Kerala HC Clarifies No Penalties or Interest for Timely ITR e-Filing U/S 234E

The Kerala High Court has made it clear that there should be no imposition of penalties or interest for filing income tax returns on time.

The current writ petition, filed under Article 226 of the Constitution of India, challenges the order for the Assessment Year 2018-19 issued by the Tribunal. This order assessed a late fee of Rs. 71,067 under Section 234E of the Income Tax Act.

The petitioner, M/s ATNK & K Area Armed Forces Veterans Canteen, an Armed Forces Veterans Canteen, received a notice under Section 201 for failing to submit the quarterly statement for the second quarter of the Financial Year 2017-18 in Form 26Q. In reality, the petitioner had deducted and paid the tax but submitted Form 24Q instead of Form 26Q, which was subsequently rejected.

However, the correct Form was filed on June 23, 2018. As a result, a late fee of Rs. 47,000 and interest on the late fee of Rs. 567 was imposed on the petitioner. The petitioner contested this order before the Commissioner of Income Tax (Appeals), who upheld the Assessing Authority’s decision.

Subsequently, the petitioner appealed to the Income Tax Appellate Tribunal (‘the Tribunal’). The Tribunal noted that a computer-generated Form 24Q had been filed on October 20, 2017, and this Form was later corrected to Form 26Q.

Considering that the quarterly TDS returns had been filed on time and only the Form was incorrectly submitted, the Tribunal remanded the matter to the Assessing Authority for fresh orders based on the Tribunal’s observations in the order issued on July 1, 2022.

The petitioner’s counsel argued that, on remand, the Assessing Authority had indeed complied with the Tribunal’s order and assessed a ‘Nil’ demand. However, subsequently, the Assessing Authority once again imposed a late fee of Rs. 47,000, interest of Rs. 23,500, and late payment interest of Rs. 567.

The petitioner’s counsel further pointed out that the Assessing Officer’s (AO) previous position had been rejected by the Tribunal, which found that the return for the second quarter of the Financial Year 2017-18 had been filed on time but in the incorrect Form, and it had been revised. Therefore, it was established that the petitioner had filed the return on time, and there should be no consideration of penalties or interest.

Read also: Kerala HC: Order Not Liable to Pay Late Fee U/S 234E for Filing Delayed TDS Returns

In response to these arguments, Justice Dinesh Kumar Singh, a Single Bench, acknowledged the validity of the petitioner’s counsel’s submission. It was undisputed that the petitioner had submitted the return on time. However, the only issue was the choice of the incorrect Form, which was later corrected. Consequently, since the petitioner had filed the return on time, there was no basis for imposing penalties and interest.