TDS Return Filing in Form 24Q Instead of 26Q Shouldn’t Attract Late Fees if No Revenue Loss

Birla Cement Works STFF Provident fund Vs ITO (ITAT Jodhpur)

This summary discusses the Income Tax Appellate Tribunal (ITAT) Jodhpur’s judgment regarding three appeals filed by Birla Cement Works Staff Provident Fund against the Income Tax Officer (ITO). These appeals arise from orders by the CIT(A), National Faceless Appeal Centre, Delhi, dated 27.03.2023, for the assessment year 2020-2021.

Grounds of Appeal

The appellant raised several grounds challenging the CIT(A)’s dismissal of their appeals:

1. The CIT(A) erred in concluding that the appeal was filed beyond the permissible time.
2. The CIT(A) incorrectly interpreted the Supreme Court’s extension of the limitation period.
3. The CIT(A) neglected to consider further Supreme Court orders extending the limitation period due to COVID-19.
4. The CIT(A) failed to decide the case on its merits.

Case Background

Birla Cement Works Staff Provident Fund is a recognized provident fund set up under the Employees Provident Fund & Miscellaneous Provisions Act, 1952. The fund’s activities include collecting contributions, managing funds, maintaining records, and disbursing pensions. The dispute arose when the fund paid interest to ex-employees on their provident fund balances and deducted tax at source (TDS), depositing it timely with the central government and filing TDS returns in Form 24Q. However, they later discovered that these deductions should have been filed in Form 26Q. Attempts to correct this were unsuccessful due to technical issues on the TRACES portal, leading them to file a new return in Form 26Q. This new return was treated as delayed, resulting in a late fee of ₹96,800 for 484 days, as communicated on 14.07.2021.

CIT(A) Decision

The CIT(A) dismissed the appeal, stating:

1. The order under dispute was passed on 30.11.2020 and served on 30.11.2020 via email.
2. The extended limitation period due to COVID-19 ended on 13.06.2021. Since the appeal was filed on 27.10.2021, it was delayed.
3. Even if the service date of 14.07.2021 was considered, the appeal period would end on 13.08.2021, still rendering the appeal late.
4. The appellant claimed no delay in Form 35, submitting incorrect verification, and did not seek condonation of delay.

Appellant’s Arguments

The appellant contended:

1. They did not receive the intimation dated 30.11.2020, and the demand notice was received on 14.07.2021.
2. Due to COVID-19, the Supreme Court extended the limitation period, culminating in an exclusion from 15.03.2020 to 28.02.2022.
3. Their appeal filed on 27.10.2021 fell within this extended period, making it timely.

ITAT Findings

The ITAT observed:

1. The appellant complied with Chapter XVII of the Income Tax Act and deducted tax on interest payments timely.
2. Technical issues on the TRACES portal prevented correction of Form 24Q to 26Q, necessitating a new return in Form 26Q.
3. The Central Processing Cell of TDS treated this new return as delayed, resulting in a late fee.
4. The Supreme Court extended the limitation period, which the CIT(A) overlooked in their decision.

ITAT Decision

The ITAT concluded:

1. The appeal was filed within the extended limitation period due to COVID-19.
2. The CIT(A) should have considered the merits of the case, not just procedural aspects.
3. Similar cases, such as GB Builders vs. ACIT (ITAT Ahmedabad) and Sh. Gurpreet Singh vs. ACIT (ITAT Chandigarh), support the appellant’s position.

Merits of the Case

On the merits, the appellant argued:

1. A technical mistake led to the TDS return being filed in Form 24Q instead of 26Q.
2. Upon realizing the mistake, they filed correction statements, which the TRACES portal did not accept.
3. They subsequently filed Form 26Q, which was processed as a new return, resulting in an undue late fee.
4. Jurisprudence supports the view that technical errors should not attract late fees when no revenue loss occurred.

Conclusion

The ITAT ruled in favor of the appellant, acknowledging that the appeal was timely filed within the extended period due to COVID-19 and that the CIT(A) should address the merits of the case. The late fee imposed due to a technical filing error was deemed inappropriate, given the circumstances and supporting case law.