Power of CIT(A) in respect of Fee under section 234E charged and cancelled holding TDS return as non-est

short overview : CIT(A) had no power in appeal to declare return of TDS filed by assessee as non est in law while justifying fee levied under section 234E.

There was a delay in filing the TDS statement and therefore the AO by intimation under section 200A levied late fee. Assessee before CIT(A) contended that the authority issuing intimation under section 200A, while processing return of TDS filed under section 200(3), could not levy fee under section 234E  in respect of statement of TDS filed prior to 1-6-2015. The assessee, challenged the validity of charging of fee under section 234E. CIT(A), however, in purported exercise of his powers of enhancement, proposed to hold that the statement of TDS filed by the assessee was non est in law because it was filed beyond the time prescribed under section 200(3).

it is held that  TDS return filed beyond time cannot be declared as non est in law and that the CIT(A) does not have powers of enhancement in an appeal against an order under section 200A. The CIT(A) cannot travel beyond the subject-matter of the appeal, which was as to whether fee under section 234E can be levied or not; and not the question, whether the return of TDS filed by the assessee was non est in law? The CIT(A) had no power in the appeal in the present case to declare return of TDS filed by the assessee as non est in law. Conclusion of the CIT(A) holding that return of TDS filed by the assessee was non est in law was not valid in the eyes of law and the said direction was directed to be deleted and the order of the CIT(A), to this extent, was held to be bad in law.

Decision: In assessee’s favour.

Followed: Manoj Kumar Jaiswal & Ors. v. Asstt. CIT, CPCTDS, Ghaziabad,  ITA No.2658/Bang/2018 order dt. 22-3-2019 : 2019 TaxPub(DT) 3006 (Bang-Trib).

IN THE ITAT, BANGALORE BENCH

N.V. VASUDEVAN, V.P. AND JASON P. BOAZ, A.M.

Scotts Garments Ltd. v. Asstt. CIT

ITA Nos. 625 to 628/Bang/2019

19 July, 2019

Appellant by: Shreehari Kutsa, CA

Respondent by: Vikas Suryavamshi, Addl. Commissioner of Income Tax (Departmental Representative)(ITAT), Bengaluru.

These are appeals filed by assessee against the common order of the Commissioner (Appeals)-9, Bangalore dt. 24-1-2019 relating to assessment years 2013-14 to 2016-17. Since common issue is involved in all these appeals, they were heard together and we deem it convenient to pass a consolidated order.

2. The assessee filed statement of tax deducted at source (TDS) for various quarters in Form No.24Q/26Q/27Q. The statement was processed by CPC TDS, Bengaluru. There was a delay in filing the above TDS statement and therefore the assessing officer by intimation under section 200A of the Income-Tax Act, 1961 (“the Act”) levied late fee of Rs. 3,77,639, Rs. 5,363,513, Rs. 4,73,610 and Rs. 4,78,800 for assessment year 2013-14 to 2016-1 respectively under section 234E of the Income-Tax Act, 1961 (“the Act”). Under section 234E of the Act, if there is a delay in filing statement of TDS within the prescribed time then the person responsible for making payment and filing return of TDS is liable to pay by way of fee a sum of Rs. 200 per day during which the failure continues. Section 234E of the Act inserted by the Finance Act, 2012 with effect from 1-7-2012. reads as follows:-

“Fee for default in furnishing statements.

234E. (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.”

3. Aggrieved by the aforesaid orders, the assessee filed appeals before the Commissioner (Appeals). The assessee’s contention before Commissioner (Appeals) was that the provisions of section 234E of the Act was inserted by the Finance Act, 2012 with effect from 1-7-2012. Section 200A of the Act is a provision which deals with how a return of TDS filed under section 200(3) of the Act has to be processed and it reads as follows:-

Processing of statements of tax deducted at source.

200A. (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 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:

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 subsection.”

4. Clause (c) to (f) of section 200A(1) was substituted by the Finance Act, 2015 with effect from 1-6-2015. The assessee contended that assessing officer could levy fee under section 234E of the Act while processing a return of TDS filed under section 200(3) of the Act only by virtue of the provisions of section 200A(1)(c), (d) & (f) of the Act and those provisions came into force only from 1-6-2015 and therefore the authority issuing intimation under section 200A of the Act while processing return of TDS filed under section 200(3) of the Act, could not levy fee under section 234E of the Act in respect of statement of TDS filed prior to 1-6-2015. The assessee, thus, challenged the validity of charging of fee under section 234E of the Act. The assessee relied on the decision of the Hon’ble High Court of Karnataka in the case of Fatehraj Singhvi v. UOI (2016) 73 Taxmann.com 252 (Karn) : 2016 TaxPub(DT) 4175 (Karn-HC) wherein the Hon’ble Karnataka High Court held that amendment made under section 200A providing that fee under section 234E of the Act could be computed at the time of processing of return and issue of intimation has come into effect only from 1-6-2015 and had only prospective effect and therefore, no computation of fee under section 234E of the Act for delayed filing of return of TDS while processing a return of TDS under section 234E of the Act could have been made for tax deducted at source for the assessment years prior to 1-6-2015.

5. The Commissioner (Appeals) accepted the claim of the assessee and he held that in view of the judgment of the Hon’ble High Court of Karnataka cited by the learned counsel for the assessee, fee under section 234E cannot be charged and cancelled the intimation under section 200A of the Act in so far as it relates to levy of fee under section 234E of the Act.

6. The Commissioner (Appeals), however, in purported exercise of his powers of enhancement, proposed to hold that the statement of TDS filed by the assessee was non est in law because it was filed beyond the time prescribed under section 200(3) of the Act. To this proposal of enhancement by the Commissioner (Appeals), the assessee filed a reply in which he took a stand that TDS statement filed without payment of fee is a valid statement. The Commissioner (Appeals), however, referred to the provisions of section 234E of the Act which lays down the amount of fee referred to sub-section (1) of section 234E shall be paid before delivering or causing to be delivered a statement in accordance with the provisions of sub-section (3) of section 200. The Commissioner (Appeals) also took a stand that TDS statement filed without payment of fee under section 234E of the Act is not a valid statement.

7. The next argument of the learned counsel for the assessee was that under section 251(1)(c) of the Act which is applicable in the present case, the Commissioner (Appeals) has no power to enhance and therefore in an appeal challenging the validity of levy of fee under section 234E of the Act by the assessee, he cannot go into the question, whether TDS return filed by the assessee has to be treated as non est. The Commissioner (Appeals), however, held that the Commissioner (Appeals) has plenary powers in disposing of an appeal and that the Commissioner (Appeals) was duty bound to correct errors in the orders of lower authorities. The Commissioner (Appeals), therefore, rejected this contention of the assessee also.

8. Aggrieved by the order of Commissioner (Appeals), in declaring the return filed by the assessee as non est, the assessee has preferred the present appeal before the Tribunal because if the return of TDS filed by the assessee is treated as non est, the other consequences under the Act for nonITA deduction of tax at source might follow and hence these appeals by the Assessee.

9. We have heard the rival submissions. The learned counsel for the Assessee brought to our notice a decision of the ITAT Bangalore Bench in the case of Manoj Kumar Jaiswal & Ors. v. Asstt. CIT, CPCTDS, Ghaziabad, in ITA No.2658/Bang/2018 order dt. 22-3-2019 : 2019 TaxPub(DT) 3006 (Bang-Trib) dealt with an identical issue wherein the Commissioner (Appeals) has passed identical order as was passed by the Commissioner (Appeals) which orders are challenged in these appeals.

In the aforesaid decision, the Tribunal held that the TDS return filed beyond time cannot be declared as non est in law and that the Commissioner (Appeals) does not have powers of enhancement in an appeal against an order under section 200A of the Act. The learned Departmental Representative relied on the order of Commissioner (Appeals) and further placed reliance on the decision of the Hon’ble Gujarat High Court in the case of Rajesh Kourani v. UOI (2017) 83 Taxmann.com 137 (Guj) : 2017 TaxPub(DT) 1953 (Guj-HC) wherein the Hon’ble High Court took a view that levy of fee under section 234E of the Act is possible even without a regulatory provision under section 200A of the Act and therefore the levy of fee under section 234E of the Act with effect from1-7-2012, when those provisions were introduced, was valid. We are of the view that this Tribunal is bound to follow the decision of the Hon’ble High Court of Karnataka which is the jurisdictional High Court and therefore this argument advanced by the learned Departmental Representative cannot be accepted. Even otherwise, the issue before the Tribunal is with regard to action of the Commissioner (Appeals) in treating the return of TDS filed by the assessee as non est and therefore the decision of the Hon’ble Gujarat High Court, with respect, is not relevant for adjudicating on the issue involved in the present appeal.

10. We have given a careful consideration to the rival submissions. In the case of Manoj Kumar Jaiswal (supra), this Tribunal decided identical issue holding that the Act contains provision for declaring a return of income filed as invalid under section 139(9) of the Act. There is no such provision for declaring a return of TDS as invalid. Therefore, there is no power conferred, either under those provisions or under any other provisions of the Act, to declare the return of TDS filed under section 200(3) as non est. The Tribunal also held that in appeal against an order under section 200A of the Act, the provision of law applicable, in so far as the powers of Commissioner (Appeals) in an appeal under section 200A of the Act, was clause (c) of section 251 and that clause empowers the Commissioner (Appeals) to pass such orders in the appeal as he thinks fit.

The Tribunal held that a reading of the aforesaid clause would show that the Commissioner (Appeals) in the cases to which the said clause applies, can pass such orders as he thinks fit, but that power is circumscribed by the words “in the appeal”. Therefore, the Commissioner (Appeals) cannot travel beyond the subject matter of the appeal, which was as to whether fee under section 234E of the Act can be levied or not; and not the question, whether the return of TDS filed by the assessee is non est in law? The following were the relevant observations of the Tribunal.

“13. We have given a very careful consideration to the rival submissions. The first aspect is as to, whether the TDS return filed under section 200(3) of the Act can be declared as non est. We have already extracted the provisions of section 200(3) of the Act.

There is no such power conferred, either under those provisions or under any other provisions of the Act, to declare the return of TDS filed under section 200(3) as non est. As rightly contended by the learned counsel for the Assessee, the Act contains provision for declaring a return of income filed as invalid under sectionection 139(9) of the Act. There is no such for declaring a return of TDS as invalid.

This is a clear indication in the Act that return of TDS cannot be declared as non est. A return of TDS only evidences payment of taxes which are withheld by a payee who, under the provisions of the Act, is bound to deduct tax at source. Declaring a return of TDS as non est, cannot have the effect of treating the payee as an Assessee in default and expose him to other consequences under the Act as an Assessee in default. Section 234E(3) lays down that the fee to be paid under section 234E of the Act shall be paid before the return of TDS is filed under section 200(3) of the Act. This provision, in our view, does not confer power on the Commissioner (Appeals) to declare the return of TDS as non est in law in a case where the return of TDS is filed without payment of fee under section 234E of the Act. Besides the above, in the present case, the levy of fee under section 234E of the Act has already been deleted by the Commissioner (Appeals) and therefore these provisions cannot be of any help to the conclusions of the Commissioner (Appeals) that the return filed without payment of fee under section 234E of the Act is invalid and can be declared as non est in law.

14. As far as the power of enhancement under Explanation to section 251(1) which was relied on by the learned Departmental Representative is concerned, the Explanation is only with regard to clauses (a), (aa) and (b) of section 251(1) of the Act and is not applicable to clause (c). The provisions of section 251 of the Act reads thus:

Powers of the Commissioner (Appeals).

251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers-

(a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment;

(aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment;

(b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;

(c) in any other case, he may pass such orders in the appeal as he thinks fit.

(2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction.

Explanation.-In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant.

15. It is not in dispute before us that clause (c) of section 251 is the clause applicable in the present case. A reading of this clause shows that the Commissioner (Appeals) in the cases to which the said clause applies can pass such orders as he thinks fit, but that power is circumscribed by the words “in the appeal”. Therefore, the Commissioner (Appeals) cannot travel beyond the subject matter of the appeal, which in the present case is as to, whether fee under section 234E of the Act can be levied or not; and not the question, whether the return of TDS filed by the assessee is non est in law? We are, therefore, of the view that the Commissioner (Appeals) had no power in the appeal in the present case to declare the return of TDS filed by the assessee as non est in law. In that view of the matter, we are of the view that the conclusion of the Commissioner (Appeals) holding that return of TDS filed by the assessee is non est in law is not valid in the eyes of law and the said direction is directed to be deleted and the order of the Commissioner (Appeals) to this extent is held to be bad in law.

Consequently, the appeal by the assessee in ITA No.2658/Bang/2018 is allowed.”

11. Since the facts and circumstances of the case in these appeals are identical to the case referred to above, following the decision in those appeals, we allow the appeals of the Assessee by holding that the conclusion of the Commissioner (Appeals) holding that return of TDS filed by the assessee is non est in law is not valid in the eyes of law and the said direction is directed to be deleted and the order of the Commissioner (Appeals), to this extent, is held to be bad in law.

12. In the result, all the appeals by the assessee are allowed.