2021 (3) TMI 634 - HC - Income Tax

Appeal overturns TDS order, emphasizes precedent on late fees.

Union Of India, Assistant Commissioner Of Income Tax Central Processing Cell-TDS, The Income Tax Officer TDS Ward-2 (1), Bangalore Versus Integreatz ERP (I) (P) Ltd.

The Writ Appeal challenged the Single Judge's order related to TDS for specific financial years, ultimately allowing the writ petitions and restoring ... Late fee levied u/s 234E - delay in furnishing the tax deducted at source statement - intimation u/s 200A - scope of amendment to section 200A - HELD THAT:- Admittedly, the levy of late fees under section 234E has been exercised under section 200A for period prior to 01/06/2015. We note that the amendment to section 200A of the Act came into effect from 01/06/2015 and is held to be prospective in nature and therefore no computation of fee for the demand or intimation for fee under section 234 E could be made for late deposit of TDS for the assessment years prior to 01/06/2015. This view is supported by the decision of Hon’ble Karnataka High Court in case of Fatheraj Singhvi [2016 (9) TMI 964 - KARNATAKA HIGH COURT]. Late fee under section 234B cannot be levied for a period up to 01/06/2015. In the present years under consideration, interest u/s 234B is not leviable for asst. year 2013-14 & 2014-15. However for asst. year 2015-16 the amended provisions would be applicable. In respect of asst. year 2015-16, no interest would be chargeable for the first quarter. We therefore direct Ld.AO to delete the addition made under section 234B of the Act in the hands of assessee for the relevant assessment years under consideration. - Decided in favour of assessee. Issues:1. Validity of the order passed by the learned Single Judge in Writ Petition Nos.25124 & 26129 of 2019.2. Interpretation of Section 234E of the Income Tax Act, 1961.3. Applicability of the judgment in the case of Fatheraj Singhvi and Others Vs. Union of India and Others.4. Comparison of judgments between Karnataka High Court and Gujarat High Court regarding the recovery of late fees for TDS under Section 234E.Issue 1:The present Writ Appeal challenged the order dated 20.6.2019 passed by the learned Single Judge in Writ Petition Nos.25124 & 26129 of 2019. The respondent, aggrieved by orders related to TDS for financial years 2012-2013 and 2013-2014, approached the Court. The Single Judge allowed the writ petition based on the judgment in the case of Fatheraj Singhvi and Others Vs. Union of India and Others, stating that the levy of late fee under Section 234E prior to 01.06.2015 was illegal. The writ petitions were allowed, and the proceedings were restored for re-computation and demand in accordance with Section 234E and Section 200A.Issue 2:The interpretation of Section 234E of the Income Tax Act, 1961 was a crucial aspect of the judgment. The Court examined the introduction of late fee provisions and the mechanism for its levy. It was argued that the machinery for calculating the late fee was not in place before 01.06.2015, making the demand for late fees prior to that date unjustified. The Court relied on the Division Bench judgment in the Fatheraj Singhvi case to support the conclusion that demand notices for late fees under Section 234E for TDS deducted before 01.06.2015 were without legal authority and thus quashed.Issue 3:The judgment in the case of Fatheraj Singhvi and Others Vs. Union of India and Others played a significant role in the decision. The Court extensively quoted the observations made in that case, highlighting that the demand notices for late fees under Section 234E, issued before 01.06.2015, lacked legal authority. The judgment in Fatheraj Singhvi case was followed by the cognate Bench, reinforcing the legal position established therein and guiding the decision in the present case.Issue 4:A comparison of judgments between the Karnataka High Court and the Gujarat High Court regarding the recovery of late fees for TDS under Section 234E was conducted. The Gujarat High Court's view that the Department was entitled to recover late fees even though the machinery for calculating the late fee came into effect later was contrasted with the Karnataka High Court's stance. The Karnataka High Court held that the absence of machinery for recovering late fees before 01.06.2015 rendered the demand notices invalid, thus dismissing the Writ Appeal based on this interpretation.In conclusion, the judgment highlighted the importance of legal precedents, the correct interpretation of statutory provisions, and the consistency in applying legal principles across different High Courts.