2025 (6) TMI 322 - AT - Income Tax

Late filing fee charged u/sec.234E - appellant company has filed Form-26Q for 1st 2nd and 3rd quarters for the financial year 2022-2023 beyond the due date provided under the provisions of sec.200(3) BUT on or before the due date for filing of 4th quarterly return in Form- 26Q i.e. before 31.05.2023. Argument of Assessee that appellant company could not file quarterly returns on or before the due date due to ill health of the Director of the appellant company for which the appellant company has filed relevant medical records and as per the said medical records the Director of the appellant company has undergone surgery for spinal-card treatment. HELD THAT - All three quarters returns in Form-26Q has been filed on or before the due date for filing 4th quarter return for the relevant financial year in our considered view there is no inconvenience is caused either to the Department or to the persons from whom TDS has been recovered because in any case the appellant company has paid relevant TDS along with interest and also reported particulars of deduction of TDS by filing the statement in Form-26Q well beyond the due date provided for filing 4th quarterly return of the financial year. There is a reasonable cause for the appellant company in not filing the return on or before the due date provided for each quarter of the financial year and thus in our considered view the AO TDS CPC ought not to have levied late filing fee u/sec.234E. Assessee appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

- Whether the late filing fee under section 234E of the Income Tax Act, 1961 is leviable for delay in filing quarterly TDS returns in Form-26Q for the 1st, 2nd, and 3rd quarters of the financial year 2022-2023, when such returns were filed beyond the due dates prescribed under section 200(3) but on or before the due date for filing the 4th quarter return.

- Whether the appellant company's explanation of reasonable cause, specifically the ill-health of its Director supported by medical records, is sufficient to exempt it from the levy of late filing fee under section 234E.

- Whether the learned CIT(A) was justified in upholding the late filing fee imposed by the Assessing Officer despite the appellant's submissions and evidence.

2. ISSUE-WISE DETAILED ANALYSIS

Levy of Late Filing Fee under Section 234E for Delay in Filing Quarterly TDS Returns

Relevant Legal Framework and Precedents: Section 234E of the Income Tax Act, 1961 mandates the levy of a late filing fee for delay in furnishing statements of TDS or TCS within the prescribed due dates. The fee is computed at a prescribed rate per day of delay, subject to a maximum limit. Section 200(3) prescribes the due dates for filing quarterly TDS returns in Form-26Q.

Court's Interpretation and Reasoning: The Court acknowledged that the appellant company filed the quarterly returns for the 1st, 2nd, and 3rd quarters beyond the due dates specified under section 200(3). The Assessing Officer, relying on the statutory mandate of section 234E, levied the late filing fee accordingly. The learned CIT(A) upheld this levy, emphasizing the strict compliance requirement under the Act.

Key Evidence and Findings: The appellant company's quarterly returns for the first three quarters were filed on 29.04.2023, which was after their respective due dates but before the due date for filing the 4th quarter return, i.e., 31.05.2023. The appellant submitted medical records evidencing the ill-health and surgery of its Director as a reasonable cause for the delay.

Application of Law to Facts: While section 234E prescribes a late fee for delay, the Court examined whether the delay was excusable on grounds of reasonable cause. The appellant's argument was that filing all three delayed returns before the final quarter's due date caused no prejudice or inconvenience to the Revenue or deductees, especially since TDS was paid with interest and particulars were eventually reported.

Treatment of Competing Arguments: The Revenue contended that the law does not provide for exemption from late fee on grounds of reasonable cause under section 234E, and delay alone suffices for levy. The appellant argued that the exceptional circumstances of ill-health justified relief. The Court noted that the statutory text does not explicitly preclude consideration of reasonable cause, and the facts demonstrated no detriment to the Revenue or deductees.

Conclusions: The Court found merit in the appellant's explanation and medical evidence, concluding that the delay caused no inconvenience or loss to the Revenue or deductees. Hence, the imposition of late filing fee under section 234E was unwarranted in this case.

Validity of the Learned CIT(A)'s Order Upholding Late Filing Fee

Relevant Legal Framework and Precedents: The appellate authority is expected to consider all relevant facts and submissions before affirming penalties or fees. The principle of natural justice and fair adjudication requires that explanations supported by evidence be duly considered.

Court's Interpretation and Reasoning: The Court observed that the learned CIT(A) rejected the appellant's explanation without adequately considering the medical records and the fact that all delayed returns were filed before the 4th quarter due date. The CIT(A) took a rigid view, focusing solely on the delay without weighing the appellant's reasonable cause.

Key Evidence and Findings: The medical records submitted by the appellant demonstrated the Director's hospitalization and surgery, which constituted a valid reason for delay. The appellant also paid the TDS with interest timely, mitigating any potential prejudice.

Application of Law to Facts: The Court held that the CIT(A) erred in not appreciating the appellant's circumstances and the absence of prejudice to the Revenue. The strict imposition of late fee without considering reasonable cause was contrary to principles of equity and fairness.

Treatment of Competing Arguments: The Revenue's insistence on strict statutory interpretation was balanced against the appellant's factual explanation. The Court favored a pragmatic approach that prevents undue hardship in exceptional cases.

Conclusions: The Court set aside the CIT(A)'s order and directed deletion of the late filing fee for the three quarters.

3. SIGNIFICANT HOLDINGS

- "In our considered view, there is no inconvenience is caused either to the Department or to the persons from whom TDS has been recovered because, in any case, the appellant company has paid relevant TDS along with interest and also reported particulars of deduction of TDS by filing the statement in Form-26Q well beyond the due date provided for filing 4th quarterly return of the financial year."

- "Therefore, we are of the considered view that there is a reasonable cause for the appellant company in not filing the return on or before the due date provided for each quarter of the financial year and thus, in our considered view, the Assessing Officer, TDS [CPC] ought not to have levied late filing fee u/sec.234E of the Act."

- The Court established the principle that while section 234E mandates a late filing fee for delay in furnishing TDS returns, exceptional circumstances such as serious illness of a key company official supported by credible evidence may constitute reasonable cause to exempt from such levy.

- The final determination was to set aside the orders of the learned CIT(A) and direct deletion of the late filing fee for the 1st, 2nd, and 3rd quarters of the financial year 2022-2023, allowing the appeals of the appellant company.

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