Section 234E Late Fee for FY 2012-13 Struck Down Despite Correction Statement Filed in 2021 — ITAT Pune

Overview of the Ruling

The Income Tax Appellate Tribunal, Pune Bench, has ruled in favour of the assessee in Mulchand Ramkisan Laddha Vs ITO (ITAT Pune) for Assessment Year 2013-14, holding that a late fee levied under Section 234E of the Income Tax Act, 1961 for a period falling before 1 June 2015 cannot be sustained in law. Crucially, the Tribunal clarified that merely filing a correction statement in 2021 did not shift the legal character of the underlying TDS statement, which continued to relate to FY 2012-13 — a period for which the statutory machinery to compute and demand such fees under Section 200A was not yet operative.

This decision carries meaningful implications for assessees who remain exposed to legacy TDS late fee demands arising from the pre-amendment era, including situations where correction filings were made years after the original statement.

Factual Background

The assessee is a business firm engaged in deriving income from business operations. As part of its TDS compliance obligations, the firm was required under Section 200 of the Income Tax Act, 1961 to deduct tax at source, remit it to the government, and file quarterly TDS statements within prescribed timelines.

The firm filed its Form 26Q for Quarter 4 of FY 2012-13 on 27 November 2013. The Centralized Processing Centre (CPC-TDS) processed this statement under Section 200A on 23 December 2013.

Several years thereafter, the assessee submitted a correction statement on 10 December 2021. CPC-TDS processed this correction statement through an order under Section 154 dated 11 December 2021. Through this order, a late fee of ₹39,200 was levied under Section 234E, along with interest of ₹37,632 under Section 220(2) of the Income Tax Act, 1961.

The first appellate authority — the Additional/Joint Commissioner of Income Tax (Appeals)-5 — upheld the demand, placing reliance on the Madras High Court's ruling in Conceria International (P.) Ltd. Vs. ITO, (2024) 464 ITR 92 (Madras). The assessee thereafter preferred an appeal before the ITAT Pune.

The central question before the Tribunal was whether a late fee under Section 234E could lawfully be computed and demanded through Section 200A in respect of a TDS statement pertaining to a period prior to 1 June 2015.

This question turns on the nature of the 2015 amendment to Section 200A, which explicitly brought the computation of fees under Section 234E within the scope of TDS statement processing. Two competing interpretations exist:

  • **Prospective view (favourable to assessee)😗* The amendment to Section 200A effective from 1 June 2015 operates only prospectively. Therefore, for TDS statements relating to periods before that date, there was no statutory authority to compute or demand fees under Section 234E through Section 200A.
  • **Contrary view (Revenue's position)😗* The levy under Section 234E is independently authorized and the processing machinery under Section 200A, as amended, can be applied regardless of the period to which the TDS default relates.

Arguments Advanced by Both Sides

Assessee's Submissions

The learned Authorised Representative for the assessee argued that no late fee under Section 234E is leviable for AY 2013-14 and placed reliance on the following decisions: