by the Hon’ble Supreme Court in Govinddas Vs. ITO (supra) is misplaced because of the distinguishable facts and issues.

(xiv) Now, coming to the connected issue raised by the learned Authorized Representative for the assessee by way of ground in some of the appeals appeal No.1 that whether any appeal is maintainable against the intimation issued under section 200A of the Act and / or order passed under section 154 r.w.s. 200A of the Act by Assessing Officer in charging the fees under section 234E of the Act. Both the learned Authorized Representatives have raised varied arguments in respect of said issue and the learned DR has referred to the order of CIT(A), who had held that no appeal is maintainable against the order of Assessing Officer passed while processing the TDS returns / statements and charging of fees under section 234E of the Act. Without going into various aspects of the issue, we make reference to the Memorandum explaining the Finance Bill, 2015, under which the heading was rationalization of provisions relating to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS). The said memorandum categorically recognized that under the existing provisions of the Act, after processing of TDS statements, an intimation is generated specifying the amount payable or refundable. It was further noted that this intimation generated after processing TDS statement is (i) subject to rectification under section 154 of the Act; (ii) appealable under section 246A of the Act; and (iii) deemed as notice of payment under section 156 of the Act. Under the amendment, similar position was given to the processing of TCS statements. In other words, the Legislature recognizes that a deductor who has filed his statement of tax deducted at source, which in turn, has been processed by the Assessing Officer and intimation is generated under which, if any amount is found to be payable, then such intimation generated after processing of TDS returns is subject to rectification under section 154 of the Act and / or is also appealable under section 246A of the Act, since the demand issued by the Assessing Officer is deemed to be a notice of payment under section 156 of the Act. Since the intimation in question issued by the Assessing Officer was appealable order under section 246A(1)(a) of the Act, therefore, the CIT(A) should have examined the legality of adjustment made under intimation issued under section 200A of the Act. The CIT(A) has rejected the present set of appeals on the surmise that first of all, no appeal is provided against the intimation issued under section 200A of the Act. Further, the CIT(A) has also decided the issue on merits and the assessee is in appeal before us on both these grounds. Vis-à-vis the first issue of maintainability of appeal against the intimation issued under section 200A of the Act, we hold that such intimation issued by the Assessing Officer after processing the TDS returns is appealable. The demand raised by way of charging of fees under section 234E of the Act is under section 156 of the Act and any demand raised under section 156 of the Act is appealable under section 246A(1)(a) and (c) of the Act. Accordingly, we reverse the findings of CIT(A) in this regard. We find support from the similar proposition being laid down by Mumbai Bench of Tribunal in bunch of cases with lead order in M/s. Kash Realtors Pvt. Ltd. Vs. ITO in ITA No.4199/M/2015, relating to assessment year 2013-14, consolidated order dated 27.07.2016, which had also decided the issue of charging of fees under section 234E of the Act in favour of the assessee following the decisions of other Benches of Tribunal. Once intimation issued under section 200A(1) of the Act is appealable order before the CIT(A) under section 246A(1)(a) of the Act, then such appealable order passed by the CIT(A) under section 250 of the Act is further appealable before the Tribunal under section 253 of the Act. Hence, we admit the present appeals filed by the assessee even on this preliminary issue. We have already adjudicated the issue of charging fees under section 234E of the Act by the Assessing Officer while processing returns / statements in the paras hereinabove and in view thereof, we hold that the Assessing Officer is not empowered to charge the fees under section 234E of the Act by way of intimation issued under section 200A of the Act in respect of defaults before 01.06.2015, we allow the claim of assessee on both the aspects. The grounds of appeal raised by the assessee are thus, allowed.

Cases referred:

Rashmikant Kundalia Vs. Union of India (2015) 54 Taxman.com 200
(Bom).

Lakshmi Niman, Bangalore Pvt. Vs. DCIT, Ghaziabad (2005) 60 taxman.com 144 (Kar).

CIT Vs. B.C. Srinivasa Setty (1981) 128 ITR 294 (SC),

Dundlod Shikshan Sansthan & Anr. Vs. Union of India and Ors. in D.B. Civil Writ Petition No.8672/2014, judgment dated 28.07.2015