2018 (4) TMI 1885 - HC - Income Tax

Constitutional Validity of Section 234E - Late filing fee under Section 234E - exercise of power under Section 200A - charging of fees payable u/s 234E 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 HELD THAT - As decided in SRI. FATHERAJ SINGHVI AND OTHERS VERSUS UNION OF INDIA AND OTHERS 2016 (9) TMI 964 - KARNATAKA HIGH COURT Amendment to section 200A(1) of the Act is prospective in nature and therefore the AO while processing the TDS statements/ returns in the present three appeals for the period prior to 01.06.20 15 was not empowered to charge fees under section 234E of the Act. Therefore the intimations issued by the AO under section 200A of the Act in these appeals are unsustainable and the demand raised by way of charging of the fees under section 234E of the Act not being valid is deleted - we hold that the AO is not empowered to charge fees under section 234E of the Act by way of intimations issued under section 200A of the Act in respect of defaults before 01.06.2015 - Decided in favour of assessee.

Summary

Issues:
Challenge to constitutional validity of Section 234E of the Income Tax Act, 1961 and related orders/communications under Section 200A for periods pre and post 01.06.2015.

Analysis:
The petitioner contested the constitutional validity of Section 234E of the Income Tax Act, 1961, inserted by the Finance Act, 2012, along with the orders/communications issued under Section 200A for various periods. The counsel argued that prior to 01.06.2015, there was no authority to compute fees under Section 234E, and any demand or intimation made for periods before this date lacked legal basis. The Division Bench judgment highlighted that the insertion of clauses under Section 200A(1) post 01.06.2015 did not confer retrospective authority, and demands made for fees under Section 234E for periods pre-01.06.2015 were deemed illegal and invalid.

The court emphasized that the impugned intimation under Section 200A for fees under Section 234E related to periods before 01.06.2015 lacked legal backing and were set aside. The judgment clarified that the retrospective nature of fee provisions and the enforceability of demands required careful consideration, and the authority to demand fees under Section 234E was not provided under Section 200A for periods pre-01.06.2015. The judgment's prospective effect was underscored, and the question of constitutional validity of Section 234E was left open for the Division Bench to consider further.

The petitioner sought to quash orders/communications for periods pre-01.06.2015 but opted to pursue the appeal remedy for periods post this date. The court allowed the writ petitions, setting aside the impugned orders/communications issued under Section 200A for periods pre-01.06.2015, and remanded the matters for fresh orders in line with the Division Bench judgment. For periods post 01.06.2015, the petitioner was advised to utilize the appeal remedy available under the Act within 30 days, with the Appellate Authority directed to consider the case without limitation objections and decide promptly.

In conclusion, the court disposed of the writ petitions, emphasizing the need for legal compliance and adherence to the Division Bench judgment regarding the constitutional validity of Section 234E and related orders/communications under Section 200A for different periods pre and post 01.06.2015.