2017 (5) TMI 1 - AT - Income Tax

Levy of fees for delay in filing the TDS return U/s 234E - Held that - The timely processing of returns is the bedrock of an efficient tax administration system. If the income tax returns, especially having refund claims, are not processed in a timely manner, then (i) a delay occurs in the granting of credit of TDS to the person on whose behalf tax is deducted (the deductee) and consequently leads to delay in issuing refunds to the deductee, or raising of infructuous demands against the deductee; (ii) the confidence of a general taxpayer on the tax administration is eroded; (iii) the late payment of refund affects the Government financially as the Government has to pay interest for delay in granting the refunds; and (iv) the delay in receipt of refunds results into a cash flow crunch, especially for business entities. Looking at this from this perspective, we are clearly of the view that section 234E of the Act is not punitive in nature but a fee which is a fixed charge for the extra service which the Department has to provide due to the late filing of the TDS statements. See case of M/s Dundlod Shikshan Sansthan & ors. 2015 (9) TMI 807 - RAJASTHAN HIGH COURT - There is no valid reason or justification to interfere with the compensatory fees imposed for late filing of TDS return. Accordingly the demand raised by AO for late filing fees u/s 234E is confirmed. - Decided against assessee

Summary

Issues:
1. Levy of fees for delay in filing the TDS return under Section 234E of the Income Tax Act, 1961.
2. Validity of the impugned levy of fees under Section 234E in the order passed under Section 200A of the Act.

Issue 1: Levy of fees for delay in filing the TDS return under Section 234E:
The appeal was filed by the assessee challenging the levy of fees for delay in filing the TDS return under Section 234E of the Income Tax Act, 1961. The assessee contended that the fees should have been waived, arguing that prior to a specific amendment by the Finance Act, 2015, the Assessing Officer lacked the authority to charge fees under Section 234E while issuing intimation under Section 200A of the Act. However, the Tribunal examined the provisions of Section 200A before and after the amendment, along with Section 234E, and referred to relevant case laws. Notably, the Tribunal cited a decision of the Rajasthan High Court which held that even before the amendment, the imposition of fees under Section 234E was not illegal. The Tribunal concluded that the fees under Section 234E were compensatory in nature and necessary for efficient tax administration, dismissing the appeal and confirming the demand raised by the Assessing Officer for late filing fees under Section 234E.

Issue 2: Validity of the impugned levy of fees under Section 234E in the order passed under Section 200A:
The second ground of appeal raised by the assessee questioned the validity of the levy of fees under Section 234E in the order passed under Section 200A of the Income Tax Act. The Tribunal analyzed the relevant provisions of Section 200A both before and after the amendment by the Finance Act, 2015. The Tribunal noted the arguments presented by the appellant and the decision of the Rajasthan High Court which upheld the imposition of fees under Section 234E even prior to the specific amendment. The Tribunal further referred to a decision of the Bombay High Court emphasizing the importance of timely processing of returns for efficient tax administration. Based on these considerations and precedents, the Tribunal found no merit in the appeal and dismissed it, upholding the demand raised by the Assessing Officer for late filing fees under Section 234E.

In conclusion, the Appellate Tribunal ITAT Jaipur, in the cited judgment, addressed the issues related to the levy of fees for delay in filing the TDS return under Section 234E and the validity of the impugned levy of fees under Section 234E in the order passed under Section 200A of the Income Tax Act. The Tribunal's detailed analysis encompassed statutory provisions, case laws, and the principles of efficient tax administration, leading to the dismissal of the appeal and confirmation of the demand for late filing fees.