Chennai ITAT Deletes Section 234E Late Fees for Pre-01.06.2015 TDS Periods

Paul System Technologies Private Limited Vs ITO (ITAT Chennai)

Summary: The Income Tax Appellate Tribunal, Chennai Bench, decided a batch of nine appeals filed by Paul System Technologies Private Limited against orders of the Commissioner of Income Tax (Appeals), ADDL/JCIT (A)-4, NFAC, Delhi, concerning late fees levied under Section 234E of the Income-tax Act, 1961 while processing quarterly TDS statements under Section 200A. The appeals related to Assessment Years 2014-15, 2015-16 and 2016-17. The Tribunal recorded that the solitary issue raised by the assessee was whether the levy of late fees under Section 234E in relation to the relevant quarterly TDS returns was lawful, particularly where the enabling provision in Section 200A was introduced only with effect from 01.06.2015.

The nine appeals concerned ITA Nos. 59 to 67/CHNY/2026. The orders passed under Section 200A and the corresponding CIT(A) orders involved amounts ranging from Rs. 5,000 to Rs. 1,01,600. The assessee had filed quarterly TDS returns belatedly, following which the CPC-TDS processed the returns and generated demands towards late fees under Section 234E. The assessee challenged the levy before the CIT(A). The CIT(A), however, dismissed all nine appeals in limine, principally observing that the appeals had been filed after delays ranging from eight to ten years. The CIT(A) also observed that Form 26Q for all four quarters of F.Y. 2014-15 had been filed after 01.06.2015, and consequently held the levy of late fees under Section 234E to be in order.

Before the Tribunal, the assessee submitted that the TDS liabilities had been fully remitted and that the late fees related to quarterly returns pertaining to F.Y. 2014-15, 2015-16 and 2016-17. The assessee contended that the levy under Section 234E through processing under Section 200A was sustainable only from 01.06.2015. It was also submitted that the CIT(A) had dismissed the appeals without properly considering the explanation for the delay. According to the assessee, the Section 200A orders had not been communicated to the company; the TDS returns were being filed and records maintained by a tax consultant; and the management became aware of the demands only when the jurisdictional TDS Assessing Officer served recovery notices. The assessee stated that it thereafter collected the demand details and immediately took steps to file appeals.

The Tribunal considered the explanation for the delay and found that it had occurred due to bona fide reasons and circumstances beyond the control of the assessee. It observed that the CIT(A) had not examined the explanation for delay in a judicious and liberal manner. Applying the principle that substantial justice should prevail over technical considerations, the Tribunal condoned the delay in filing all the appeals before the CIT(A).

On merits, the Tribunal noted that the late fees under Section 234E had been levied while processing TDS statements under Section 200A. It found that the TDS returns pertaining to F.Y. 2014-15 and part of F.Y. 2015-16 related to the period prior to 01.06.2015, before the amendment enabling levy of Section 234E fee through processing under Section 200A came into effect. The Tribunal held that prior to 01.06.2015 there was no enabling provision under Section 200A to levy fees under Section 234E while processing TDS statements. It therefore held that such levy for the period prior to 01.06.2015 was not sustainable in law.

In reaching this conclusion, the Tribunal followed the jurisdictional Madras High Court decision in M/s. Sri Rujula International vs. PCIT, W.P. Nos. 4307 of 2024, W.M.P. Nos. 4619 & 4621 of 2024, dated 12.09.2024, which had followed the earlier decision in M/s. True Blue Voice India Private Limited vs. Chief CIT, TDS. The Tribunal also relied upon the coordinate-bench decision in Gopuram Enterprises Private Limited vs. ACIT, ITA No.1002-1007/Chny/2024, dated 26.06.2024, and referred to the coordinate-bench decision in M/s. M.F. Textiles Pvt. Ltd. Vs. ACIT, ITA Nos. 578 & 579/Chny/2021, dated 24.02.2022. The Tribunal reproduced the relevant reasoning concerning the insertion of Section 200A(1)(c) with effect from 01.06.2015. The supplied material also records the Finance Act, 2015 amendment as the basis for enabling computation of the Section 234E fee while processing TDS statements.

Respectfully following the binding judicial precedents relied upon by the assessee, the Tribunal held that levy of late fees under Section 234E in respect of TDS statements pertaining to the period prior to 01.06.2015 was invalid and liable to be deleted. Accordingly, the eight appeals bearing ITA Nos. 59 to 66/Chny/2026, relating to A.Ys. 2014-15 and 2015-16, were allowed and the corresponding demands under Section 234E, aggregating to the amounts shown in the order’s table, were deleted.

The Tribunal treated ITA No.67/Chny/2026 differently. That appeal concerned A.Y. 2016-17, Quarter 1, and the Tribunal recorded that the relevant period fell after 01.06.2015, subsequent to the amendment to Section 200A which enabled levy of fees under Section 234E during processing of TDS returns. The Tribunal therefore held that the levy of late fees for that assessment year was in accordance with law and upheld it. Consequently, ITA No.67/Chny/2026 was dismissed.

Thus, the final disposition was that ITA Nos. 59 to 66/Chny/2026 filed by the assessee were allowed, while ITA No.67/Chny/2026 was dismissed. The order was pronounced in the open court at Chennai on 10 April 2026.

Cases Discussed

• M/s. Sri Rujula International vs. PCIT, W.P. Nos. 4307 of 2024, W.M.P. Nos. 4619 & 4621 of 2024, dated 12.09.2024 — followed on the issue of levy of Section 234E late fees through processing under Section 200A for the period prior to 01.06.2015.
• M/s. True Blue Voice India Private Limited vs. Chief CIT, TDS, [2024] 158 taxmann.com 67 (Madras), referred to as 2023(10) TMI 1141 — followed for the proposition that, in the absence of the enabling provision in Section 200A, Section 234E late fees could not be imposed while processing TDS statements for the relevant pre-01.06.2015 period.
• Gopuram Enterprises Private Limited vs. ACIT, ITA No.1002-1007/Chny/2024, dated 26.06.2024 — considered as a coordinate-bench decision covering the levy of Section 234E late fees for the relevant pre-01.06.2015 period.
• M/s. M.F. Textiles Pvt. Ltd. Vs. ACIT, ITA Nos. 578 & 579/Chny/2021, dated 24.02.2022 — considered for the identical issue and the finding that, in the absence of an enabling provision under Section 200A, the Assessing Officer could not levy Section 234E late fees for belated quarterly TDS returns relating to the period prior to 01.06.2015.

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT CHENNAI

These bunch of 9 (Nine) appeals of the assessee are filed against the order of the learned Commissioner of Income Tax (Appeals), ADDL/JCIT (A)-4, (NFAC), Delhi, (in short “ld.CIT(A)”) for the assessment year (A.Y.) 2014-15 (26Q – Q1, Q2, Q4 and 24Q – Q4), 2015-16 (26Q – Q1, Q2, Q3 and Q4) and 2016-17 (26Q – Q1) vide orders in respect of the intimation u/s.200A of the Act passed by the TDS CPC as detailed below :

2. The solitary issue raised by the assessee in all the above appeals is that the levy of late fees u/s.234E of the Act in relation to the quarterly TDS returns for the A.Y.2014-15, 2015-16 & the first quarter of A.Y. 2016-17 is unlawful as the enabling provision u/s.200A of the Act has been introduced only from 01.06.2015.

3. Brief facts of the case emanating from the records are that the assessee is a Company, had belatedly filed its quarterly returns of TDS for A.Y.2014-15 (26Q – Q1, Q2, Q4 and 24Q – Q4), 2015-16 (26Q – Q1, Q2, Q3 and Q4) and 2016-17 (26Q – Q1). The CPC – TDS, has processed all the impugned TDS quarterly returns and generated the demand for late fee u/s.234E of the Act, which are prior to 01.06.2015 by passing an order u/s.200A of the Act as detailed supra. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A).

4. At the outset, we observed that the Ld.CIT(A) has dismissed in limine, all the nine appeals filed by the assessee observing that the assessee had filed all these appeals with a huge delay of 8 to 10 years by passing separate orders as per the table given above. Form 26Q for all the 4 quarters of the F.Y.2014-15 have been filed after 01.06.2015 i.e. 27.10.2015 and hence the levy of late fees u/s.234E after processing of the returns by the TDS CPC is in order as per the provisions of section 200A of the Act.

5. Aggrieved by the impugned order of the Ld.CIT(A), the assessee is in appeal before us.

6. The ld.AR submitted that The CPC – TDS, has processed all the impugned TDS quarterly returns and generated the demand for late fee u/s.234E of the Act, which are prior to 01.06.2015 by passing an order u/s.200A of the Act by raising a demand. The ld.AR further submitted that the TDS liabilities have been remitted in full by the assessee. Further, the ld.AR submitted that the late fees has been levied u/s.234E of the Act for belated filing of quarterly returns pertains to the F.Y. 2014-15, 2015-16 & 2016-17 which is leviable only from 01.06.2015 as per the provisions of section 200A r.w.s 234E of the Act.

7. The ld.AR further submitted that the ld.CIT(A) has dismissed all the appeals in limine without condoning the delay in filing the appeal of the assessee. The ld.AR stated that the assessee had given the cause for delay in filing the appeal in form No.35 filed before the ld.CIT(A). The ld.AR explained that, firstly the orders passed u/s.200A were never communicated to the assessee. All the TDS returns of the company had been filed by the Tax consultant and who was maintaining the records and details of updates also. Since these provisions were introduced newly and also the TDS records maintenance and filing were outsourced, the levy of late fees u/s.234E of the Act was not brought to the notice of the company management. The assessee became aware only when the jurisdictional TDS – Assessing Officer served notice of recovery. Immediately, the assessee collected and downloaded all the details of the demand and took action to file the appeals of before the ld.CIT(A). Therefore, the ld.AR submitted that in the interest of substantive justice, the delay may please be condoned and the levy of late fees for belated filing of quarterly returns relating to the period prior 01.06.2015 is not sustainable under the law and prayed for deleting the same.

8. Further the ld.AR relied on the decision of the Hon’ble Madras High Court in the case M/s.Sri Rujula International vs. PCIT (WP Nos. 4307 of 2024, WMP Nos.4619 & 4621 of 2024) dated 12.09.2024 by following the earlier decisions of the Hon’ble High Court in the case of 2023(10) TMI 1141 [M/s.True Blue Voice India Private Limited vs. Chief CIT, TDS [2024] 158 taxmann.com 67 (Madras) and also the decision of Chennai Tribunal in the case of Gopuram Enterprises Private Limited vs. ACIT, ITA No.1002-1007/Chny/2024 dated 26.06.2024, wherein the issue of levy of late fees u/s.234E of the Act has been nullified upto 01.06.2015. In view of the above arguments, the ld.AR prayed for deleting the late fees u/s.234E of the Act.

9. The Ld.DR supported the order of the ld.CIT(A) and prayed for confirming the same as the assessee had filed the appeals with inordinate delay before the ld.CIT(A).

10. We have heard the case, perused the materials on record, and gone through orders of the authorities below. The issues arising in the present bunch of appeals are twofold, viz., (i) whether the delay in filing the appeals before the ld. CIT(A) deserves to be condoned, and (ii) whether the levy of late fees under section 234E of the Act in the facts of the present case is sustainable in law.

At the outset, it is noticed that the ld. CIT(A) has dismissed all the nine appeals in limine on account of inordinate delay ranging from 8 to 10 years, without adjudicating the issue on merits. The assessee has placed on record the reasons for such delay in Form No. 35, stating that the intimations issued under section 200A of the Act were not brought to its notice, as the TDS compliances were handled by an external consultant, and the management became aware of the impugned demands only upon receipt of recovery notices from the jurisdictional TDS Assessing Officer. Immediately thereafter, the assessee took steps to file the appeals.

11. Considering the explanation furnished, we find that the delay has occurred due to bonafide reasons and circumstances beyond the control of the assessee. It is a settled proposition of law that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. In the present case, the ld. CIT(A) has not examined the explanation for delay in a judicious and liberal manner. Therefore, in the interest of justice, we are inclined to condone the delay in filing all the appeals before the ld. CIT(A).

12. Having condoned the delay, we now proceed to examine the issue on merits. The undisputed facts are that the late fees under section 234E of the Act have been levied while processing the TDS statements under section 200A of the Act for the relevant assessment years. It is also not in dispute that the TDS returns pertaining to F.Y. 2014-15 and part of F.Y. 2015-16 relate to the period prior to 01.06.2015, i.e., before the amendment enabling levy of fee under section 234E through processing under section 200A came into effect.

13. It is by now well settled by various judicial precedents, including the decisions of the Hon’ble jurisdictional High Courts and coordinate benches of the Tribunal, that prior to 01.06.2015, there was no enabling provision under section 200A of the Act to levy fees under section 234E while processing TDS statements. Therefore, any such levy for the period prior to 01.06.2015 is not sustainable in law. Our view is supported by the Hon’ble jurisdictional Madras High Court decision M/s.Sri Rujula International vs. PCIT (WP Nos. 4307 of 2024, WMP Nos.4619 & 4621 of 2024) dated 12.09.2024 by following the earlier decisions of the Hon’ble High Court in the case of 2023(10) TMI 1141 [M/s.True Blue Voice India Private Limited vs. Chief CIT, TDS [2024] 158 taxmann.com 67 (Madras) held as under:-

“4. In the present case, the respondent had imposed the late fee only under Section 234E of the Act for the assessment years 2012-2013, 2013-2014. However, Section 200A of the Act was not introduced during the said assessment years and it was introduced only with effect from 01.06.2015. Therefore, in the absence of any provisions under Section 200A of the Act, the respondents ought not to have imposed late fee under Section 234E while processing the applications for TDS under Section 200A. Hence, in such view of the matter, this Court is of the opinion that the impugned Demand Intimation Letters are liable to be set aside.

5. Accordingly, the impugned demand Intimation Letters dated 28.03.2019 are set aside and the Writ Petition stands disposed of. No costs.”

14. Further, we note that the issue is already covered by the decision of the coordinate bench of the tribunal in the case of Gopuram Enterprises Private Limited vs. ACIT, ITA No.1002-1007/Chny/2024 dated 26.06.2024 by holding as under:-

“4. We have heard ld. Counsel for the assessee and ld.DR. We have perused orders of the authorities below. We find that the issue involved in the present appeals filed by the assessee is on levy of late fee under section 234E of the Act, for belated filing of quarterly TDS returns beyond prescribed date and this issue is squarely covered by the decision of Hon’ble Jurisdictional Madras High Court in the case of M/s.True Blue Voice India Private Limited vs. CCIT & Ors (WP Nos. 2700 & 2703 of 2022) dated 09.10.2023 and held as under:-

“10. There is no dispute on the aspect of validity of the Section 234E of the Act. The only issue that has to be decided in the present case is as to whether the late fee can be imposed under Section 234E of the Act, while processing the statement of TDS under Section 200A of the Act for the subject assessment years?

11. On considering the submissions of both the learned counsel and while reading Section 234E of the Act, it appears that the Department/respondents can impose the late fee for the circumstances mentioned under Section 234E of the Act with effect from 01.07.2012, but not when they process the TDS under Section 200A of the Act. In the Finance Bill, 2015, Section 200A(1)(c) of the Act was introduced, which reads as follows:

“200A. Processing of statements of tax deducted at source.—

(1)………………….

(a)………………….

(b)……………………

(c) the fee, if any, shall be computed in accordance with the provisions of section 234E;”

12. Further, the objects and reasons for introduction of Section 200A(1)(c) of the Act are as follows:

“Rationalisation of provisions relating to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS)

Under Chapter XVII-B of the Act, a person is required to deduct tax on certain specified payment at the specified rate if the payment exceeds the specified threshold. The person deducting tax (‘the deductor’) is required to file a quarterly Tax Deduction at Source (TDS) statement containing the details of deduction of tax made during the quarter by the prescribed due date. Similarly, under Chapter XVII-BB of the Act, a person is required to collect tax on certain specified receipts at the specified rates. The person collecting tax (‘the collector’) also is required to file a quarterly Tax Collection at Source (TCS) statement containing the details of collection of tax made during the quarter by the prescribed due date. In order to provide effective deterrence against delay in furnishing of TDS/TCS statement, the Finance Act, 2012 inserted section 234E in the Act to provide for levy of fee for late furnishing of TDS/TCS statement. The levy of fee under section 234E of the Act has proved to be an effective tool in improving the compliance in respect of timely submission of TDS/TCS statement by the deductor or collector.

Finance (No.2) Act, 2009 inserted section 200A in the Act which provides for processing of TDS statements for determining the amount payable or refundable to the deductor. However, as section 243E was inserted after the insertion of section 200A in the Act, the existing provisions of section 200A of the Act does not provide for determination of fee payable under section 234E of the Act at the time of processing of TDS statements. It is, therefore, proposed to amend the provisions of section 200A of the Act so as to enable computation of fee payable under section 234E of the Act at the time of processing of TDS statement under section 200A of the Act.

Currently, the provisions of sub-section (3) of section 200 of the Act enable the deductor to furnish TDS correction statement and consequently, section 200A of the Act allows processing of the TDS correction statement. However, currently, there does not exist any provision for allowing a collector to file correction statement in respect of TCS statement which has been furnished. It is, therefore, proposed to amend the provisions of section 206C of the Act so as to allow the collector to furnish TCS correction statement.

Currently, there does not exist any provision in the Act to enable processing of the TCS statement filed by the collector as available for processing of TDS statement. As the mechanism of TCS statement is similar to TDS statement, it is proposed to insert a provision in the Act for processing of TCS statements on the line of existing provisions for processing of TDS statement contained in section 200A of the Act. The proposed provision shall also incorporate the mechanism for computation of fee payable under section 234E of the Act.”

13. A reading of the above makes it clear that since no mechanism was available for determination of late fee payable under Section 234E of the Act at the time of processing TDS statements. Thus it was proposed to amend the provisions of Section 200A of the Act, so as to enable the computation of fee payable under Section 234E of the Act at the time of processing of TDS statement under Section 200A of he Act. Thus, the said sub-Section 200A(1)(c) of the Act was came to be inserted with effect from 01.06.2015.

14. Now the dispute is with regard to the assessment years 2012- 13, 2013-14, 2014-15 and the applicability of Section 200A(1)(c) of the Act for relevant assessment years. There is no dispute on the aspect that the TDS statement was filed under Section 200A of the Act and the respondent had also issued the intimation under Section 200A of the Act, which means the respondents have processed the returns under Section 200A of the Act. When the respondent had started to process the returns of the petitioner under Section 200A of the Act, obviously they have to follow the requirements under Section 200A of the Act. Section 200A(1)(c) of the Act was introduced with effect from 01.06.2015. A reading of the objects and reasons of the same makes it clear that since no mechanism was available, Section 200A(1)(c) of the Act was introduced for imposing late fee for the delay in filing statement of TDS. Therefore, from the introduction of the said Sub-Section it is clear that prior to the same, though Section 234E of the Act was introduced with effect from 01.07.2012, the Authorities were not empowered to impose the late fee while processing the statement of TDS under Section 200A of the Act.

15. The learned counsel for the respondent advanced his arguments on the aspect of the imposition of late fee by applying Section 200A(1)(c) of the Act retrospectively. This Court is not in agreement with the said submissions of the respondent. Since, there was no provision for imposing the late fee under Section 234E of the Act while filing and processing the TDS returns under Section 200A of the Act, clause (c) to Sub-Section (1) to Section 200A was introduced with effect from 01.07.2012. Therefore, the aforesaid submission made by the learned counsel for the respondent is rejected by this Court.

16. Further it was stated by the respondent that they have no power to waive the late fee and only the Commissioner of Income Tax is empowered to pass the revised order by proper application of provision of Section 264C of the Act.

17. In view of the above, it is made clear that the respondent had had imposed the late fee only under Section 234E of the Act for the assessment years 2012-2013, 2013-2014, 2015-2015. However, Section 200A(1)(c) of the Act was not introduced during the said assessment years. In the absence of any provisions under Section 200A of the Act, when they have processed the application for TDS under Section 200A, no late fee can be imposed under Section 234E. Hence, in such view of the matter, this Court feels that the impugned orders are liable to be set aside’’

The Co-ordinate Bench of the Tribunal also in the case of M/s.M.F.Textiles Pvt.Ltd. Vs. ACIT in ITA Nos. 578 & 579/Chny/2021 dated 24.02.2022 had considered an identical issue in light of provisions of section 234E of the Act and also amendment to section 200A by Finance Act, 2015 w.e.f. 01.06.2015 and held that in absence of enabling provision under section 200A of the Act, the Assessing Officer cannot levy late fee under section 234E of the Act for belated filing of quarterly TDS return for period prior to 01.06.2015.

6. In the present appeals, on perusal of the facts, we find that the assessment years involved are prior to 01.06.2015. Therefore, we are of the considered view that the late fee charged by the Assessing Officer under section 234E of the Act, while processing quarterly TDS return under section 200A of the Act, is without any authority and invalid. Hence, by respectfully following the decisions of the Hon’ble Jurisdictional Madras High Court in the case of M/s. True Blue Voice India Private Limited (supra) and Co-ordinate Bench in the case of M/s.M.F.Textiles Pvt.Ltd (supra), we are of the considered view that the Assessing Officer cannot levy late fee while processing of TDS return under section 200A of the Act upto the financial year 2014-15. Since, late fee charged in the present case pertaining to the financial years 2012-2013 and 2013-14, we direct the Assessing Officer to delete the late fee charged under section 234E of the Act in the intimation issued under section 200A of the Act for the processing of quarterly TDS return filed by the assessee.

7. In the result, all six these appeals filed by the assessee are allowed.

15. Respectfully following the binding judicial precedents relied upon by the ld.AR, we hold that the levy of late fees u/s.234E of the Act in respect of TDS statements pertaining to the period prior to 01.06.2015 is invalid and liable to be deleted. Accordingly, the eight (8) appeals for A.Ys. 2014-15 and 2015-16 and corresponding demands raised u/s.234E of the Act as detailed below are hereby deleted.

16. However, insofar as the appeal in ITA No.67/Chny/2026 relating to A.Y. 2016-17 (26Q – Q1) is concerned, it is an admitted position that the relevant period falls after 01.06.2015, i.e., subsequent to the amendment in section 200A of the Act, which enabled the levy of fees u/s.234E of the Act during processing of TDS returns. Therefore, the levy of late fees in respect of this assessment year is in accordance with law, and the same is upheld.

17. In the result, the eight appeals in ITA No.59 to 66/Chny/2026 filed by the assessee are allowed and the appeal of the assessee in ITA No. 67/Chny/2026 is dismissed.

Order pronounced in the open court on 10^th April, 2026 at Chennai.