BARALU THIMAPPA NAGARAJ V. UNION OF INDIA

WP/22704/2019

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The case involves Baralu Thimappa Nagaraj, a Class-I Civil Contractor, who challenged the notices issued by the Income Tax Officer (TDS) demanding late fees under Section 234E of the Income Tax Act, 1961, for the financial years 2012-13 to 2015-16. The petitioner argued that the late fees were illegally levied for the period prior to June 1, 2015, when the mechanism to levy such fees was introduced by the amendment to Section 200A. The court, referencing the Division Bench judgment in Fatheraj Singhvi and ors vs. Union of India and ors, agreed with the petitioner's contention and set aside the demands for the period prior to the specified date.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 722286 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 17-06-2019
• Assessment Year: misc
• Other Referred Cases: Fatheraj Singhvi and ors vs. Union of India and ors
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: JEEVAN NEERALAGI
• Assessee Lawyers: MAHESH UPPIN
• Keywords: Assessment Year; Financial year; Late fee; TDS; Illegal levy
• Section: 234E; 200A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF JUNE, 2019 BEFORE THE HON'BLE MRS. JUSTICE S.SUJATHA WRIT PETITION NO.22704/2019 (T-IT) Between: Baralu Thimappa Nagaraj, S/o Mr.Thimappa, Age: 58 years, Kasaba Hobli, Baralu Post, Channarayapatna, Hassan District-573 116. …Petitioner (By Sri.Mahesh.R.Uppin, Adv.,) And: 1. Union of India, By its Secretary, Ministry of Finance, South Block, New Delhi-110 001. 2. Central Board of Direct Taxes, Rep. by its Chairman, Department of Revenue, Fourth Floor, Jeevan Deep Building, Parliament Street, New Delhi-110 001. 3. Income Tax Officer (TDS), Ward-1, N.G.Road, Attavar, Mangaluru-575 001. 2 4. Asst. Commissioner of Income Tax, Centralized Processing Cell, TDS CPC, Aaykar Bhawan, Sector 3, Vaishali, Ghaziabad (U.P)-20102. ...Respondents (By Sri.Jeevan.J.Neeralagi, Adv.,) This Writ Petition is filed under Articles 226 and 227 of the Constitution of India praying to quash the notice of attachment dated 04.02.2019 issued to the bankers of the petitioner by R-3 and marked as Annexure-B bearing TAN No.BLRB11911E PAN No.AAJPN6628C Annexure-C bearing TAN No.BLRB11911E PAN No.AAJPN6628C and Annexure-D bearing TAN No.BLRB11911E PAN No.AAJPN6628C by issuing a writ in the nature of Certiorari. This petition coming on for Preliminary Hearing in ‘B’ Group, this day, the Court made the following: ORDER Heard the learned counsel for the parties. 2. The petitioner is assailing the notices issued to the Bankers of the petitioner by respondent No.3, relating to the financial year 2012-13 relating to the assessment years 2013-14 to 2015-16. 3 3. The petitioner is claiming to be a Class-I Civil Contractor, undertaking various civil works. The petitioner used to assign civil works to various sub- contractors and in respect of whom, he was required to make TDS as per the Income Tax Act, 1961. In view of the amendment to Section 200A, the respondent No.4 processed the quarterly returns filed by the petitioner in respect of the aforesaid assessment years and demanded the late fee under Section 234E of the Act. 4. The learned counsel for the petitioner would submit that Section 234E was introduced with effect from 01.07.2012. However, the mechanism to levy such late fee was introduced by virtue of the amendment to Section 200A with effect from 01.06.2015. Hence, the said levy of late fee in respect of the period prior to 01.06.2015 is illegal. According to the learned counsel, a sum of Rs.6,92,609/- comes within the period prior to 01.06.2015 and the levy of such late fee is illegal. 4 5. In support of his contentions, learned counsel placed reliance on the Division Bench judgment of this Court in the case of Fatheraj Singhvi and ors vs. Union of India and ors. (Writ Appeal Nos. 2663 to 2674 of 2015 and allied matters) as well as the order of the cognate Bench in W.P.No.9049/2015 and connected matters (D.D. 12.12.2017). 6. Learned counsel for the revenue does not dispute the said legal position. 7. The relevant paragraphs of Fatheraj Singhvi and others vs. Union of India and others, supra, are quoted below for ready reference : “23. In view of the aforesaid observation and discussion, since the impugned intimation given by the respondent- Department against all the appellants under section 200A are so far as they are for the period prior to 1st June, 2015 can be said as without any authority under law. Hence, the same can be said and illegal and invalid. 24. If the facts of the present cases are examined in light of the aforesaid 5 observation and discussion, it appears that in all matters, the intimation given in purported exercise of power under section 200A are in respect of fees under section 234E for the period prior to 1st June, 2015. As such, it is on account of the intimation given making demand of the fees in purported exercise of power under section 200A, the same has necessitated the appellant-original petitioner to challenge the validity of section 234E of the Act. In view of the reasons recorded by us herein above, when the amendment made under section 200A of the Act which has come into effect on 1st June, 2015 is held to be having prospective effect, no computation of fee for the demand or the intimation for the fee under section 234E could be made for the TDS deducted for the respective assessment year prior to 1st June, 2015. Hence, the demand notices under section 200A by the respondent-authority for intimation for payment of fee under section 234E can be said as without any authority of law and the same are quashed and set aside to that extent. 25. As such, as recorded earlier, it is on account of the intimation received under section 200A for making computation and demand of fees under section 234E, the same has necessitated the appellant to challenge the constitutional validity of section 234E. When the intimation of the demand notices under section 200A is held to be without authority of law so far as it relates to computation and demand of fee 6 under section 234E, we find that the question of further scrutiny for testing the constitutional validity of section 234E would be rendered as an academic exercise because there would not be any cause on the part of the petitioners to continue to maintain the challenge to constitutional validity under section 234E of the Act. At this stage, we may also record that the learned counsels appearing for the appellant had also declared that if the impugned notices under section 200A are set aside, so far as it relates to computation and intimation for payment of fee under section 234E, the appellant-petitioners would not press the challenge to the constitutional validity of section 234E of the Act. But, they submitted that the question of constitutional validity of section 234E may be kept open to be considered by the Division Bench and the judgment of the learned Single Judge may not conclude the constitutional validity of section 234E of the Act. 26. Under these circumstances, we find that no further discussion would be required for examining the constitutional validity of section 234E of the Act. Save and except to observe that the question of constitutional validity of section 234E of the Act before the Division Bench of this Court shall remain open and shall not be treated as concluded. 27. In view of the aforesaid observations and discussion, the impugned notices under 7 section 200A of the Act for computation and intimation for payment of fee under section 234E as they relate to for the period of the tax deducted prior to 1st June, 2015 are set aside. It is clarified that the present judgment would not be interpreted to mean that even if the payment of the fees under section 234E already made as per demand/intimation under section 200A of the Act for the TDS for the period prior to 1st April, 2015 is permitted to be reopened for claiming refund. The judgment will have prospective effect accordingly. It is further observed that the question of constitutional validity of section 234E shall remain open to be considered by the Division Bench and shall not get concluded by the order of the learned Single Judge.” 8. The said judgment has been followed by the cognate Bench in W.P.No.9049/2015 and connected matters referred to supra. 9. In view of the settled legal position as aforesaid, the writ petition is allowed and as the amount demanded by the authorities as per Annexures – ‘B’, ‘C’ and ‘D’ would penalize the petitioner, they are set aside and the proceedings are restored to the file of the respondent 8 No.4 to re-compute and raise demand accordingly, in terms of Section 234E read with Section 200A of the Act, and in the light of the observations made herein above. 10. Writ petition stands disposed of in terms aforesaid. 11. If any amount is collected from the Bankers of the petitioner, in excess, the same shall be adjusted towards the tax liability of the petitioner or shall be refunded. Sd/- JUDGE mgn/- "