IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24TH DAY OF OCTOBER, 2019 BEFORE:
THE HON’BLE MRS. JUSTICE S.SUJATHA WRIT PETITION No.50075/2019 (T – IT) BETWEEN:
M/s SHRISHAILA ELECTRICALS (INDIA) PVT. LTD., COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956 HAVING OFFICE AT NO.8, NGEF, EHBCS LAYOUT, NAGARABHAVI MAIN ROAD, BENGALURU-560072 REP BY ITS MANAGING DIRECTOR SRI JAGADEESH S/O SRI YESUDAS AGED ABOUT 55 YEARS ... PETITIONER [BY SMT.VANI H., ADV.] AND:
1 . UNION OF INDIA REP. BY ITS SECRETARY, MINISTRY OF FINANCE, SOUTH BLOCK, NEW DELHI-110001 2 . THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRALIZED PROCESSING CELL-TDS, TDS CPC, AAYKAR BHAWAN, SECTOR-3, VAISHALI, GHAZIABAD, UTTAR PRADESH-201010 3 . COMMISSIONER OF INCOME TAX (APPEALS)-10 SEVENTH FLOOR, BMTC BUILDING, 6TH BLOCK, 80 FEET ROAD, KORAMANGALA, BENGALURU-560095.
4 . THE INCOME TAX OFFICER TDS WARD-3(2), 4TH FLOOR, R.NO.415, NO.59, HMT BHAVAN, BELLARY ROAD, BANGALORE-560032. …RESPONDENTS [BY SRI JEEVAN J. NEERALAGI, ADV.] THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO DECLARE TH NEWLY INSERTED SECTION 234E TO INCOME TAX ACT, 1961 BY FINANCE ACT, 2012 AS VIOLATIVE OF ARTICLES 14 AND 19 AND THUS ULTRA VIRES THE CONSTITUTION OF INDIA IN SO FAR AS THE PETITIONER IS CONCERNED AND ETC., THIS PETITION COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:-
O R D E R Learned counsel Sri. Jeevan J. Neeralagi accepts notice for the respondents.
The petitioner has challenged the Constitutional validity of Section 234E of the Income Tax Act, 1961 (‘Act’ for short) inserted by Finance Act, 2012, inter alia, assailing the orders/intimations in respect of four Quarters of the Financial years 2012-13, 2013-14, 2014-15 relevant to Assessment years 2013-14, 2014-
15, 2015-16 respectively and the common order dated 28.08.2019 passed by the Commissioner of Income Tax (Appeals) – 10 in ITA Nos.10130 to 10134, 10239, 10240 and 10242/CIT(A)-10/2019-20 as well as the consequential demand notices.
2. Learned counsel appearing for the parties submit that the issue relating to the Constitutional validity of Section 234E of the Act is squarely covered by the decision of the Division Bench of this Court in the case of Fatheraj Singhvi and others vs. Union of India and others reported in (2016) 142 DTR (Kar) 281. The relevant paragraphs 14, 21, 23, 24 and 27 reads thus:-
“14. We may now deal with the contentions raised by the learned counsel for the appellants. The first contention for assailing the legality and validity of the intimation under Section 200A was that, the provision of Section 200A(1)(c)d) and (f) have come into force only with effect from 1.6.2015 and hence, there was no authority or competence or jurisdiction on the part of the concerned Officer or the Department to compute and determine the fee under Section 234E in respect of the assessment year of the earlier period and the return filed for the said respective assessment years namely all assessment years and the returns prior to 1.6.2015. It was submitted that, when no express authority was conferred by the statute under Section 200A prior to 1.6.2015 for computation of any fee under Section 234E nor the determination thereof, the demand or the intimation for the previous period or previous year prior to 1.6.2015 could not have been made.
21. However, if Section 234E providing for fee was brought on the statute book, keeping in view the aforesaid purpose and the intention then, the other mechanism provided for computation of fee and failure for payment of fee under Section 200A which has been brought about with effect from 1.6.2015 cannot be said as only by way of a regulatory mode or a regulatory mechanism but it can rather be termed as conferring substantive power upon the authority. It is true that, a regulatory mechanism by insertion of any provision made in the statute book, may have a retroactive character but, whether such provision provides for a mere regulatory mechanism or confers substantive power upon the authority would also be a aspect which may be required to be considered before such provisions is held to be retroactive in nature. Further, when any provision is inserted for liability to pay any tax or the fee by way of compensatory in nature or fee independently simultaneously mode and the manner of its enforceability is also required to be considered and examined. Not only that, but, if the mode and the manner is not expressly prescribed, the provisions may also be vulnerable. All such aspects will be required to be considered before one considers regulatory mechanism or provision for regulating the mode and the manner of recovery and its enforceability as retroactive. If at the time when the fee was provided under Section 234E, the Parliament also provided for its utility for giving privilege under Section 271H(3) that too by expressly put bar for penalty under Section 272A by insertion of proviso to Section 272A(2), it can be said that a particular set up for imposition and the payment of fee under Section 234E was provided but, it did not provide for making of demand of such fee under Section 200A payable under Section 234E. Hence, considering the aforesaid peculiar facts and circumstances, we are unable to accept the contention of the learned counsel for respondent-Revenue that insertion of clause (c) to (f) under Section 200A(1) should be treated as retroactive in character and not prospective.
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 1.6.2015 can be said as without any authority under law. Hence, the same can be said as illegal and invalid.
24. If the facts of the present cases are examined in light of the aforesaid 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 1.6.2015. 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 hereinabove, when the amendment made under Section 200A of the Act which has come into effect on 1.6.2015 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 1.6.2015. 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.
27. In view of the aforesaid observations and discussion, the impugned notices under 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 1.6.2015 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 01.04.2015 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.”
3. It is submitted by the learned counsel for the petitioner that the cognate bench of this Court in the case of Sree Ayyappa Educational Charitable Trust vs. The Deputy Commissioner of Income Tax in W.P.No.618/2015 and connected matters (D.D. 12.12.2017), following the Division Bench judgment of this Court in Fatheraj Singhvi supra, has allowed the writ petitions, setting aside the impugned orders/intimations issued under Section 200A of the Act.
4. Learned counsel for the revenue does not dispute the same.
5. Accordingly, in terms of the judgment referred to above, the writ petition is allowed and the impugned orders/intimations at Annexures – A to Q are quashed. Consequently, the order dated 28.08.2019 passed by the Commissioner of Income Tax (Appeals) – 10 at Annexure – S and the notices at Annexures – T and U are set aside. The matters are remanded to the Assessing Authority to pass fresh orders in accordance with law after giving an opportunity of hearing to the petitioner/assessee in terms of the judgment of the Division Bench referred to above.
Sd/- JUDGE PMR