Citation Codes

Equivalent Citations

citation codes

Case Number

Special Civil Application No. 302 Of 2014

Attorney(S)

For the Petitioner Parth Contractor, Advocate. For the Respondents R1, Devang Vyas, Maithili D. Mehta, R4, Manish Bhatt, Mauna M. Bhatt, Advocates, R2-R3, R5, Rule Served.

Judges

Hon'ble Mr. Justice Akil Abdul Hamid Kureshi
Hon'ble Mr. Justice Biren A. Vaishnav

Acts

sub-section (3) of section 206C.(4) The provisions of this section
section 234E of the Income-Tax Act, 1961 ('the Act' for short)
sub-section (3) of section 200. Sub-rule (2) of rule 31A
rule 31A of the Income-Tax Rules, 1961 ('the Rules'
section 200 or section 201 or section 234E
clause (k) of sub-section (2) of section 272A
clause (c) of sub-section (1) of section 200A
01.06.2015, sub-section (1) of section 200A
sub-rule (1) of rule 31A of the Rules
sub-section (3) of section 200
section 200 and section 201,
Sub-rule (2) of rule 31A
FINANCE ACT 2015
FINANCE ACT 2012
sub-rule (1)

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Smart Summary

Summary of Opinion — Akil Kureshi, J. (Oral)

Factual and Procedural Background

The petition was filed by an individual proprietor of M/s Sai Baba Textiles, a business engaged in manufacture and trading of ladies garments. In the course of business the petitioner made payments that required deduction of tax at source and was obliged to file periodic statements and deposit tax within prescribed times. The petitioner challenged:

the vires (constitutionality) of section 234E of the Income-Tax Act, 1961 ("the Act");
the demand of fee raised under section 200A of the Act (adjusting fee under section 234E); and
the validity of rule 31A of the Income-Tax Rules, 1961 ("the Rules").

The opinion records statutory context: rule 31A prescribes quarterly filing in prescribed form by persons responsible for deduction under sub-section (3) of section 200 and sub-rule (2) prescribes different due dates. Section 234E (fee for default in furnishing statements) was introduced by the Finance Act, 2012 (the opinion contains references to effective date(s) which are stated at different places in the text — see below). Section 200A pertains to processing of TDS statements and, prior to an amendment effective 01.06.2015, did not refer to adjustments for fee under section 234E. The petition presented three specific grievances and the matter was heard orally.

Legal Issues Presented

Whether section 234E of the Income‑Tax Act, 1961 is ultravires and unconstitutional.
Whether rule 31A of the Income‑Tax Rules, 1961 is discriminatory and arbitrary by prescribing longer filing periods for Government offices than for other deductors (i.e., whether this classification violates Article 14).
Whether, prior to the amendment of section 200A effective 01.06.2015, the Assessing Officer was authorized to adjust/collect the fee under section 234E — and if the amendment is not retrospective, whether the department could charge such fee for the period between introduction of section 234E and 01.06.2015.

Arguments of the Parties

Petitioner's Arguments (Counsel: Shri Parth Contractor)

Although the petitioner initially challenged constitutionality of section 234E, counsel stated that in view of the Bombay High Court judgment in Rashmikant Kundalia v. Union of India (2015) he was instructed not to press the challenge to constitutionality of section 234E.
Challenged rule 31A as discriminatory: legislature prescribed different time limits for Government and non‑Government deductors; granting extra time to Government offices is unnecessary, irrational and discriminatory because Government agencies face the same difficulties as other assessees.
Challenged ability of Assessing Officer to adjust fee under section 200A prior to its amendment: contended that before the 01.06.2015 amendment there was no mechanism for collection/adjustment of fee under section 234E, and therefore the AO could not validly adjust such fee. Relied on:
- Intimation from Assessing Officer which adjusted Rs. 33,123 by way of late filing fee under section 234E;
- Decision of Pune ITAT in Gajanan v. Deputy Commissioner (CPC (TDS), Ghaziabad) (2016) holding that the AO was not empowered to charge fee under section 234E before 01.06.2015;
- Division Bench of Karnataka High Court in Fatheraj Singhvi v. Union of India (2016) taking the view that the amendment to section 200A with effect from 01.06.2015 was not retrospective.

Respondent's / Department's Arguments (Counsel: Shri Manish Bhatt)

Regarding rule 31A: the two different time limits (Government offices given 15 extra days) reflect reasonable classification based on multilayered government procedures, complexity and workload; not discrimination under Article 14.
Regarding section 200A amendment: submission that the charging provision is section 234E, while section 200A is merely a machinery provision providing a mechanism for processing and adjustment. Even without the amendment to section 200A the Assessing Officer could levy fee under section 234E (or the amendment is at best clarificatory). Referred to Rajasthan High Court decision in Dundlod Shikshan Sansthan v. Union of India (2015) in this context.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Rashmikant Kundalia and another v. Union of India (Bombay High Court) reported in (2015) 373 ITR 268	Authority relied upon by petitioner such that the petitioner did not press challenge to constitutionality of section 234E.	The petitioner, in view of this judgment, did not press the constitutional challenge to section 234E. The court notes this procedural concession.
Gajanan v. Deputy Commissioner, CPC (TDS), Ghaziabad (Pune ITAT) reported in (2016) 73 taxmann.com 380 (Pune - Trib.)	Held that prior to 01.06.2015 the Assessing Officer was not empowered to charge fee under section 234E.	Cited by petitioner counsel. The court considered the point but concluded (in its reasoning) that even in absence of the amended machinery provision the Revenue could demand and collect fee under section 234E; thus the court did not adopt a blanket rule that no fee could be charged before 01.06.2015.
Fatheraj Singhvi v. Union of India (Karnataka High Court) reported in (2016) 73 taxmann.com 252 (Karnataka)	Held that amendment in section 200A (effective 01.06.2015) could not have retrospective effect and appeared to treat section 200A as conferring substantive power.	Cited by petitioner counsel. The court expressly disagreed with the Karnataka High Court's characterisation of section 200A as conferring substantive power and declined to concur with that view.
Dundlod Shikshan Sansthan v. Union of India (Rajasthan High Court) reported in (2015) 63 taxmann.com 243 (Rajasthan)	Cited by departmental counsel in context of challenge to vires of section 234E; issue of section 200A arose incidentally in that judgment.	Referred to by departmental counsel as authority supporting the department's position. The court noted the reference but reached its own conclusions on the legal effect of section 200A and section 234E.
Commissioner of Income-Tax, Bangalore v. B.C. Srinivasa Setty (Supreme Court) reported in 1981 (128) ITR 294	Cited by petitioner to contend that when a machinery provision is not provided, the levy itself might fail.	The court considered this Supreme Court decision but held it was rendered in an entirely different factual and legal background (capital gains/goodwill issue) and therefore not applicable to the present case.

Court's Reasoning and Analysis

The court's analysis proceeds in two main strands: (A) challenge to rule 31A as discriminatory; and (B) challenge to the department's power to levy/adjust fee under section 234E prior to amendment of section 200A (effective 01.06.2015).

A. Rule 31A — Classification and Article 14

The court examined sub-rule (2) of rule 31A which prescribes different due dates for quarterly TDS statements for Government offices (column (3)) and other deductors (column (4)), noting Government offices are consistently given 15 days extra for each quarter.
The court applied the principle that Article 14 permits reasonable classification but prohibits arbitrary class legislation. The critical question was whether the classification between Government and non-Government deductors was reasonable.
The respondents' affidavit explained that Government transactions involve multiple agencies, multilayered processes and higher volume/complexity. The court found these distinctions legitimate, noting Government agencies and private assessees do not form a homogeneous class that cannot be bifurcated.
Therefore the court concluded that granting an extra 15 days to Government offices is neither unreasonable nor discriminatory and upheld the classification under rule 31A.

B. Section 234E (Charging Provision) and Section 200A (Machinery Provision)

The court first set out the statutory framework: section 234E was introduced by the Finance Act, 2012. (The opinion contains references to effective dates: in some paragraphs it states the effective date as 01.07.2012 while in one paragraph it records 01.07.2015; the opinion thus records the Finance Act, 2012 as the source of section 234E and contains differing date references in the text.)
Section 234E is a charging provision creating a fee for default in furnishing statements (Rs. 200 per day subject to a cap equal to the amount of tax deductible/collectible). Section 271H (introduced at the same time) creates a penalty for failure to file statements (Rs. 10,000 to Rs. 1 lakh) subject to conditions under which penalty may be avoided.
Section 200A deals with processing statements of tax deducted at source and authorizes certain arithmetical/ apparent adjustments and issuance of an intimation. Prior to amendment effective 01.06.2015, section 200A did not expressly refer to computation/adjustment of fee under section 234E. The amendment recast sub‑section (1) to explicitly include computation of fee under section 234E and its adjustment.
The court emphasized the distinction between a charging provision and a machinery provision: section 234E creates the substantive charge; section 200A is machinery that provides a mechanism for processing and adjustment. A machinery provision cannot override a charging provision.
On the core contention that fee could not be levied prior to the 01.06.2015 amendment to section 200A, the court held:
- Even without the amended section 200A, the substantive power to levy fee existed in section 234E; absence of an express machinery provision did not preclude the Revenue from demanding or collecting the fee.
- The inclusion of clause (c) in the recast section 200A is in the nature of a clarificatory/ procedural amendment that brought computation and adjustment of the fee within the fold of the processing mechanism under section 200A.
- A direct practical consequence of bringing fee computation into section 200A is procedural: an order under section 200A is rectifiable under section 154 and is appealable under section 246A. In absence of section 200A power, fee calculations might not have partaken the character of an intimation and thus might have lacked the same rectification/appealability; the amendment remedied that procedural lacuna.
- The court expressly disagreed with the Karnataka High Court's view (Fatheraj Singhvi) that treated section 200A as conferring substantive power and that section 234E was a privilege to the defaulter. The court found section 200A is not a source of substantive power and that fee under section 234E is not in lieu of penalty under section 271H — both are independent levies.
- The petitioner’s reliance on the Supreme Court decision in B.C. Srinivasa Setty (1981) was rejected as inapposite because it arose in a different factual and statutory context (capital gains/goodwill) and therefore did not apply to the present statutory scheme concerning TDS statements and fee/penalty provisions.

Holding and Implications

HOLDING: The petition is DISMISSED.

Implications (direct effects recorded in the opinion):

The court upheld rule 31A's differing due dates for Government and non‑Government deductors as a reasonable classification and not violative of Article 14.
The court held that section 234E is a charging provision creating the substantive liability to pay fee for default in furnishing statements; section 200A is a machinery provision which, after amendment effective 01.06.2015, expressly provides for computation and adjustment of that fee.
The court concluded that even prior to the amendment of section 200A, it was open to the Revenue to demand and collect the fee under section 234E; the amendment is clarificatory and brings computation/adjustment within the procedural machinery of section 200A, thereby making such intimations rectifiable under section 154 and appealable under section 246A.
The court expressly declined to follow the Karnataka High Court's contrary view in Fatheraj Singhvi (that section 200A confers substantive power and that the amendment could not operate retrospectively) and found those propositions not persuasive in the present context.
The direct consequence for the parties is dismissal of the petition; the opinion does not set out that it is laying down any novel binding principle beyond its reasoning and the outcome stated above.

Note: This summary is confined to and drawn exclusively from the contents of the provided opinion. Where the opinion itself contains differing references (for example, to the effective date of section 234E), those variations are reflected as recorded in the opinion.

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Rajesh Kourani v. Union Of India & Others

Akil Kureshi, J.

(Oral)

This petition is filed by an individual. He has challenged the vires of section 234E of the Income-Tax Act, 1961 ('the Act' for short) and has also challenged the demand of fee in terms of the said provision raised under section 200A of the Act. The petitioner has also challenged the validity of rule 31A of the Income-Tax Rules, 1961 ('the Rules' for short).

2. Brief facts are as under.

3. The petitioner is a proprietor of one M/s Sai Baba Textiles which is engaged in the manufacture and trading of ladies garments. In course of the business, the petitioner would make payments to individuals and agencies, many of which would require deducting tax at source. The provisions under the Act would further require the petitioner to file periodic statements of such tax deducted at source and depositing the tax in the Government within the time prescribed. With effect from 01.07.2012, section 234E was introduced in the Act for levying fee for default in furnishing the statement of tax deducted or collected at source. As per rule 31A of the Rules, the person responsible for deduction of tax in terms of sub-section (3) of section 200 would have to file quarterly statements in prescribed form. Sub-rule (2) of rule 31A prescribed dates by which such statements would have to be filed.

4. Section 200A of the Act pertains to processing of statements of tax deducted at source. This provision provides for processing the statement filed by person deducting the tax. Prior to 01.06.2015, this provision did not contain any reference to the adjustment of fee to be computed in accordance with the provisions of section 234E of the Act. This provision was made only with effect from 01.06.2015.

5. In the petition, the petitioner has raised following threefold grievances:

I. That section 234E of the Act is ultravires and unconstitutional.

II. Rule 31A of the Rules insofar as it prescribes longer period for the Government to file the statements as compared to the other assessees is discriminatory and arbitrary and therefore unconstitutional.

III. Prior to 01.06.2015, section 200A did not authorize the Assessing Officer to make adjustment of the fee to be levied under section 234E of the Act. This provision introduced with effect from 01.03.2016 is not retrospective and therefore, for the period between 01.07.2002 i.e. when section 234E was introduced in the Act and 01.06.2015 when proper mechanism was provided under section 200A of the Act for collection of fee, the department could not have charged such fee.

6. Appearing for the petitioner, learned advocate Shri Parth Contractor at the outset, stated that in view of the judgment of the Bombay High Court in case of Rashmikant Kundalia and another v. Union of India and Others reported in (2015) 373 ITR 268, he has instructions not to press the challenge to constitutionality of section 234E of the Act. He however made detailed submissions with respect to the other two grievances of the petitioner. Regarding rule 31A of the Rules, he pointed out that the legislature has prescribed different time limits for filing statements for the Government and the rest of the assessees. The special concession to the Government agencies was wholly unnecessary and not based on any rational. The same difficulties and complexities which are faced by Government agencies would also be faced by the individual assessees.

7. With respect to the amendment in sub-section (1) of section 200A, counsel submitted that prior to such amendment, there was no mechanism provided under the Act for collection of fee under section 234E of the Act. The Assessing Officer therefore could not have adjusted such fee in terms of section 200A of the Act. Counsel drew our attention to an intimation sent by the Assessing Officer, purported to be under section 200A of the Act, in which, he had adjusted a sum of Rs. 33,123/- by way of late filing fee under section 234E of the Act. Counsel relied on a decision of Pune Bench of ITAT in case of Gajanan v. Deputy Commissioner, CPC (TDS), Ghaziabad, reported in (2016) 73 taxmann.com 380 (Pune - Trib.), in which, the Tribunal held that prior to 01.06.2015, the Assessing Officer was not empowered to charge fee under section 234E of the Act. Counsel also relied on a decision of Division Bench of Karnataka High Court in case of Fatheraj Singhvi v. Union of India, reported in (2016) 73 taxmann.com 252 (Karnataka), in which, the Court has taken a view that the amendment in section 200A with effect from 01.06.2015 cannot have retrospective effect.

8. On the other hand learned counsel Shri Manish Bhatt for the department opposed the petition contending that two different time limits for filing statements under rule 31A are for Government and non-Government agencies. Looking to the multilayered system of operation of the Government agencies and overall workload, the legislature thought it fit to grant 15 days additional time to the Government agencies to file the statements. This is therefore not a case of discrimination, but a case of reasonable classification.

9. With respect to the amendment in section 200A, counsel submitted that the charging provision is section 200E of the Act. Section 200A merely provides a mechanism. Such a provision cannot govern the charging provision. Even in absence of amendment in section 200A, the Assessing Officer was always authorized to levy fee in terms of section 200E of the Act. At best, the amendment in the said provision should be seen as clarificatory or providing a mechanism which till then was missing. Counsel referred to the decision of Rajasthan High Court in case of Dundlod Shikshan Sansthan v. Union of India reported in (2015) 63 taxmann.com 243 (Rajasthan), where, in the context of challenge to the vires to the section 234E of the Act, incidentally this issue also came up for consideration.

10. In order to appreciate the rival contentions, we may take a closer look at the statutory provisions applicable. Section 200 of the Act pertains to duty of the person deducting tax and imposes a duty on a person deducting tax in accordance with the foregoing provisions of chapter-XVII to pay such sum to the credit of the Central Government within the time prescribed. sub-section (3) of section 200 requires such a person to prepare such statements for the prescribed periods and to file the same within the prescribed time. Section 200C of the Act makes similar provision for the person responsible for the collection of tax at source to deposit the same with the Government revenue and to file a statement within the prescribed time.

11. Section 200A of the Act pertains to processing of statements of tax deducted at source. We would notice the provisions of this section prior to 01.06.2015 and the changes made therein by virtue of Finance Act, 2015, with effect from 01.06.2015. Further, we would take note of provisions of section 234E of the Act. For the time being, we may notice that section 200A provides for a mechanism for processing a statement filed under section 200 of the Act and enables the Assessing Officer to make some adjustments and to intimate the final outcome to the assessee.

12. Section 234E which pertains to fee for default in furnishing the statements was introduced for the first time by the Finance Act, 2012, with effect from 01.07.2015. Section 234E reads as under:

"234E.Fee for default 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."

13. With effect from 01.07.2012, the legislature also introduced section 271H of the Act providing penalty for failure to furnish statements required to be filed under sub-section (3) of section 200 or under proviso to sub-section (3) of section 206C of the Act. As per sub-section (2) of section 271H in case of default to file the statements, the assessee may be liable to penalty of not less than rupees ten thousand but not more than rupees one lakh. Under sub-section (3) of section 271H however, such penalty would be avoided if the assessee proves that he had paid the tax deducted or collected alongwith interest and he had filed the necessary statement within one year from the time prescribed for filing such statements. We may also record that clause (k) of sub-section (2) of section 272A provides for penalty for failure to deliver the statement within the time specified in sub-section (3) of section 200 or the proviso to sub-section (3) of section 206C at a rate of rupees one hundred for every date during which the failure continues. However, with effect from 01.07.2012, a proviso was added limiting the effect of this provision upto 01.07.2012. In other words, after 01.07.2012, the penalty provision of section 271H would apply in such cases of defaults.

14. Section 200A(1) of the Act prior to 01.06.2015 provided as under:

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

(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 sub-section."

With effect from 01.06.2015, sub-section (1) of section 200A was amended. In the amended form, the same provision reads as under:

(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;

(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;

15. In view of such statutory provisions, we may consider the petitioner's two challenges. Coming to the question of discriminatory nature of rule 31A of the Rules, it can be seen that sub-rule (1) of rule 31A of the Rules provides for filing of the statements in prescribed forms as required under sub-section (3) of section 200. Sub-rule (2) of rule 31A lays down the time limit for filing such quarterly statements and provides as under:

"(2) Statements referred to in sub-rule (1) for the quarter of the financial year ending with the date specified in column (2) of the Table below shall be furnished by

(i) the due date specified in the corresponding entry in column (3) of the said Table, if the deductor is an office of Government; and

(ii) the due date specified in the corresponding entry in column (4) of the said Table, if the deductor is a person other than the person referred to in clause (i)

Sl. No.Date of ending of quarter of financial yearDue dateDue date

(1)(2)(3)(4)

130th June31st July of the financial year15th July of the financial year

230th September31st October of the financial year15th October of the financial year

331st December31st January of the financial year15th January of the financial year

431st March15th May of the financial year immediately following the financial year in which the deduction is made15th May of the financial year immediately following the financial year in which the deduction is made

This rule thus, while laying down the last date by which such statements should be filed, draws two categories; in case of deductor is an office of government and in case of a deductor is a person other than the office of the government. Consistently, the office of the government is granted 15 days extra time as compared to the other deductors. For example, the statement for the date of the quarter ending on 30th June, an ordinary deductor would have to file a statement latest by 15th July of the same year, whereas for the Government office, the last date for filing such statement would be 31st July of the said year. This 15 days extra time is a consistent feature in all four quarters. The short question is, did the legislature discriminate in doing so? It is well settled that Article 14 does not prohibit reasonable classification but frowns upon class legislation. In the affidavit in reply filed, the respondents have pointed out that multiple agencies are involved in every transaction in the Government offices and the same therefore cannot be compared with the private individuals or business houses. We do not found that the extra time of 15 days for the Government to file a return of deduction of tax at source is in any manner either unreasonable or discriminatory. If the legislature found it appropriate to grant slightly longer period to the government agencies looking to the complex nature of transactions involved, the volume and turnover of such transactions and filtering necessary statements required at many stages, in our opinion, the same was perfectly legitimate. Looking to the differences between the Government agencies and private assessees in the context of providing the last date for filing the statements, do not form a homogeneous class which cannot be further bifurcated.

16. We now come to the petitioner's central challenge viz. of non permissibility to levy fee under section 234E of the Act till section 200A of the Act was amended with effect from 01.06.2015. We have noticed the relevant statutory provisions. The picture that emerges is that prior to 01.07.2012, the Act contained a single provision in section 272A providing for penalty in case of default in filing the statements in terms of section 200 or proviso to section 206C. Such penalty was prescribed at the rate of Rs. 100 for every day during which the failure continued. With effect from 01.06.2012, three major changes were introduced in the Act. Section 234E as introduced for the first time to provide for charging of fee for late filing of the statements. Such fee would be levied at the rate of Rs. 200/- for every day of failure subject to the maximum amount of tax deductible or collectible as the case may be. Section 271H was also introduced for the first time for levying penalty for failure to furnish the statements. Such penalty would be in the range of Rs. 10,000/- and Rs. 1 lakh. No penalty would be imposed if the tax is deposited with fee and interest and the statement is filed within one year of the due date. With addition to these two provisions prescribing fee and penalty respectively, clause (k) of sub-section (2) of section 272A became redundant and by adding a proviso to the said section, this effect was therefore limited upto 01.07.2012.

17. In essence, section 234E thus prescribed for the first time charging of a fee for every day of default in filing of statement under sub-section (3) of section 200 or any proviso to sub-section (3) of section 206C. This provision was apparently added for making the compliance of deduction and collection of tax at source, depositing it with Government revenue and filing of the statements more stringent.

18. In this context, we may notice that section 200A which pertains to processing of statements of tax deducted at source provides for the procedure once a statement of deduction of tax at source is filed by the person responsible to do so and authorizes the Assessing Officer to make certain adjustments which are primafacie or arithmetical in nature. The officer would then send an intimation of a statement to the assessee. Prior to 01.06.2015, this provision did not include any reference to the fee payable under section 234E of the Act. By recasting sub-section (1), the new clause (c) permits the authority to compute the fee, if any, payable by the assessee under section 234E of the Act and by virtue of clause (d), adjust the said sum against the amount paid under the various provisions of the Act.

19. In plain terms, section 200A of the Act is a machinery provision providing mechanism for processing a statement of deduction of tax at source and for making adjustments, which are, as noted earlier, arithmetical or prima facie in nature. With effect from 01.06.2015, this provision specifically provides for computing the fee payable under section 234E of the Act. On the other hand, section 234E is a charging provision creating a charge for levying fee for certain defaults in filing the statements. Under no circumstances a machinery provision can override or overrule a charging provision. We are unable to see that section 200A of the Act creates any charge in any manner. It only provides a mechanism for processing a statement for tax deduction and the method in which the same would be done. 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.

20. Even in absence of section 200A of the Act with introduction of section 234E, it was always open for the Revenue to demand and collect the fee for late filing of the statements. Section 200A would merely regulate the manner in which the computation of such fee would be made and demand raised. In other words, 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 sub-section (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. This would have one direct effect. An order passed under section 200A of the Act is rectifiable under section 154 of the Act and is also appealable under section 246A. In absence of the power of authority to make such adjustment under section 200A of the Act, any calculation of the fee would not partake the character of the intimation under said provision and it could be argued that such an order would not be open to any rectification or appeal. 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. The Karnataka High Court in case of Fatheraj Singhvi (supra) held that section 200A was not merely a regulatory provision, but was conferring substantive power on the authority. The Court was also of the opinion that section 234E of the Act was in the nature of privilege to the defaulter if he fails to pay fees then he would be rid of rigor of the penal provision of section 271H of the Act. With both these propositions, with respect, we are unable to concur. 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.

21. Counsel for the petitioner however, referred to the decision of Supreme Court in case of Commissioner of Income-Tax, Bangalore v. B.C. Srinivasa Setty reported in 1981 (128) ITR 294, to contend that when a machinery provision is not provided, the levy itself would fail. The decision of Supreme Court in case of B.C. Srinivasa Setty (supra) 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.

22. In the result, petition fails and is dismissed.

Rajesh Kourani v. Union Of India & Others

Summary of Opinion — Akil Kureshi, J. (Oral)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner's Arguments (Counsel: Shri Parth Contractor)

Respondent's / Department's Arguments (Counsel: Shri Manish Bhatt)

Table of Precedents Cited

Court's Reasoning and Analysis

A. Rule 31A — Classification and Article 14

B. Section 234E (Charging Provision) and Section 200A (Machinery Provision)

Holding and Implications

Rajesh Kourani v. Union Of India & Others

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