2019 (8) TMI 617 - HC - Income Tax

Levy of fees u/s 234E as per demand/intimation u/s 200A - petitioner submit that Section 234E was introduced with effect from 01.07.2012 and the mechanism to levy such late fee was introduced by virtue of the amendment to Section 200A with effect from 01.06.2015, hence, the said levy of late fee in respect of the period prior to 01.06.2015 is illegal HELD THAT - This Court in the case of Fatheraj Singhvi and others vs. Union of India 2016 (9) TMI 964 - KARNATAKA HIGH COURT held that when the amendment made u/s 200A of the Act which has come into effect on 1st June, 2015 is held to be having prospective effect, no computation of fee for the demand or the intimation for the fee u/s 234E could be made for the TDS deducted for the respective assessment year prior to 1st June, 2015. In view of the settled legal position as aforesaid, the writ petitions are allowed and as the amount demanded by the authorities as per Annexures A, B, C, D, E and F would penalize the petitioner, they are set aside and the proceedings are restored to the file of respondent No.2 to re-compute and raise demand accordingly, in terms of Section 234E read with Section 200A of the Act, and in the light of the observations made herein above.

Summary

Issues:
Assailing order relating to financial years 2012-13 & 2013-14; Levy of late fee under Section 234E prior to 01.06.2015; Interpretation of Section 234E and Section 200A; Legal challenge to the validity of Section 234E; Applicability of Division Bench judgment on the case.

Analysis:
The petitioner challenged the order and communications issued by respondent No.2 regarding the financial years 2012-13 & 2013-14, specifically related to the levy of late fee under Section 234E. The petitioner, engaged in software development, contended that the late fee was demanded illegally for the period before 01.06.2015, citing the amendment to Section 200A. The petitioner's counsel argued that the mechanism to levy late fees was introduced post 01.06.2015, rendering the pre-amendment levy illegal. The revenue's counsel did not contest this legal position, acknowledging the discrepancy in the application of late fees.

The legal challenge was supported by a Division Bench judgment and a cognate Bench order, which highlighted the invalidity of demands made under Section 200A for fees under Section 234E for periods before 01.06.2015. The Division Bench's ruling emphasized that demands made under Section 200A lacked legal authority for pre-June 2015 periods. Consequently, the judgment set aside the demands and restored the proceedings to re-compute and raise demands in accordance with Section 234E and Section 200A, aligning with the observations made in the judgment.

The judgment's application was not to permit reopening of fees already paid under Section 234E based on demands under Section 200A for periods before 01.04.2015. It clarified the prospective effect of the judgment and left open the consideration of the constitutional validity of Section 234E for the Division Bench, ensuring that the issue was not conclusively determined by the Single Judge's order. The writ petitions were allowed, setting aside the demands to prevent penalizing the petitioner and directing respondent No.2 to re-compute and raise demands in compliance with the legal provisions and the judgment's directives.