ITAT Chennai Strikes Down Section 234E Late Fee for TDS Returns Filed Before 01.06.2015: M.F. Textiles Pvt. Ltd. vs ACIT

Case Overview

Background and Context

The Income Tax Appellate Tribunal, Chennai Bench, took up two appeals filed by M.F. Textiles Pvt. Ltd., both directed against identical orders passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, on 29.09.2021. The appeals pertained to Assessment Years 2013-14 and 2015-16. Given that the underlying facts and legal issues were substantially the same across both appeals, the Tribunal consolidated them and disposed of both through a single unified order.

The core dispute revolved around whether the Assessing Officer was legally empowered to levy a late filing fee under Section 234E of the Income-tax Act, 1961, while processing quarterly TDS returns under Section 200A of the Act, for periods falling prior to 01.06.2015 — a date that carries significant legislative significance in this context.

Preliminary Issue: Condonation of Delay

Before addressing the merits, the Tribunal was required to examine a procedural threshold issue. Both appeals had been filed 11 days beyond the prescribed limitation period. The assessee's authorised representative submitted that the delay was negligible and sought condonation in the interest of justice.

The Tribunal, after hearing both sides and examining the condonation petition, accepted that the reasons offered by the assessee for the delay constituted reasonable cause within the meaning of the relevant provisions of the Act. Accordingly, the delay was condoned and both appeals were admitted for adjudication on merits.

Note: Condonation of delay, even for short periods, requires the assessee to demonstrate a reasonable cause. The Tribunal's willingness to condone an 11-day delay here underscores that genuine cases should not be defeated by minor procedural lapses.

Facts of the Case

For the relevant Assessment Years 2013-14 and 2015-16, M.F. Textiles Pvt. Ltd. had filed its quarterly TDS returns in Forms 24Q and 26Q after the due dates prescribed under the Act.

The Assessing Officer, upon processing these quarterly TDS returns under Section 200A, proceeded to levy late filing fee under Section 234E of the Income-tax Act, 1961 on account of the delay in furnishing these statements.

The assessee challenged this levy before the CIT(A). However, despite multiple hearing opportunities being granted — specifically on 03.02.2021, 09.04.2021, 20.08.2021, and 16.09.2021 — the assessee failed to place any written submissions or supporting material on record before the appellate authority.

Consequently, the CIT(A) rejected both appeals:

• On procedural grounds (limitation in filing the appeal), and
• On merits, by affirming the Assessing Officer's order levying late fee under Section 234E

The Central Legal Question

The singular and decisive legal issue that the Tribunal was required to adjudicate was: