2017 (12) TMI 1721 - HC - Income Tax

Levy of interest under Section 234E - Intimation under Section 200A - Levy for period prior to 01/06/2015 - HELD THAT - There cannot be levy of late fee u/s. 234E for the period prior to 01/06/2015, we are inclined to delete the levy of late fee u/s. 234E of the Act in all the cases. See Fatheraj Singhvi Ors. Vs. Union of India 2016 (9) TMI 964 - KARNATAKA HIGH COURT - Decided in favour of assessee

Summary

Issues:
1. Impugned intimation under Section 200A of the Income Tax Act, 1961 regarding failure to deduct Tax at Source and levy of interest under Section 234E.
2. Interpretation of Division Bench judgment on the legality of levying interest under Section 234E.
3. Implementation of Division Bench judgment by the Respondents.
4. Setting aside the impugned Intimation under Section 200A and remanding the matter to the local Assessing Authority.

Analysis:

1. The petitioner challenged the impugned intimation under Section 200A of the Income Tax Act, 1961, issued by the Centralized Processing Cell (TDS) for alleged failure to deduct Tax at Source and the levy of interest under Section 234E. The Division Bench judgment highlighted that no interest could be levied under Section 234E for the period prior to 1.6.2015, deeming such demands as illegal and invalid. The judgment emphasized that the demand notices under Section 200A for fees under Section 234E were unauthorized for periods before 1.6.2015 due to the prospective effect of the amendment made under Section 200A.

2. The Division Bench judgment clarified that the impugned notices under Section 200A related to the tax deducted before 1.6.2015 were set aside. It was mentioned that the judgment did not allow the reopening of fees paid under Section 234E for TDS prior to 01.04.2015 for claiming refunds. The decision also stated that the question of constitutional validity of Section 234E remained open for consideration by the Division Bench, not conclusively determined by the Single Judge.

3. The petitioner's counsel argued that the Division Bench judgment should be binding on the Respondents, as they had not appealed against it in the Supreme Court. The Revenue's counsel did not dispute this argument, leading to the allowance of the writ petitions. Consequently, the impugned Intimation under Section 200A was set aside, and the matter was remanded to the local Assessing Authority for fresh orders in compliance with the Division Bench judgment.

4. The Court's decision to set aside the impugned Intimation under Section 200A and remand the matter back to the local Assessing Authority for further action aligned with the interpretation of the Division Bench judgment, emphasizing the unauthorized nature of demanding fees under Section 234E for periods before 1.6.2015. The judgment's prospective effect and the open question of the constitutional validity of Section 234E were reiterated, ensuring compliance with legal provisions and due process in the assessment of Tax at Source.