ITAT Hyderabad rules fees under section 234E for TDS returns filed before 1.6.2015 as unauthorized

The ITAT Hyderabad allowed the appeals against the CIT (A)'s order for A.Ys 2013-14 & 2014-15, holding that fees under section 234E of the Income Tax Act for TDS returns filed before 1.6.2015 were unauthorized. Relying on legal precedents, the Tribunal directed the deletion of the fees, citing the principle favoring the assessee in case of statutory ambiguity. The decision was pronounced on 3rd October 2018.

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Issues:
- Appeal against order of CIT (A) for A.Ys 2013-14 & 2014-15
- Charging of fee u/s 234E of the I.T. Act for TDS returns filed prior to 1.6.2015

Analysis:
1. The appeals were filed against the order of the CIT (A) for the assessment years 2013-14 & 2014-15. The grounds raised by the assessee were common except for the quantum. The main issue revolved around the charging of fees under section 234E of the Income Tax Act for TDS returns filed before 1.6.2015. The assessee contended that the fee charged was erroneous in law as section 234E was brought under section 200A only w.e.f. 1.6.2015. The AO rejected the application stating there was no provision under the IT Act to raise such objections. The assessee challenged this decision, citing a judgment of the Gujarat High Court upholding the levy of late fee even before the amendment in section 200A. However, the assessee relied on a decision of the Tribunal at Chandigarh and the Karnataka High Court, arguing that no adjustment on account of fee u/s 234E could be made before 1.6.2015.

2. The ITAT Hyderabad, comprising of Smt. P. Madhavi Devi and Shri S.Rifaur Rahman, analyzed the case in detail. They noted that while the provisions for the levy of fee were introduced in the statute book from 1.7.2012, it was included under section 200A only from 1.6.2015. The Tribunal referred to the decision of the B Bench of the Tribunal at Chandigarh and held that interest u/s 234E could not be levied for TDS returns filed prior to 1.6.2015. The Tribunal observed that there were conflicting views of the High Courts on the issue, but in line with the principle favoring the assessee in case of ambiguity in the statute, they directed the deletion of fees levied under section 234E before 1.6.2015.

3. The Tribunal, after considering the arguments and legal precedents, concluded that the levy of fees u/s 234E for TDS returns filed before 1.6.2015 was without authority of law. Therefore, the appeals of the assessee were allowed, and the fees charged under section 234E were directed to be deleted. The decision was based on the principle that when two reasonable constructions of a statute are possible, the one favoring the assessee should be adopted. The order was pronounced in the Open Court on 3rd October 2018.

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