Jodhpur ITAT: Dept Can’t Charge Late Fees or Interest for TDS Based on the Intimation U/S 200A Before Amendment

The Income Tax Department lacks the authority to impose late fees and interest related to Tax Deduction at Source (TDS) as per the notification under Section 200A of the Income Tax Act, 1961, before the amendment of the law, the Income Tax Appellate Tribunal (ITAT), Jodhpur bench, has ruled.

In this case, Dinesh Infrastructure Private, the taxpayer, submitted a TDS return for the fourth quarter (Q4) of the 2012-13 financial year. The TDS Centralized Processing Cell processed the return on December 23, 2013, and imposed a late filing fee of Rs. 38,200.

The taxpayer sought a correction of the order under Section 200A, which the Assessing Officer (AO) granted on December 10, 2017. Subsequently, the taxpayer applied for a correction under Section 154, which the AO approved on June 13, 2019, without providing the requested relief.

Unsatisfied with the decision, the taxpayer appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who dismissed the appeal. Subsequently, the taxpayer filed an appeal against the CIT(A)’s decision before the tribunal. During the tribunal’s consideration of the matter, the taxpayer’s counsel, Raksha Birla, argued that the confirmed late fee imposed by CIT(A) should be reversed.

Additionally, the taxpayer contended that the department has the authority to impose a fee under Section 234E of the Income Tax Act, which became effective on June 1, 2015. Therefore, as the amendment is prospective, it cannot be applied to the year in question.

In contrast, S.M. Joshi, representing the Revenue, supported the decisions of the lower authorities. The tribunal observed that the authority to levy the aforementioned late fees under Section 234E of the Income Tax Act became effective on June 1, 2015, making it a prospective provision. Consequently, it did not apply to the financial year 2012-13.

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After a thorough review of the facts and records, the two-member bench consisting of Rathod Kamlesh Jayantbhai (Accountant Member) and Dr S. Seethalakshmi (Judicial Member) concluded that the late fees under Section 234E of the Income Tax Act can not have been imposed in the notification under Section 200A of the Income Tax Act for the late filing quarterly TDS returns. This authority to impose fees became effective on June 1, 2015. Hence, the bench upheld the taxpayer’s appeal.