The late fees u/s. 234E is justified?
The late fees u/s. 234E is justified?
Recently, a newly section 234E for levy of fees in certain cases have been introduced in the Income Tax Act effective from 1st July 2012. It speaks about levy of late fee to be paid before delayed filing of TDS statements.
Simultaneously, the department of income tax has started a CPC/Traces section at Ghaziabad (U.P.) for the online filing of TDS matters. It is a welcome procedure. All the TDS related matters are processed and result is decided at that centre. However, the usual problems like, jurisdiction of the assessee for addressal of grievances, the disputed issues appeals etc. are the common issues which are always remains unresolved or disputed.
Over and above the additional burden of late fees had been introduced under the section 234E. Under this article we are trying to discuss whether the levy of late fees u/s. 234E is justified?
The section 234E can be analyzed on following lines-
1. This section has been inserted by the Finance Act 2012 w.e.f. 1st July 2012.
2. The section enumerates the fees for default in furnishing the statements.
3. The levy of late fee is concerned with the deductor who fails to deliver the statement as required u/s. 200(3) or section 206 C (3) of the Income Tax Act.
4. The amount of fee is 200 per day for each day of failure to deliver the statement.
5. However, the amount of late fees will not exceed the amount of tax deductible or collectible.
6. However, the late fees shall be paid before the delivery of statement so required to be filed.
7. The said section enacts to levy the late fee for the statements to be delivered as mentioned above on or after 1st day of July 2012. Interest u/s. 234E is in fact the late fees for non-filing of TDS statement u/s. 200(3) & 206 C (3).
However, the said late fees could not be applicable to the cases where TDS payment is made beyond the time limit prescribed for payment of TDS u/s. 200(3) because-
a. The deductor should pay the TDS to the credit of Central Government within stipulated time and thereupon he has to file statement in prescribed form within prescribed time section 200(3).
Whereas if the deducted TDS is not paid in stipulated time the question of filing prescribed statement in prescribed time does not arise. Therefore, the provision of section 234E will also not attract.
b. Where the section 200(3) says first to pay the tax and then to file return or statement. It means unless the TDS dues had not been paid with interest, if any, u/s. 201 for the delay in payment the returns/statement cannot be filed. In this situation the fees u/s. 234E cannot be charged, since without payment of tax the statement or return cannot be delivered. It had been decided in the court of law that “law cannot ask people to do what is not possible to do”.
c. Without prejudice to the above, it could also be contented that the provision of section 234E starts with “without prejudice to the provisions of the Act” and does not starts as “Not withstanding anything contented in the provision of this Act”. Therefore, the technical effect of the some could be the start of days for 234E fees is from the due date of filing the statements or the date of TDS remittance whichever is later.
Alternatively, the procedure of deducting or collecting TDS is an administrative process. In this, the deductor becomes the representative of the Government of India to collect the tax and deposit in to the Central Government treasury. In other words, the deductor saves the time and money of the Central Government to administer the tax collection.
However, the Hon. Central Government had levied many penal provisions on such deductor who is a part of Government machinery for his default or delay or non-compliance. Some of them are enumerated below.272A(2)(g) Failure to furnish TDS Certificate Penalty of Rs. 100 per day restricted to the amount of TDS. 272A(2)(k) Non-filing of TDS Penalty Rs. 100 per day till default continues restricted to the amount of TDS Applicable up to 1st July 2012
|201(1)||Failure to deduct or pay||Considered as assessee in default and its consequences would follow|
|201(1A)||Interest on Late Payments of TDS||Interest- 1% from date of deductible to date of deduction. 1.5% from date of deduction to date of payment.|
|221||Non-Payment of demand raised||Amount of tax in arrears.|
|234E||Fees for default in furnishing return||Rs.200 per day till default continues restricted to the amount of TDS.|
|271C||Failure to deduct tax at source||Sum equal to amount of tax.|
|271H||Non-filing of TDS statement beyond one year.||Penalty Rs. 10000 which may extend up to Rs. 100000.|
|242(2)(c)||Furnishing returns in due time||Penalty of Rs. 100 per day restricted to the amount of TDS.|
|272BB||Failure to apply for TAN or Non-Quoting of TAN||Penalty of Rs. 10000.|
|276B||Failure to pay tax to credit of government.||Imprisonment for not less than 3uears but may extend to 7 years.|
Consequences of TDS defaults- Failure to deduct taxes or wrong deduction of TDS (non-deposit, short deposit or late deposit)-
|Section||Default/Failure or Penalty||Nature of Demand||Quantum of Demand|
|201(1)||Failure to deduct tax at source||Tax demand||Equal to tax amount deductible but not deducted.|
|201(1A)||Interest||@1% p.m. of tax deductible.|
|271C||Penalty||Equal amount of tax deductible but not deducted.|
|201(1)||Failure to deposit tax at source||Tax demand||Equal to tax amount not deposited.|
|201(1A)||Interestemail@example.com% p.m. of tax not deducted.|
|276B||Prosecution||Rigorous imprisonment for a term for a minimum of 3months which may extend to 7years and with fine.|
|272BB||Failure to apply for TAN no. u/s. 203A||Penalty||Rs. 10000|
|272A(2)(k)||Failure to furnish prescribed statements u/s 200(3)||Penalty||Rs. 100 every day during which the failure continues subject to maximum of TDS amount|
|272(A)(g)||Failure to issue TDS certificate u/s 203||Penalty||Rs. 100 every day during which the failure continues subject to maximum of TDS amount.|
|272(A)(i)||Failure to furnish statement of perquisite of profit in lieu of salary u/s 192(2C)||Penalty||Rs.100 every day during which the failure continues subject to maximum of TDS amount|
|272B||Failure to mention PAN of the deductee in the TDS statements and certificates||Penalty||Rs. 10000|
Recently, in the court of law the issue of fees of section 234E had been admitted and stay had been granted for the levy of fees u/s. 234E of the I.T. Act 1961. The related cases are as follows-
a. Om Prakash Dhoot v/s. Union of India Rajasthan High Court: (2014) Tax Corp (IJ) 3199 dated 18/04/2014.
b. Court of its own motion v/s. Commissioner of Income Tax: (2013) 258 CTR (Del) 113.
c. Narath Mapila L.P. School v/s. Union of India: WPC No. 31498/2013(J) decided on 18/12/2013 Kerala High Court 2014 ITL (3).
d. High Court of Karnataka at Bangalore: Writ Petition No. 6918-6938/2014 (T-IT) decided on 19/02/2014.
i. Adithya Bizorp Solutions India Pvt. Ltd.
ii. Divine Auto CNC
iii. Micro Tech CNC
iv. VRL Automation Engineering and Project Pvt. Ltd.
v. VIPRA Machine Tools
vi. Mookambika CNC
vii. Stainless Vessels Fabricators
viii. Bhavana Fluid Power.
ix. Manjunatha Precision Tools
x. Innova CNC
xi. Adarsha Machine Tools
xii. Phoenix Precision Parts
xiii. Sree Vehkateshwara Service Station
xiv. Excel Forge Tech
xv. Sukhena Technologies Pvt. Ltd.
xvi. B.M. Developers
xvii. Radiant Supply Chain Solutions.
xviii. AL Amen Charitable Fund Trust
xix. Roopashri Shankar Chindalur
xx. P. Chakravarthy
xxi. C.R. Shreekumar
The section 234E (3)- It states that- “Amount of late fee shall be paid before delivering a TDS statement”, It means that any late fee should have been deposited just at the time of delivering TDS statement and not later than this. The authorized TIN-NSDL centre which accepted the TDS statement also accepted these without late fee, as well as the software utility of the TDS department itself accepted these without late fee.
Once the TDS statement has been accepted without late fee, then such late fee cannot be recovered later on. However this late fee cannot be waived even for any reasonable.
As per provision of section 234E (4) late fee is applicable for “TDS statement which is to be delivered or caused to delivered for tax deducted at source or tax collected at source, as the case may be, on or after 1st July 2012”.
Late fee cannot be recovered for TDS statements which were due for F.Y. 2011-12 as well as TDS statement late fee cannot be recovered for F.Y. 12-13, if not collected at the time of delivering TDS statement to the department.
On the other hand it is also pertinent to note that the law has not made any person responsible, to deposit late fee, in case of default in depositing late fee along with TDS statement, which can be inferred from the provisions of section 204 of the act, which states as under-
“For the purposes of[the foregoing provisions of this chapter] and section 285, the expression person responsible for paying “ means-
i. In the case of payments of income chargeable under the head ”salaries”, other than payments by the Central Government or the Government of a state, the employer himself or, if the employer is a company, the company itself, including the principal officer thereof;
ii. In the case of payments of income chargeable under the head ”Interest on Securities”, other, than payments made by or on behalf of the Central Government or the Government of a state, the local authority, corporation or company, including the principal officer thereof;
iia) in the case of any sum payable to a non-resident Indian, being any sum representing consideration for the transfer by him of any foreign exchange asset, which is not a short-term capital asset, the [authorized person] responsible for remitting such sum to the non-resident Indian or for crediting such sum to his Non-resident (External) Account maintained in accordance with [the Foreign Exchange Management Act, 1999 (42 of 1999)], and any rules made there under;]
iii. [in the case of credit, or, as the case may be, payment] of any other sum chargeable under the provisions of this Act, the prayer himself, or, if the prayer is a company, the company itself including the principal officer thereof;
iv. [in the case of credit, or as the case may be, payment of any sum chargeable under the provisions of this Act made by or on behalf of the Central Government or the Government of a state, the drawing and disbursing officer or any other person, by whatever name called, responsible, for crediting, or as the case may be, paying such sum.]”.
The section 204 specifically says that: “For the purposes of the foregoing provisions of this chapter means section 190 to section 203 and for section 285 of the act the following persons would be responsible”, so it is clear that for the purpose of section 234E none of the person has been made responsible, therefore if any late fee is due and not deposited along with the tds statement none can be held responsible to deposit it.
Demand of late fee cannot be raised also by way of processing of TDS statement, because provisions of section 200A of the act does not cover default in payment of late fee, except any arithmetical error, or incorrect claim, or default in payment of interest, any tds payable or refundable etc.
In view of the above it is my opinion that late fee cannot be recovered later on by way of any notice, neither notice of demand u/s. 156 can be issued for this.
There are instances of the Hon. Supreme Court in the case of TDS issues had pronounced a very cordial view-such as-
i. In the case of Hindustan Coca Cola Beverage P Ltd. v/s. CIT: (2007) 163 Taxman 355 (SC). The assessee is excused for inaccurate deduction of TDS.
ii. In the various appeals of the revenue at Supreme Court in the case of M/s. Tata Chemicals Ltd. and others civil appeal no. 6301 of 2011 together with other 28 civil appeals up to 2014. The Hon. Supreme Court has directed to give interest u/s. 244A of the Income Tax Act on the excess refund of TDS.
iii. On the one hand the highest court of the country had shown a liberal view to the assessee but Hon. CBDT had acted with bias attitude toward the common assessee. It is because the Hon. CBDT had issued a Circular No. 7/2014 dated 4-3-2014 extending the date of filing the TDS statements for Government deductor and not for common deductor. Why there should by such partially-?
Considering, all above facts and contentions the validity of the section 234E may could be questioned because of following reasons-
a. There are two penal provisions already exists for the failure to file TDS statements and now one more had been levied in the name of late fees. Therefore for one and same crime (not filing of TDS returns) can department penalize many fold to the assessee.
b. Even if the assessee is being helping to the Government by collecting and paying tax on behalf of the Government and similarly, there are various provisions of levy of interest, penalty and prosecution to such person who fails to pay the collected dues. Even in this situation to levy fees for merely default in filing the statement which is on administrative matter. The provision of section 234E may could be called as rigorous.
c. It is pertinent to note that there is no term of late fees in whole I.T. Act 1961, except this newly inserted section 234E.
Therefore it is therefore requested to keep the issue of late fees u/s. 234E in abeyance till the guidelines received from the court of law and oblige.
d. It is surprising that there are so many automats defaults identified at CPC Bangalore and CPC Ghaziabad. The assessee has to suffer for the none of his fault and why not the Government mechanism or its own default is a million dollar question.
e. Recently the Delhi High Court lauds computerization but issues 7 mandamuses for addressing tax payer grievances in the decision laid down of the court an its motion v/s. CIT: (2013) 31 taxmann.com 31 (Delhi). The Hon. High Court had advocated that the department should observe the citizen character also.
In light of all the above contentions and already the issue is before the various High Courts in India in which stay had been granted till the decision.
The readers are requested to keep the issue in abeyance till the settlement of the issue at court of law and oblige.
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