2025 (5) TMI 389 - AT - Income Tax

Late Filing Fees for TDS Returns Before 1.6.2015 Invalidated: Statutory Amendment Lacks Retroactive Power for Penalties

Classic Motels C/o- Matta Garg & Co. Versus Income Tax Officer, Ward-1 (1) (2), Dehradun Uttarakhand

Classic Motels C/o- Matta Garg & Co. Versus Income Tax Officer, Ward-1 (1) (2), Dehradun Uttarakhand - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether levy of late filing fee under section 234E of the Income Tax Act, 1961 can be effected by processing TDS returns under section 200A/section 201(1A) for TDS statements pertaining to periods prior to 01.06.2015. 2. Whether the amendment to section 200A (insertion of sub-clause (c)) with effect from 01.06.2015 operates retrospectively or prospectively with respect to the power to process TDS returns and levy fees under section 234E. 3. Whether intimation/demand raised under section 200A/section 201(1A) for levy of fees under section 234E beyond the statutory scope of those sections is maintainable. ISSUE-WISE DETAILED ANALYSIS Issue 1: Power to levy section 234E fee by processing TDS returns under section 200A/section 201(1A) for periods before 01.06.2015 Legal framework: Section 234E prescribes a late filing fee for delayed furnishing of TDS statements. Section 200A and section 201(1A) govern processing of TDS returns and consequential intimation/demand upon the tax deductor. An amendment inserting sub-clause (c) in section 200A came into effect on 01.06.2015. Precedent Treatment: Earlier decisions have been divided. A coordinate Tribunal bench and at least one High Court have held that imposition of section 234E fees via section 200A/201(1A) for periods prior to 01.06.2015 is not sustainable; other authorities have taken an opposite view (as relied upon by the lower appellate authority). Interpretation and reasoning: The Tribunal examined the statutory scheme and the temporal effect of the amendment to section 200A. It concluded that the amendment enabling processing for levy of section 234E fees was introduced w.e.f. 01.06.2015 and thereby does not empower processing of TDS statements and levy of fees for deduction periods prior to that date. Processing and automatic charging of section 234E in respect of earlier periods exceeds the statutory power available prior to amendment. Ratio vs. Obiter: Ratio - imposition of section 234E fees by processing returns under section 200A/201(1A) for periods prior to 01.06.2015 is not sustainable because the enabling amendment is prospective. Obiter - observations regarding specific procedural facts (e.g., non-service of electronic order) are ancillary and not central to the legal holding. Conclusion: Levy of section 234E fee for AY 2014-15 (period prior to 01.06.2015) by processing TDS returns under section 200A/201(1A) is unsustainable and is to be deleted. Issue 2: Prospective effect of the 01.06.2015 amendment to section 200A (insertion of sub-clause (c)) Legal framework: Principles of statutory interpretation govern whether an amendment alters liability retrospectively or prospectively. Absent express retrospective language, amendments are treated as prospective, particularly when they enlarge or alter the assessing authority's powers. Precedent Treatment: The Tribunal followed the view of a coordinate Bench and of a High Court that held the amendment prospective in effect and therefore not applicable to periods prior to 01.06.2015. The lower appellate authority had relied on contrary High Court authority but that view was not followed by the Tribunal. Interpretation and reasoning: The Tribunal reasoned that the insertion of sub-clause (c) in section 200A created a new procedural power to process returns and compute late fees under section 234E; absent an express retrospective clause, such an empowerment cannot be read to reach back to periods before its commencement. Applying normal rules of construction, the amendment must be treated as prospective. Ratio vs. Obiter: Ratio - the amendment is prospective and does not validate imposition of section 234E fees for periods anterior to 01.06.2015. Obiter - discussion of policy considerations underlying the amendment is ancillary to the interpretive conclusion. Conclusion: The amendment to section 200A effective 01.06.2015 has prospective operation only; it does not authorize retrospective processing or levy of section 234E fees for tax deduction periods prior to that date. Issue 3: Maintainability of intimations/demands under section 200A/201(1A) when used to levy section 234E fees beyond statutory scope Legal framework: Intimations/demands under section 200A/201(1A) must conform to the authority granted by those provisions. Any charge outside the statutory scope is subject to being held invalid. Precedent Treatment: The Tribunal relied on consistent decisions of a coordinate Bench and a High Court holding that demands raising section 234E fees for periods prior to the enabling amendment are not maintainable. Contrary authorities were noted but not followed. Interpretation and reasoning: Because the statutory power to compute and levy section 234E via processing was not available before the amendment, intimations/demands issued under section 200A/201(1A) claiming such fees for pre-amendment periods are beyond jurisdiction. The Tribunal thus concluded the intimations/demands in question were not maintainable to the extent they sought to charge section 234E fees for the earlier period. Ratio vs. Obiter: Ratio - intimations/demands under section 200A/201(1A) that purport to levy section 234E fees for periods prior to the amendment's commencement are invalid for being beyond statutory power. Obiter - procedural observations about electronic service and timing of appeals are collateral. Conclusion: Intimations/demands under section 200A/201(1A) raising section 234E fee for pre-01.06.2015 periods are not maintainable and must be set aside. Cross-references and Treatment of Conflicting Authorities The Tribunal expressly followed earlier coordinating decisions and the cited High Court decision holding the amendment prospective and the pre-amendment levies unsustainable. The Tribunal declined to follow contrary authority relied upon by the lower appellate authority, treating the post-amendment enabling provision as not validating pre-amendment demands. The Tribunal noted the rule that conflicting decisions favorable to the assessee should be followed where applicable, and applied that approach. Disposition The Tribunal deleted the late filing fee under section 234E charged for the assessment year in question (a period prior to 01.06.2015) and allowed the appeal.