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2017 (7) TMI 458 - HC - Income TaxLevy of fees u/s 234E - Non permissibility to levy fee till section 200A of the Act was amended with effect from 01.06.2015 - Fee for default in furnishing statements - Held that - When section 234E has already created a charge for levying fee that would thereafter not been necessary to have yet another provision creating the same charge. Viewing section 200A as creating a new charge would bring about a dichotomy. In plain terms, the provision in our understanding is a machinery provision and at best provides for a mechanism for processing and computing besides other, fee payable under section 234E for late filing of the statements. We cannot subscribe to the view that without a regulatory provision being found for section 200A for computation of fee, the fee prescribed under section 234E cannot be levied. Any such view would amount to a charging section yielding to the machinery provision. If at all, the recasted clause (c) of subsection (1) of section 200A would be in nature of clarificatory amendment. Even in absence of such provision, as noted, it was always open for the Revenue to charge the fee in terms of section 234E of the Act. By amendment, this adjustment was brought within the fold of section 200A of the Act. Upon introduction of the recasted clause (c), this situation also would be obviated. Even prior to 01.06.2015, it was always open for the Revenue to calculate fee in terms of section 234E of the Act Section 200A is not a source of substantive power. Substantive power to levy fee can be traced to section 234E of the Act. Further the fee under section 234E of the Act is not in lieu of the penalty of section 271H of the Act. Both are independent levies. Section 271H only provides that such penalty would not be levy if certain conditions are fulfilled. One of the conditions is that the tax with fee and interest is paid. The additional condition being that the statement is filed latest within one year from the due date. The decision of Supreme Court in case of B C Srinivasa Setty (1981 (2) TMI 1 - SUPREME Court) was rendered in entirely different background. Issue involved was of charging capital gain on transfer of a capital asset. In case on hand, the asset was in the nature of goodwill. The Supreme Court referring to various provisions concerning charging and computing capital gain observed that none of these provisions suggest that they include an asset in the acquisition of which no cost can be conceived. In such a case, the asset is sold and the consideration is brought to tax, what is charged is a capital value of the asset and not any profit or gain. This decision therefore would not apply in the present case. - Decided against assessee.
Issues Involved:
1. Constitutionality of Section 234E of the Income Tax Act, 1961. 2. Validity of Rule 31A of the Income Tax Rules, 1961. 3. Authority of the Assessing Officer to levy fees under Section 234E before the amendment to Section 200A effective from 01.06.2015. Detailed Analysis: I. Constitutionality of Section 234E The petitioner initially challenged the vires of Section 234E of the Income Tax Act, 1961, arguing it was unconstitutional. However, in light of the Bombay High Court judgment in Rashmikant Kundalia and another v. Union of India and Others, the petitioner chose not to press this challenge. Thus, the court did not delve into the constitutional validity of Section 234E. II. Validity of Rule 31A The petitioner contended that Rule 31A of the Income Tax Rules, 1961, is discriminatory and arbitrary as it prescribes a longer period for the Government to file statements compared to other assessees. The petitioner argued that the special concession to Government agencies was unnecessary and not based on any rational basis, as the same difficulties faced by Government agencies would also be faced by individual assessees. Court’s Analysis: The court examined Rule 31A, which provides different deadlines for filing quarterly statements for Government offices and other deductors. Government offices are granted 15 extra days compared to other deductors. The court held that Article 14 of the Constitution does not prohibit reasonable classification but frowns upon class legislation. The court found that the additional 15 days for Government agencies was neither unreasonable nor discriminatory. The affidavit in reply highlighted the complex nature of transactions and the volume handled by Government agencies, justifying the extra time. Therefore, the court ruled that the classification was legitimate and did not violate Article 14. III. Authority of the Assessing Officer to Levy Fees under Section 234E Before 01.06.2015 The petitioner argued that before the amendment to Section 200A effective from 01.06.2015, there was no mechanism for the Assessing Officer to levy fees under Section 234E. The petitioner cited the Pune Bench of ITAT in Gajanan Constructions v. Deputy Commissioner of Income-tax, CPC (TDS), Ghaziabad, and the Karnataka High Court in Fatheraj Singhvi v. Union of India, which held that the amendment to Section 200A was not retrospective and thus, fees under Section 234E could not be levied for the period between 01.07.2012 and 01.06.2015. Court’s Analysis: The court examined the statutory provisions, noting that Section 234E, introduced by the Finance Act, 2012, with effect from 01.07.2012, created a charge for levying fees for defaults in filing statements. Section 200A, which pertains to processing statements of tax deducted at source, was amended effective from 01.06.2015 to include the computation of fees under Section 234E. The court held that Section 200A is a machinery provision providing a mechanism for processing statements and making adjustments. It does not create a charge but regulates the computation and demand of fees already prescribed under Section 234E. The court opined that even in the absence of Section 200A, the Revenue could demand and collect fees under Section 234E. The amendment to Section 200A was seen as clarificatory, ensuring that the computation of fees under Section 234E could be adjusted and intimated to the assessee. The court disagreed with the Karnataka High Court's view that Section 200A conferred substantive power and that fees under Section 234E were in lieu of penalties under Section 271H. The court clarified that Section 234E is a charging provision, and Section 200A is a machinery provision, with the latter not overriding the former. Conclusion The petition was dismissed. The court upheld the validity of Rule 31A and confirmed that fees under Section 234E could be levied even before the amendment to Section 200A effective from 01.06.2015.
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