Jiji Varghese Vs ITO (Kerala High Court)
Kerala High Court has quashed demands for late fees levied under of the Income Tax Act, 1961, for the period between 2012-13 and 2014-15, ruling that the provision for levying such fees through intimation became effective only from June 1, 2015. The judgment came in the case of Jiji Varghese Vs ITO, where the petitioner challenged intimations demanding late fees for delayed filing of TDS remittance statements.
The petitioner, an assessee, had deducted and remitted TDS to the Income Tax Department but faced delays in filing the corresponding statements of returns. Upon processing, the second respondent (Income Tax Department) levied a late fee of Rs. 200 per day for the failure, as stipulated in Section 234E. This section, introduced by the Finance Act, 2012, came into effect on July 1, 2012.
However, the petitioner contended that while Section 234E itself was introduced in 2012, the authority for the Assessing Officer to compute and demand such fees during processing of returns, specifically through clause (c) of Section 200A(1), was incorporated only with effect from June 1, 2015. Prior to this amendment, the mechanism for automatic levy of such fees through intimation was absent. Therefore, the petitioner argued that no liability for late fees could be imposed for delays occurring before June 1, 2015.
The respondents, in their statement, opposed the petitioner’s claim, asserting that the demands were raised between 2013 and 2016 and remained outstanding. They further argued that the intimations were appealable orders under Section 246A of the Act, and the petitioner’s failure to challenge them in a timely manner meant the demands had become final. The respondents also raised the contention of delay in approaching the High Court, citing various judicial precedents to argue that such delay should defeat the claim.
Judicial Precedents Cited by Respondents:
The respondents relied on the following Supreme Court decisions to support their argument regarding delay:
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- State of Maharashtra v. Digambar (AIR 1995 SC 1991): This case involved a delay of 20 years in seeking compensation for land utilization, which the Supreme Court deemed a decisive factor to disentitle the petitioner.
- G.C. Gupta and Others v. N.K. Pandey and Others [(1988) 1 SCC 316]: Here, the issue was related to seniority, and the petitioners challenged orders of confirmation and inter se seniority after a delay of 15 years.
- State of M.P. And Another v. Bhailal Bhai (AIR 1964 SC 1006): This judgment concerned a belated claim for refund of tax.
Court’s Analysis and Ruling:
Justice Bechu Kurian Thomas, after considering the arguments from Sri. P.J. Anilkumar (for the petitioner), Sri. Christopher Abraham (for respondents 1-3), and Sri. S. Manu (Assistant Solicitor General for the fourth respondent), found in favor of the petitioner.
Judicial Precedent Applied by the Court:
The High Court drew heavily from its own previous decision in M/s. Sarala Memorial Hospital v. Union of India and Another (W.P.(C) No.37775 of 2018). In that case, an identical question regarding the retrospective application of Section 234E and Section 200A was considered. The court in Sarala Memorial Hospital had held that the amendment incorporating clause (c) into Section 200A(1) was prospective in nature, taking effect only from June 1, 2015. The court in Jiji Varghese noted that this judgment had become final and was binding on the authorities.
The court explicitly stated, “Thus the jurisdiction to levy late fee under section 234E arises only from 01-06.2015 and not earlier.”
Regarding the respondents’ contention of delay, the court acknowledged its initial impression but ultimately dismissed it. The High Court reasoned that the petitioner’s challenge was based on a “total lack of jurisdiction” of the respondents to impose the late fee for the disputed period. In such matters where the authority to act is entirely absent, the court held that delay cannot be a ground to deny relief.
The court distinguished the precedents cited by the respondents, noting that those cases did not involve a fundamental lack of jurisdiction or authority. The delays in Digambar, G.C. Gupta, and Bhailal Bhai related to claims that were otherwise within the purview of the respective authorities, unlike the present case where the very power to levy the fee for the specified period was absent.
Conclusion:
Based on the binding precedent of M/s. Sarala Memorial Hospital and the finding that the demands were issued without proper authority for the period before June 1, 2015, the Kerala High Court concluded that the demands in Ext.P1 to Ext.P9 intimations were “bereft of authority and cannot be legally sustainable.”
Accordingly, the court quashed the demands for late fee under Section 234E for the period from 2012-13 till June 1, 2015. The writ petition was therefore allowed. This judgment provides clarity on the prospective application of Section 234E when read with Section 200A(1)(c), safeguarding assessees from retrospective levies of late filing fees for TDS statements prior to the specific legislative amendment.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
As an assessee under the Income Tax Act, 1961, petitioner had deducted TDS for payments made by him and remitted the same to the Income Tax Department. While filing the statement of returns regarding the remittance of TDS, delay occurred. When the returns were processed, the second respondent, on noticing the delay in filing the statement of TDS remittance, levied late fee under section 234E of the Act.
2. By Ext.P1 to Ext.P9 intimations, petitioner was called upon to pay the late filing fee under section 234E of the Income Tax Act, 1961 (for short,’the Act’). As per the aforesaid intimations, amounts have been demanded as late fee for the periods from 2012-13 to 2014-15 on the basis of the provisions in section 234E of the Act, which is as follows:
“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 subsection (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.”
3. According to the petitioner, though section 234E of the Act was introduced by the Finance Act, 2012 with effect from 1st July, 2012, since petitioner is being demanded to pay, by Ext.P1 to Ext.P9, late fee for not filing the statement of tax deduction at source, it is necessary to refer to section 200A of the Act. It was further submitted that Section 200A(1) incorporated clause (c) only with effect from 01.06.2015. Sub-clause (c) to section 200A (1) refers to the fee if any to be computed in accordance with the provisions of section 200A(1)(e). It is the claim of the petitioner that till 01.06.2015 petitioner cannot be mulcted with any liability to pay late fee for non filing of any statement of tax deduction at source.
4. A statement has been filed by the respondents objecting to the claim of the petitioner. It is averred that the demands of late filing fee under section 234E of the Act were raised by orders issued from 2013 till 2016 and that the demands are still outstanding. The intimations issued by the department were all appealable orders under section 246A of the Act and the petitioner failed to challenge the levy of late fee. In such circumstances, the demands have become final and the petitioner has accepted the demands.
Respondents also pleaded that the delay is a ground to refuse an appropriate relief so as to avoid unsettling the settled things. Relying upon the decisions in State of Maharashtra v. Digambar (AIR 1995 SC 1991), G.C.Gupta and Others v. N.K.Pandey and Others [(1988) 1 SCC 316] and State of M.P. And Another v. Bhailal Bhai (AIR 1964 SC 1006), it was asserted that the delay must defeat the claim raised by the petitioner.
5. I have heard Sri.P.J.Anilkumar, learned counsel for the petitioner, Sri. Christopher Abraham, learned Standing Counsel for the respondents 1 to 3 as well as Sri.S.Manu, learned Assistant Solicitor General of India for the fourth respondent.
6. I have considered the rival contentions.
7. In the decision in M/s.Sarala Memorial Hospital v. Union of India and Another (W.P.(C) No.37775 of 2018) an identical question arose for consideration. After considering the statutory provisions of section 234E and section 200A of the Act and the implications of the amendment brought in to the Act, it was held that the amendment would take effect only from 1st June, 2015 and is thus prospective in nature. The aforesaid judgment has become final and is binding upon the authorities. Thus the jurisdiction to levy late fee under section 234E arises only from 01-06.2015 and not earlier.
8. As regards the contention on the delay, though the said contention was impressive on first blush, it can be seen that the nature of challenge raised by the petitioner is based upon the lack of jurisdiction of the respondents to impose late fee. Since in matters where total lack of jurisdiction is alleged, delay cannot be relied upon as a ground to deny the relief, this Court is of the view that the objections of the respondents are without any basis.
9. Further the decisions cited are distinguishable on the facts of those cases itself. In the decision in Digambar’s case (supra), the delay of 20 years in approaching the High Court for grant of compensation for alleged utilization of the land was held as a decisive factor to disentitle the petitioner therein. Similarly in G.C.Gupta’s case (supra) the issue related to seniority and petitioners challenged the orders of confirmation and determination of inter se seniority only after 15 years. In the decision in Bhailal Bhai’s case (supra) the question related to refund of tax claimed belatedly. None of those cases related to a total lack of jurisdiction or authority.
10. In view of the above, the demand in Ext.P1 to Ext.P9 intimations for the period from 2012-13 to 2014-15 is bereft of authority and cannot be legally sustainable.
11. Accordingly, I quash Ext.P1 to Ext.P9 intimations to the extent it demands late fee under section 234E for the period from 2012-13 till 01.06.2015.
The writ petition is therefore allowed as above.
Sd/-
BECHU KURIAN THOMAS
JUDGE
Corrigendum
Dated 30.03.2022
The words “Dated this the 24th day of March, 2021” in the header of the judgment shall be read as “Dated this the 24th day of
March, 2022”.
