Levy of Late Fee u/s 234E for TDS Returns Filed Prior to June 2015 Unjustified: ITAT Rules Amendment is Prospective [Read Order]

The Pune Bench of the Income Tax Appellate Tribunal (ITAT) ruled that late fees levied under Section 234E of the Income Tax Act, 1961, for delayed TDS returns processed prior to June 1, 2015, were unjustified and held that the amendment to Section 200A is prospective in nature.

Shrikrishna Laxminarayan Thakur (assessee) filed TDS returns for various quarters across Assessment Years 2013-14, 2014-15, 2015-16, and 2016-17. These returns were filed belatedly, and the Central Processing Cell (CPC) processed them under Section 200A, imposing late fees under Section 234E for the delay.

The assessee filed rectification applications before the CPC to remove the fees, which were rejected. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) dismissed the appeal and upheld the CPC’s order.

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Aggrieved by the order of CIT(A), the assessee filed an appeal before the ITAT. The Counsel for the assessee argued that the levy of late fees under Section 234E for returns processed before June 1, 2015, was invalid.

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The Counsel also submitted that the provision in Section 200A was amended only with effect from that date. The Counsel for the Revenue supported the orders of the lower authorities. The Counsel also contended that the fees were correctly imposed for the delayed filings.

The two-member bench, comprising Dr. Manish Borad (Accountant Member) and Vinay Bhamore (Judicial Member), observed that the issue of late fees under Section 234E was well-settled by prior judicial pronouncements.

The tribunal observed that the amendment to Section 200A, introduced via the Finance Act, 2015, empowered authorities to levy fees under Section 234E, but it can be levied only prospectively from June 1, 2015.

The tribunal relied on decisions such as the Kerala High Court’s rulings in Olari Little Flower Kuries Pvt. Ltd. vs. Union of India and Jiji Varghese vs. ITO(TDS), which confirmed that no fees could be imposed for periods prior to June 1, 2015.

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The tribunal found that eight of the assessee’s appeals, pertaining to Assessment Years 2013-14 and 2014-15 with returns processed before June 1, 2015, were covered by these precedents. The tribunal overturned the levy of late fees for these appeals and allowed the assessee’s grounds.

The remaining five appeals related to Assessment Years 2015-16 and 2016-17 with returns processed after June 1, 2015, the tribunal upheld the applicability of Section 234E fees. The tribunal directed the Revenue authorities to recompute the fees, considering only the delay from June 1, 2015, until the date of return processing. The tribunal held that the amendment to Section 200A was prospective in nature. The appeals of the assessee partly allowed.

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