The Kerala High Court’s recent verdict addressed a crucial issue involving the Atnk & K Area Armed Forces Veterans Canteen, focusing on the delay in TDS return filing. The case centered on the inadvertent filing of Form 24Q instead of the mandated Form 26Q, leading to the imposition of penalties under section 234E of the Income Tax Act. This article provides an in-depth analysis of the case, examining the circumstances, assessment, and the court’s decision to delete the penalty.
Detailed Analysis: The petitioner, an Armed Forces Veterans Canteen, encountered penalties due to a procedural error in filing the quarterly statement for the second quarter of Financial Year 2017-18. Despite promptly deducting and remitting taxes, the petitioner mistakenly submitted Form 24Q instead of the required Form 26Q. This filing error triggered the assessment of a substantial penalty, including a late fee of Rs.47,000, interest of Rs.23,500, and late payment interest of Rs.567.
Challenging the penalties, the petitioner pursued the matter through the appellate process, reaching the Income Tax Appellate Tribunal (ITAT). The ITAT, recognizing the timely filing of quarterly TDS returns, remanded the case to the Assessing Authority for a fresh assessment.
Initially, the Assessing Authority adhered to the ITAT’s directive, resulting in a ‘Nil’ demand. However, in a subsequent order (Ext.P6), the authority reinstated the penalties. The petitioner contested this inconsistency, asserting that the Tribunal had rejected the initial stand. The Tribunal’s stance emphasized that, as the return was filed on time and subsequently corrected to Form 26Q, penalties were unjustified.
The Kerala High Court, in its analysis, concurred with the petitioner’s argument. It underscored that the return was indeed filed on time, with the only flaw being the initial choice of Form, which was later rectified. Consequently, the court found no legal basis for the imposition of penalties and interest, leading to the overturning of the order in Ext.P6.
Conclusion: In conclusion, the Kerala High Court’s decision in the Atnk & K Area Armed Forces Veterans Canteen case sends a strong precedent, emphasizing the importance of substance over procedural errors in tax filings. The court’s meticulous examination of the facts, coupled with a consistent adherence to the ITAT’s observations, resulted in the deletion of penalties initially imposed under section 234E. This judgment provides clarity on the interpretation of tax regulations, highlighting the significance of timely filing and corrective measures to rectify procedural discrepancies.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
Heard Ms K Krishna learned Counsel for the petitioner and Mr Christopher Abraham learned Stading Counsel for the Income Tax Department.
2. The present writ petition under Article 226 of the Constitution of India has been filed impugning Ext.P6 order dated 03.03.2023 for the Assessment Year 2018-19 on remand by the Tribunal wherein the demand of late fee under Section 234E of the Income Tax Act has been assessed at Rs.71,067/-, [which includes late fee of Rs.47,000/-, interest of Rs.23,500/- and interest of late payment of Rs.567/-].
3. The petitioner, an Armed Forces Veterans Canteen, was served with a notice under Section 201 for not filing the quarterly statement for the second quarter of Financial Year 2017-18 in Form 26Q. In fact, the petitioner had deducted and paid the tax but filed Form 24Q instead of Form 26Q. The said Form 24Q was rejected. However, the petitioner filed the correct Form only on 23.06.2018. Therefore, the late fee of Rs.47,000/- and interest on the payment of the late fee of Rs.567/- was levied on the petitioner. The petitioner challenged the said order before the Commissioner of Income Tax (Appeals), which affirmed the order passed by the Assessing Authority.
3.1 Thereafter, the petitioner approached the Income Tax Appellate Tribunal (for short, ‘the Tribunal’) by filing I.T.A. No.98/Coch/2022. The Tribunal noted that computer- generated Form 24Q was filed on 20.10.2017. This Form was revised and corrected in Form 26Q. Considering the fact that the quarterly TDS returns were filed on time, and only the Form was incorrectly filed, the Tribunal remanded the matter back to the Assessing Authority to pass fresh orders in the light of the observation made in the Order dated 01.07.2022 passed by the Tribunal (Ext.P4).
4. Learned Counsel for the petitioner submits that on remand, the Assessing Authority, in fact, gave effect to the order of the Tribunal and assessed ‘Nil’ demand. However, subsequently, vide order in Ext.P6, the Assessing Authority has again levied a late fee of Rs.47,000/-, interest of Rs.23,500/- and interest of late payment of Rs.567/-. Learned Counsel for the petitioner submits that the earlier stand of the Assessing Officer was rejected by the Tribunal. The Tribunal found that the return for the second quarter of the Financial Year 2017- 18 was filed on time, however, it was in the incorrect Form, and the said Form was revised. Therefore, it cannot be said that the petitioner did not file the return on time and that there was no question of levying any late fee. She also submits that when the petitioner had deposited the tax deducted as TDS on time, there was no question of levy of any interest.
5. I find substance in the submission of the learned Counsel for the petitioner. It is not in dispute that the petitioner had filed the return on time. However, it was not in the correct Form, and it was revised. Therefore, when the petitioner had filed the return on time, there is no question of levying penalty and interest.
The writ petition stands allowed. The impugned order in Ext.P6 is set aside.