2019 (12) TMI 824 - AT - Income Tax

Late filing fees u/s 234E and interest on account of late payment - The said fee u/s 234E was levied on account of late filing of quarterly electronic TDS return, as provided u/s 200(3) of the Act read with Rule 31A of the Income Tax Rules - Scope of amendment - HELD THAT - As rightly observed by co-ordinate bench in para-17, the decision of Hon ble Bombay High Court in Rashmikant Kundalia v. Union of India 2015 (2) TMI 412 - BOMBAY HIGH COURT deal only with examining the constitutional validity of provisions of section 234E of the Act and do not deal with effect of amendment in Section 200A w.e.f. 01.06.2015. We hold that view favorable to the assessee was to be adopted and therefore, the levy of fees u/s 234E for any period prior to 01/06/2015 would not be sustainable in the eyes of law. We order so. See MEDICAL SUPERINTENDENT RURAL HOSPITAL DODI BK AND JUNAGADE HEALTHCARE PVT. LTD. 2018 (10) TMI 1587 - ITAT PUNE So far as the levy of interest of ₹ 1,485/- is concerned, the same being mandatory and consequential in nature, would require no interreference on our part. The action of revenue in levying the same is upheld.

Issues Involved:
1. Confirmation of penalty by CIT(A) without considering the facts and circumstances.
2. Rejection of the appellant's genuine reason by CIT(A).
3. Allegation that CIT(A)'s order is based on surmises and conjectures.

Detailed Analysis:

Issue 1: Confirmation of Penalty by CIT(A) without Considering the Facts and Circumstances

The appellant contested the levy of late filing fees under Section 234E of the Income Tax Act, 1961, imposed for the late filing of quarterly electronic TDS returns. The CIT(A) upheld this penalty, referencing the constitutional validity of Section 234E as upheld by the Hon’ble Bombay High Court in Rashmikant Kundalia V/s Union of India (373 ITR 268). However, the appellant relied on the Hon’ble Karnataka High Court's decision in Fatehraj Singhvi V/s Union of India (73 Taxmann.com 252), which held that fees under Section 234E could not be levied for periods prior to the amendment of Section 200A effective from 01/06/2015.

Issue 2: Rejection of the Appellant's Genuine Reason by CIT(A)

The appellant argued that the amendment to Section 200A, which allowed for the levy of fees under Section 234E, was only effective from 01/06/2015. Therefore, no fees should be payable for any period before this date. This argument was supported by the Hon’ble Karnataka High Court in Fatehraj Singhvi V/s Union of India and subsequent decisions. However, the CIT(A) rejected this argument, relying on the contrary decision of the Hon’ble Gujarat High Court in Rajesh Kourani V/s Union of India (297 CTR 502), which upheld the levy of fees under Section 234E from its introduction on 01/07/2012.

Issue 3: Allegation that CIT(A)'s Order is Based on Surmises and Conjectures

The Tribunal noted that different High Courts had divergent views on this issue. The Pune Bench of the Tribunal, in Medical Superintendent Rural Hospital, DOBI, BK V/s DCIT (100 Taxmann.com 78), followed the favorable decision of the Hon’ble Karnataka High Court. The Tribunal held that in cases of conflicting High Court decisions, the one favoring the assessee should be adopted, as per the Hon’ble Supreme Court's decision in CIT V/s Vegetable Products Ltd. (1972 88 ITR 192).

The Tribunal found that the amendment to Section 200A was procedural and prospective. Therefore, the Assessing Officer was not empowered to levy fees under Section 234E for periods before 01/06/2015. Consequently, the demand raised by charging fees under Section 234E was invalid and deleted.

Levy of Interest:

The Tribunal upheld the levy of interest of ?1,485/- as it was mandatory and consequential in nature.

Conclusion:

The Tribunal allowed the appeal to the extent that the levy of fees under Section 234E for periods prior to 01/06/2015 was not sustainable. However, the levy of interest was upheld. The appeal was pronounced in favor of the appellant on 10th December 2019.

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