Late fee under section 234E cannot be imposed for belated TDS quarterly statements processed before 01/06/2015

ITAT Pune held that late fee under section 234E cannot be imposed for belated furnishing of TDS quarterly statements processed under section 200A prior to 01/06/2015. Following the precedent in Pancharatna Buildcon Pvt. Ltd., the tribunal ruled that section 234E provisions were not applicable to periods before 01/06/2015. The assessee's appeal was allowed, providing relief from the late fee levy for the pre-amendment period.

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The core legal issue considered in this series of appeals is whether the late fee under section 234E of the Income Tax Act, 1961 (the "Act") can be levied for delay in furnishing quarterly TDS returns for the financial year 2012-13, where such returns were processed prior to 1 June 2015, the date when the amendment introducing section 200A(1)(c) enabling levy of late fee under section 234E came into effect.

The Tribunal also considered the related question of the validity of the levy of consequential interest under section 220(2) of the Act arising from the imposition of the late fee. A further procedural issue implicitly addressed was the maintainability of appeals filed after rejection of rectification applications under section 154 of the Act, especially when no appeal was filed against the original orders under section 200A.

Regarding the first issue, the relevant legal framework includes:

• Section 234E of the Income Tax Act, which prescribes a late fee for delay in furnishing TDS statements;
• Section 200A(1)(c), inserted by the Finance Act, 2015 with effect from 1 June 2015, which authorizes the Centralized Processing Cell (CPC) to levy late fee under section 234E on delayed TDS returns;
• Judicial precedents from coordinate benches of the Tribunal and High Courts, notably the Kerala High Court and Karnataka High Court, which have held that section 234E cannot be applied retrospectively to defaults occurring before 1 June 2015.

The Tribunal's interpretation rested heavily on the timing of the statutory amendment. It emphasized that although section 234E was introduced by the Finance Act 2012, the enabling provision for CPC to levy the late fee through processing under section 200A(1)(c) was inserted only with effect from 1 June 2015. Therefore, levying late fee for defaults prior to this date lacks statutory authority (sine auctoritate) and is unsustainable in law.

The Tribunal extensively relied on prior decisions, including:

• Pancharatna Buildcon Pvt. Ltd. vs. ITO, where a coordinate bench held that late fee under section 234E cannot be levied for defaults prior to 1 June 2015;
• Dhairyasheel Pralhad Pawar vs. DCIT, where the Tribunal held that since section 200A(1)(c) came into force only from 1 June 2015, fee under section 234E cannot be levied for earlier periods;
• Dadasaheb Vittalrao Urhe vs. ITO, which reaffirmed that fees levied for defaults before 1 June 2015 are without authority, citing supporting High Court decisions.

In the instant appeals, the assessee filed quarterly TDS returns for FY 2012-13, which were processed before 1 June 2015. The CPC levied late fee under section 234E for delay in filing these returns. The assessee did not challenge the original orders under section 200A but filed rectification applications under section 154, which were rejected. Subsequently, the assessee filed appeals against the section 154 orders, which were also dismissed by the Commissioner of Income Tax (Appeals). The assessee then approached the Tribunal.

On the facts, the Tribunal found the levy of late fee under section 234E for periods prior to 1 June 2015 to be without legal basis. The Tribunal noted that the learned Departmental Representative failed to produce any binding precedent supporting the Revenue's position. The Tribunal applied the ratio of the aforementioned coordinate bench decisions to the instant case.

Regarding the procedural aspect, the Tribunal implicitly accepted the maintainability of appeals filed after rejection of rectification applications under section 154, even though the original orders under section 200A were not appealed. The Tribunal did not find any procedural bar to entertain these appeals on merits.

The Tribunal also addressed the consequential interest levied under section 220(2) of the Act, which was computed on the late fee amount. Since the late fee itself was held to be invalid, the consequential interest was also deleted.

In considering competing arguments, the Tribunal noted that the Revenue supported the lower authorities' orders but did not place any binding judicial precedent to counter the assessee's submissions. The Tribunal gave precedence to the settled position of law established by coordinate benches and High Courts, which uniformly held that section 234E could not be applied retrospectively before 1 June 2015.

The Tribunal concluded by setting aside the orders of the Commissioner of Income Tax (Appeals) and directing deletion of the late fee under section 234E and consequential interest under section 220(2) for the relevant periods. The appeals filed by the assessee were allowed.

Significant holdings include the following verbatim observations from the Tribunal's order in Pancharatna Buildcon Pvt. Ltd. (cited with approval):

"Although the levy of fees u/s 234E for delay in furnishing statement has been brought into statute we.f. 1 July, 2012, the enabling provision of section 200A(1)(c) authorising such levy came into force w.e.f. 1st June, 2015 by Finance Act, 2015, consequently the fees levied for any default prior thereto being sine auctoritate hence unsustainable in the eyes of law."

Core principles established are:

• Section 234E late fee can only be levied for defaults occurring on or after 1 June 2015, the date from which section 200A(1)(c) enabling such levy came into force;
• Late fee levied for defaults prior to 1 June 2015 is without statutory authority and must be deleted;
• Consequential interest under section 220(2) computed on such invalid late fee is also liable to be deleted;
• Appeals filed after rejection of rectification applications under section 154 are maintainable to challenge such levies;
• Revenue bears the burden of establishing the validity of the levy by placing binding precedents, failing which the Tribunal will decide in favour of the assessee.

Final determinations on the issues are:

• The late fee levied under section 234E for delay in furnishing quarterly TDS returns for FY 2012-13 (period prior to 1 June 2015) is quashed;
• The consequential interest levied under section 220(2) on the late fee is also quashed;
• The appeals filed by the assessee against the orders under section 154 and the Commissioner of Income Tax (Appeals) are allowed;
• The orders of the lower authorities upholding the late fee are set aside.

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