2022 (9) TMI 1024 - AT - Income Tax

Levying Late filing fees u/s 234E and consequentially interest u/s 220(2) - whether late filing fee u/s 234E of the Act could be levied for TDS returns filed for the period pertaining to the period prior to 1.6.2015 - Diversified views on matter - HELD THAT - Respectfully following the decision of Hon ble Supreme Court in the case of CIT vs Vegetable Products Ltd 1973 (1) TMI 1 - SUPREME COURT we prefer to follow the decision in the case of Fatehraj Singhvi 2016 (9) TMI 964 - KARNATAKA HIGH COURT and cancel the levy of late filing fees u/s 234E of the Act for both the quarters for both Form 24Q and 26Q TDS statements. - Decided in favour of assessee.

Summary

Issues Involved:

1. Whether the Commissioner of Income Tax (Appeals), NFAC was justified in confirming the rectification order passed by the Income Tax Officer under Section 154 of the Income Tax Act, 1961.
2. Whether the levy of fees under Section 234E of the Income Tax Act for late filing of TDS returns for periods prior to 01/06/2015 is valid.
3. Whether the consequential interest under Section 220(2) of the Income Tax Act for delayed payment of interest and fees is justified.

Issue-wise Detailed Analysis:

1. Justification of Rectification Order under Section 154:

The appeals arose from the rectification orders passed under Section 154 of the Income Tax Act by the Income Tax Officer, TDS Ward, Kalyan. The rectification orders levied fees under Section 234E and consequential interest under Section 220(2). The assessee contended that the fees under Section 234E could not be charged for periods prior to 01/06/2015, as the amendment to Section 200A, which allowed for such computation, came into effect only from that date. The Commissioner of Income Tax (Appeals), NFAC, upheld the rectification orders, observing that Section 200A was amended by the Finance Act, 2015, with effect from 01/06/2015 to include the computation of fees under Section 234E during the processing of TDS statements.

2. Levy of Fees under Section 234E for Periods Prior to 01/06/2015:

The core issue was whether fees under Section 234E could be levied for TDS returns filed for periods before 01/06/2015. The assessee argued that the amendment to Section 200A, which allowed for the computation of such fees, was prospective and could not apply to periods before its enactment. The Tribunal referred to various judicial pronouncements, including the decision of the Karnataka High Court in the case of Fatheraj Singhvi vs Union of India, which held that the amendment to Section 200A was prospective and fees under Section 234E could not be levied for periods prior to 01/06/2015. The Tribunal also noted conflicting views from other High Courts but preferred the view favorable to the assessee, following the principle established by the Supreme Court in CIT vs Vegetable Products Ltd., which states that in case of two reasonable constructions of a taxing statute, the one that favors the assessee should be adopted.

3. Consequential Interest under Section 220(2):

Given the Tribunal's decision to cancel the levy of late filing fees under Section 234E for the periods prior to 01/06/2015, the consequential interest under Section 220(2) for delayed payment of such fees was also deemed unjustified. The Tribunal held that since the primary levy of fees under Section 234E was not valid, the interest charged for delayed payment of these fees could not stand.

Conclusion:

The Tribunal allowed the appeals, canceling the levy of late filing fees under Section 234E for the periods prior to 01/06/2015 and the consequential interest under Section 220(2). The Tribunal's decision was based on the principle of adopting the interpretation favorable to the assessee in case of conflicting judicial views and the prospective nature of the amendment to Section 200A.