Central Processing Centre- TDS Wing is part of Income Tax Dept, not an ‘External Law Enforcement Agency’ for the purpose of CBDT Circular: ITAT

While dismissing two departmental appeals, the Income Tax Appellate Tribunal (ITAT), Jaipur has held that the Central Processing Centre- TDS Wing of the income tax department, being a part of the department, cannot be treated as an external law enforcement agency for the purpose of the low tax effect circular issued by the Central Board of Direct Taxes (CBDT).

The assessee has filed his TDS statement on TRACES which is an IT platform managed and run by the Tax Department and thereafter, the said statement has been processed centrally by Central Processing Centre which is again manned by the personnel of the Tax department and finally, intimation u/s 200A(1)(C) of the said processing has been issued duly signed by DCIT, CPCTDS Ghaziabad.

Before the Tribunal, the Revenue contended that the fee under section 234E has been levied on the basis of the information and processing of TDS statement by Central Processing Centre, which is an external agency.

The Tribunal found that exception 10(e) to the aforesaid CBDT Circular relates to cases where addition is based on information received from external sources in the nature of law enforcement agencies such as CBI/ ED/ DRI/ SFIO/ Directorate General of GST Intelligence (DGGI).

Dismissing the appeal, the Tribunal observed that “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. Therefore, 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 Assessing officer, 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.”