2020 (9) TMI 529 - AT - Income Tax

Tribunal dismisses Revenue's appeal on late TDS filing fee under Income Tax Act

The Tribunal dismissed the Revenue's appeals challenging the deletion of the fee levied under Section 234E of the Income Tax Act for late TDS filing, ... Fee levied u/s 234E - late filing of e-TDS statement - Intimation u/s 200A - Low tax effect - maintainability of revenue appeal - CIT- A deleted levy of fee - HELD THAT:- Whether a particular provision is within the four corners of the Constitution is a matter which falls in the exclusive domain and jurisdiction of the Courts and the ld CIT(A) doesn’t have any authority and jurisdiction to hold any provisions as constitutionally not valid. In the present case, we are of the considered view that he has not breached his authority and jurisdiction in this regard while passing the impugned order. Revenue may have other grievances against his order passed by the ld CIT(A) deleting the fee u/s 234E on merits of the case, however, as far as Para 10(a) of the CBDT Circular no. 3 of 2018 as amended is concerned, the exception carved out therein is not applicable in the present case. Second exception 10(e) as contended that fee u/s 234E has been levied basis the information and processing of TDS statement by Central Processing Centre, which is an external agency and therefore, the said exception is applicable in the instant case - In the instant case, the assessee has filed his TDS statement on TRACES which is an IT platform managed and run by the Tax Department - As per the Revenue’s own submission, DCIT, CPC-TDS Ghaziabad holds concurrent jurisdiction with the Assessing Officer(TDS)-3, Jaipur over the case, as per the provisions of Section 120 read with 124 of the Income Tax Act, 1961. Even though CPC has its separate and identifiable functions relating to TDS returns, the officers hold concurrent jurisdiction over such TDS matters with that of the AO, there cannot be any dispute that both administratively and functionally, the CPC of the Department is part of Income Tax Department and is therefore clearly not an external law enforcement agency qua Income Tax department and that too, as specified in the aforesaid exception. Therefore, in the instant case, where the TDS statement has been processed by the CPC and while processing the same, fee u/s 234E has been levied having tax effect less than the prescribed limit, it will continue to be governed by low tax effect circular issued by the CBDT which is binding on the Revenue. Present appeal filed by the Department is dismissed on account of low tax effect given that the matter is not covered by any of the exceptions so specified and the contentions advanced by the ld DR on merits of the case are left open and not adjudicated upon. - Decided in favour of assessee. Issues Involved:1. Deletion of fee levied under Section 234E of the Income Tax Act, 1961.2. Validity of the application of provisions of Section 234E by the Assessing Officer (TDS) and/or CPC-TDS authority.3. Distinguishability of fee levied under Section 234E from a penalty and its appealability under Section 246A of the Income Tax Act, 1961.4. Applicability of the exceptions to the monetary limits for filing appeals as per CBDT Circular No. 3/2018.Detailed Analysis:1. Deletion of Fee Levied Under Section 234E:The Revenue challenged the deletion of the fee levied under Section 234E for the late filing of the TDS statement for the third quarter of FY 2016-17. The fee was levied by the DCIT, CPC-TDS, Ghaziabad, and subsequently deleted by the CIT(A)-3, Jaipur. The CIT(A) held that the fee levied was not in accordance with the law, treating it as a penalty and an adjustment made in the TDS statement, which is not appealable under Section 246A.2. Validity of Application of Provisions of Section 234E:The Revenue argued that the fee levied under Section 234E is constitutionally valid and mandatory for the late filing of TDS statements as per the amendment by the Finance Act, 2015, effective from 01.06.2015. The Revenue cited judgments from the Rajasthan High Court and the Bombay High Court, which upheld the constitutional validity of Section 234E.3. Distinguishability of Fee from Penalty and Appealability:The Revenue contended that the fee under Section 234E is not a penalty as referred to in Chapter XXI of the Act and is not an adjustment made under Section 200A(1)/206CB(1). Therefore, it is not appealable under Section 246A. The CIT(A) had erred in treating the fee as a penalty and deleting it.4. Applicability of Exceptions to Monetary Limits for Filing Appeals:The Revenue argued that the appeal falls under the exceptions to the monetary limits specified in CBDT Circular No. 3/2018. The exceptions cited were:- Exception 10(a): Where the constitutional validity of the provisions of an Act or Rule is under challenge.- Exception 10(e): Where the addition is based on information received from external sources in the nature of law enforcement agencies.The Tribunal found that the CIT(A) did not challenge the constitutional validity of Section 234E in his order. He merely referred to the submission of the assessee regarding an SLP admitted against the Bombay High Court's decision. Therefore, Exception 10(a) does not apply.Regarding Exception 10(e), the Tribunal held that the Central Processing Centre (CPC) is part of the Income Tax Department and not an external law enforcement agency. Thus, the exception is not applicable.Conclusion:The Tribunal dismissed the appeals filed by the Revenue on account of low tax effect, as the matters were not covered by any of the specified exceptions in the CBDT Circular No. 3/2018. The contentions on the merits of the case were left open and not adjudicated upon. The appeals in ITA No. 519/JP/2019 and ITA No. 595/JP/2019 were dismissed due to the low tax effect.Order Pronounced:The order was pronounced in the open Court on 14/08/2020.