2019 (12) TMI 574 - AT - Income Tax

Tribunal rules late fees pre-2015 not valid, favors appellant citing High Court decision. Late fees annulled.

National Laminate Corporation Versus ITO-CPC (TDS) Uttar Pradesh

The Tribunal held that the levy of late fees under Section 234E for periods before 01/06/2015 was not legally sustainable. Relying on the Karnataka High ... Levy of late fee u/s 234E - late filing of quarterly electronic TDS returns, as provided u/s 200(3) for AY 2013-14 - 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. Therefore, respectfully following the aforesaid view of co-ordinate bench of Pune Tribunal, 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. Issues Involved:1. Authority to levy late fees under Section 234E.2. Applicability of the Karnataka High Court decision in Shree Ayappa Educational Charitable Trust.3. Judicial discipline and adherence to High Court judgments.Detailed Analysis:1. Authority to Levy Late Fees under Section 234E:The primary issue revolves around whether the Assessing Officer (AO) had the authority to levy late fees under Section 234E for periods prior to the amendment of Section 200A(1) effective from 01/06/2015. The appellant contended that the AO levied late fees without any legal authority, as the mechanism for such levy was introduced only prospectively from 01/06/2015. The appellant relied on the Karnataka High Court’s decision in Fatehraj Singhvi v. Union of India, which held that the amendment in Section 200A(1) was prospective, and thus, no late fees could be levied for periods before 01/06/2015.2. Applicability of the Karnataka High Court Decision:The appellant argued that the CIT(A) erred in not following the Karnataka High Court's decision in Shree Ayappa Educational Charitable Trust, which supported the appellant's position. The appellant emphasized that judicial discipline necessitates adherence to this decision, especially in the absence of a contrary ruling from the jurisdictional High Court. The CIT(A), however, upheld the levy of fees, citing a conflicting decision from the Gujarat High Court in Rajesh Kourani v. Union of India, which allowed the levy of fees under Section 234E even without the amendment in Section 200A.3. Judicial Discipline and Adherence to High Court Judgments:The CIT(A) preferred the Gujarat High Court's later decision, following the principle of stare decisis as explained by the Bombay High Court in CIT v. Thana Electric Supply Ltd., which suggests that in case of conflicting decisions of coordinate jurisdiction, the later decision should be preferred if it was reached after full consideration of the earlier decisions. The appellant challenged this approach, arguing that in the case of conflicting judgments from non-jurisdictional High Courts, the view favorable to the assessee should be adopted, as per the Supreme Court's ruling in CIT v. Vegetable Products Ltd.Tribunal's Findings:The Tribunal, upon careful consideration, found that the provisions of Section 234E, introduced by the Finance Act 2012, envisaged a levy of fees for defaults in filing TDS statements. However, the mechanism for computing such fees under Section 200A was introduced only from 01/06/2015. The Tribunal noted the conflicting decisions of the Karnataka and Gujarat High Courts and observed that the decision of the Karnataka High Court was more favorable to the assessee.The Tribunal referred to the Pune Bench's decision in Medical Superintendent Rural Hospital v. DCIT, which followed the Karnataka High Court's ruling, holding that the amendment to Section 200A was prospective and thus, late fees under Section 234E could not be levied for periods prior to 01/06/2015. The Tribunal emphasized that in the absence of a jurisdictional High Court decision, the view favorable to the assessee should be adopted, aligning with the Supreme Court's ruling in CIT v. Vegetable Products Ltd.Conclusion:The Tribunal concluded that the levy of fees under Section 234E for any period prior to 01/06/2015 was not sustainable in law. The appeal was allowed to this extent, and the late fees charged by the AO were deleted.Order:The appeal was allowed, and the order was pronounced in the open court on 10th December 2019.