Section 234E adjustment beyond scope of permissible adjustments contemplated under section 200A

By | January 18, 2016

Whether so far as period prior to 1st June 2015 is concerned, fees under section 234 E of the Income Tax Act 1961 (hereinafter referred to as ‘the Act’), in respect of defaults in furnishing TDS statements, could be levied in intimation under section 200A of the Act ?

HELD ; NO

IN THE ITAT AMRITSAR BENCH

Sibia Health Care (P.) Ltd.

v.

Deputy Commissioner of Income-tax (TDS), Ghaziabad

PRAMOD KUMAR, ACCOUNTANT MEMBER
AND A.D. JAIN, JUDICIAL MEMBER

IT APPEAL NO. 95 (ASR.) OF 2015
[ASSESSMENT YEAR 2013-14]

JUNE  9, 2015

Ashwani Kalia for the Appellant. Tarsem Lal for the Respondent.

ORDER

Pramod Kumar, Accountant Member – By way of this appeal, the assessee has called into question correctness of the order dated 13th October 2014 passed by the learned CIT(A) upholding levy of fees, under section 234E of the Income Tax Act, 1961, on the assessee and by way of intimation dated 11th January 2014 issued under section 200A in respect of processing of TDS statements the second quarter of the financial year 2012-13. The appeal is time barred by 62 days but the assessee has filed a petition seeking condonation of this delay. Having perused the condonation petition and having rival contentions on the same, we are inclined to condone the delay and proceed to take up the matter on merits. Delay condoned.

2. During the course of this hearing, learned representatives were asked to address us on the question as to whether or not, so far as period prior to 1st June 2015 is concerned, fees under section 234 E of the Income Tax Act 1961 (hereinafter referred to as ‘the Act’), in respect of defaults in furnishing TDS statements, could be levied in intimation under section 200A of the Act. It is on this short issue, and for the reasons we will set out in a short while, we propose to decide these appeals.

3. To adjudicate on these appeals, only a few material facts need to be taken note of. It is a case in which there was admittedly a delay in filing of the TDS returns. In the course of the processing of the TDS return, the Assessing Officer (TDS) raised a demand, by way of an intimation dated 9th September 2013 issued under section 200A of the Act, for levy of fees under section 234E for delayed filing of TDS statement. Aggrieved by this levy of fees, assessee carried the matter in appeal before the CIT(A) but without any success. The assessee is not satisfied and is in further appeal before us.

4. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. In addition to his argument on the merits, learned counsel has also invited our attention to the reports about the decisions of various Hon’ble High Courts, including Hon’ble Kerala High Court, in the case of Narath Mapila LP School v. Union of India [WP (C) No. 31498/2013(J)], Hon’ble Karnataka High Court in the case of Adithya Bizor P Solutions v. Union of India [WP Nos. 6918-6938/2014(T-IT)], Hon’ble Rajasthan High Court in the case of Om Prakash Dhoot v. Union of India [WP No. 1981 of 2014] and of Hon’ble Bombay High Court in the case of Rashmikant Kundalia v. Union of India [2015]  229 Taxman 596, granting stay on the demands raised in respect of fees under section 234E. The full text of these decisions were not produced before us. However, as admittedly there are no orders from the Hon’ble Courts above retraining us from our adjudication on merits in respect of the issues in this appeal, and as, in our humble understanding, this appeal requires adjudication on a very short legal issue, within a narrow compass of material facts, we are proceeding to dispose of this appeal on merits.

5. We may produce, for ready reference, section 234E of the Act, which was inserted by the Finance Act 2012 and was brought into effect from 1st July 2012. This statutory provision is as follows:

234E. Fee for defaults in furnishing statements

(1) Without prejudice to the provisions of the Act, where a person fails to deliver or cause to be delivered a statement within the time prescribed in sub-section (3) of section 200 or the proviso to sub-section (3) of section 206C, he shall be liable to pay, by way of fee, a sum of two hundred rupees for every day during which the failure continues.
(2) The amount of fee referred to in sub-section (1) shall not exceed the amount of tax deductible or collectible, as the case may be.
(3) The amount of fee referred to in sub-section (1) shall be paid before delivering or causing to be delivered a statement in accordance with sub-section (3) of section 200 or the proviso to sub-section (3) of section 206C.
(4) The provisions of this section shall apply to a statement referred to in sub-section (3) of section 200 or the proviso to sub-section (3) of section 206C which is to be delivered or caused to be delivered for tax deducted at source or tax collected at source, as the case may be, on or after the 1st day of July, 2012

6. We may also reproduce the Section 200A which was inserted by the Finance Act 2009 with effect from 1st April 2010. This statutory provision, as it stood at the relevant point of time, was as follows:

200A: Processing of statements of tax deducted at source

(1) Where a statement of tax deduction at source, or a correction statement, has been made by a person deducting any sum (hereafter referred to in this section as deductor) under section 200, such statement shall be processed in the following manner, namely:—

(a) the sums deductible under this Chapter shall be computed after making the following adjustments, namely:—

(i) any arithmetical error in the statement; or
(ii) an incorrect claim, apparent from any information in the statement;

(b) the interest, if any, shall be computed on the basis of the sums deductible as computed in the statement;

(c) the sum payable by, or the amount of refund due to, the deductor shall be determined after adjustment of amount computed under clause (b) against any amount paid under section 200 and section 201, and any amount paid otherwise by way of tax or interest;

(d) an intimation shall be prepared or generated and sent to the deductor specifying the sum determined to be payable by, or the amount of refund due to, him under clause (c); and

(e) the amount of refund due to the deductor in pursuance of the determination under clause (c) shall be granted to the deductor:

Provided that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the statement is filed.

Explanation : For the purposes of this sub-section, “an incorrect claim apparent from any information in the statement” shall mean a claim, on the basis of an entry, in the statement—

(i) of an item, which is inconsistent with another entry of the same or some other item in such statement;
(ii) in respect of rate of deduction of tax at source, where such rate is not in accordance with the provisions of this Act;

(2) For the purposes of processing of statements under sub-section (1), the Board may make a scheme for centralised processing of statements of tax deducted at source to expeditiously determine the tax payable by, or the refund due to, the deductor as required under the said sub- section.

7. By way of Finance Act 2015, and with effect from 1st June 2015, there is an amendment in Section 200A and this amendment, as stated in the Finance Act 2015, is as follows:

In section 200A of the Income-tax Act, in sub-section (1), for clauses (c) to (e), the following clauses shall be substituted with effect from the 1st day of June, 2015, namely:—

“(c) the fee, if any, shall be computed in accordance with the provisions of section 234E;

(d) the sum payable by, or the amount of refund due to, the deductor shall be determined after adjustment of the amount computed under clause (b) and clause (c) against any amount paid under section 200 or section 201 or section 234E and any amount paid otherwise by way of tax or interest or fee;

(e) an intimation shall be prepared or generated and sent to the deductor specifying the sum determined to be payable by, or the amount of refund due to, him under clause (d); and

(f) the amount of refund due to the deductor in pursuance of the determination under clause (d) shall be granted to the deductor.”

8. In effect thus, post 1st June 2015, in the course of processing of a TDS statement and issuance of intimation under section 200A in respect thereof, an adjustment could also be made in respect of the “fee, if any, shall be computed in accordance with the provisions of section 234E”. There is no dispute that what is impugned in appeal before us is the intimation under section 200A of the Act, as stated in so many words in the impugned intimation itself, and, as the law stood, prior to 1st June 2015, there was no enabling provision therein for raising a demand in respect of levy of fees under section 234E. While examining the correctness of the intimation under section 200A, we have to be guided by the limited mandate of Section 200A, which, at the relevant point of time, permitted computation of amount recoverable from, or payable to, the tax deductor after making the following adjustments:

(a) after making adjustment on account of “arithmetical errors” and “incorrect claims apparent from any information in he statement” — Section 200A(1)(a)
(b) after making adjustment for ‘interest, if any, computed on the basis of sums deductible as computed in the statement” — Section 200A(1)(b)

9. No other adjustments in the amount refundable to, or recoverable from, the tax deductor, were permissible in accordance with the law as it existed at that point of time.

10. In view of the above discussions, in our considered view, the adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. This intimation is an appealable order under section 246A(a), and, therefore, the CIT(A) ought to have examined legality of the adjustment made under this intimation in the light of the scope of the section 200A. Learned CIT(A) has not done so. He has justified the levy of fees on the basis of the provisions of Section 234E. That is not the issue here. The issue is whether such a levy could be effected in the course of intimation under section 200A. The answer is clearly in negative. No other provision enabling a demand in respect of this levy has been pointed out to us and it is thus an admitted position that in the absence of the enabling provision under section 200A, no such levy could be effected. As intimation under section 200A, raising a demand or directing a refund to the tax deductor, can only be passed within one year from the end of the financial year within which the related TDS statement is filed, and as the related TDS statement was filed on 19th February 2014, such a levy could only have been made at best within 31st March 2015. That time has already elapsed and the defect is thus not curable even at this stage. In view of these discussions, as also bearing in mind entirety of the case, the impugned levy of fees under section 234E is unsustainable in law. We, therefore, uphold the grievance of the assessee and delete the impugned levy of fee under section 234E of the Act. The assessee gets the relief accordingly.

11. In the result, the appeal is allowed.

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