COMMISSIONER FOR GOVT EXAMINATIONS ,POOJAPPURA vs. DCIT CIRCLE 1(2), TRIVANDRUM

Appellant by: ----- None ----- Respondent by: Smt. J.M. Jamuna Devi, Sr. D.R. Date of Hearing: 24.01.2024 Date of Pronouncement: 15.04.2024 O R D E R Per: Sanjay Arora, AM This is a set of 11 Appeals by the Assessee directed against the dismissal of it’s appeals contesting the levy of fee under section 234E of Income Tax Act, 1961 (the Act) for the delayed filing of the quarterly TDS returns/statements (in Form 24Q & 26Q) for FY 2015-16 to FY 2018-19, by the Commissioner of Income Tax (Appeals) Income Tax Department [CIT(A)] vide his separate orders dated 30.08.2022.

6. We may next tabulate, for ready comprehension, default/s for which the impugned fee u/s. 234E stands levied:

Return Short Total S. Date of Date of Late Fee ITA No. Quarter/A.Y Form Deduction (R/off) No. Filing Processing U/s 234E No. & Interest Rs. 1 985/C/2022 Q2/2016-17 03.06.2021 07.06.2021 26Q 4,08,400 - 4,08,400 2 986/C/2022 Q3/2016-17 03.06.2021 07.06.2021 26Q 43,028 - 43,030 3 984/C/2022 Q4/2016-17 02.07.2016 08.07.2016 24Q 9,200 255 9,460 4 987/C/2022 Q4/2016-17 03.06.2021 07.06.2021 26Q 16,874 - 16,870 5 988/C/2022 Q1/2017-18 07.08.2017 10.08.2017 24 Q 60,750 - 60,750 6 989/C/2022 Q1/2017-18 24.02.2021 02.03.2021 26Q 46,193 - 46,190 7 990/C/2022 Q2/2017-18 24.02.2021 02.03.2021 26Q 3,15,400 - 3,15,400 8 991/C/2022 Q4/2017-18 24.02.2021 02.03.2021 26Q 10,120 - 10,120 9 992/C/2022 Q2/2018-19 23.11 2017 02.12.2017 24Q 4,600 - 4,600 10 993/C/2022 Q2/2019-20 16.07.2019 20.07.2019 26Q 51,600 - 51,600 11 994/C/2022 Q3/2019-20 16.07.2019 20.07.2019 26Q 33,200 - 33,200 5.2 The default of the delayed filing of the TDS returns/statements for the relevant quarters is admitted. As also stated more than once by the ld. CIT(A) per the impugned order, no mistake in the computation of the impugned fee stands pointed out by the assessee, and neither is there any reference thereto in the assessee’s written note dated 19.11.2022 filed with the Tribunal. That apart, in each case, the statement 4 | P a g e to 994/Coch/2022 (AYs : 2016-17 to 2019-20) Commissioner for Govt. Examinations v. Dy. CIT has been filed and, accordingly, processed u/s. 200A of the Act only after 01.06.2015, i.e., the date w.e.f. which s. 200A stands amended enabling computing fee u/s. 234E – brought on statue w.e.f. 01.07.2012, while processing the statement filed u/s. 200(3), and toward which the ld. CIT(A) cites the decision by the Tribunal in Lampmaster Wolters India P. Ltd. v. ITO [2022] 141 taxmann.com 149 (Chny) dated 29.07.2022, also quoting there-from.

5.3 The assessee’s principal grievance, however, as we gather from the impugned order, as indeed the grounds raised before us, is that the fee is in the nature of penalty. This is as: (a) it draws no distinction between small and large deductors; (b) no daily, incremental administrative expenditure to compensate for the delay incremental fee is incurred; (c) no daily additional service is rendered to demand a daily incremental fee reckoned per day of the delay for the continuing default; and (d) no nexus with the quantum of service rendered is established.

5.4 Save for the plea at (a) above, we find, for the reasons stated hereinafter, considerable merit in the assessee’s argument, not met by the ld. CIT(A), before whom we find the assessee’s objections to be principally the same, even as he, to be fair to him, adverts to several decisions sustaining the constitutional validity of the levy u/s. 234E of the Act. The same stands upheld by the Hon’ble Courts on the basis of being toward processing of TDS returns/statements and avoiding unwanted consequences of the delayed processing; finalizing the tax return of the tax deductees, including grant of refund, where applicable, thereto.

5.5 The question that, however, is raised before us, is if the levy is, as stated, in the nature of fee, or penal in nature, i.e., providing a deterrent. Fee to the extent it is toward cost of processing, as explained by the Union of India (UoI) in it’s reply/s in the challenges to the vires of the provision, since upheld per the several decisions 5 | P a g e to 994/Coch/2022 (AYs : 2016-17 to 2019-20) Commissioner for Govt. Examinations v. Dy. CIT referred to by the ld. CIT(A) in his order, the same would apply equally to the statements filed in time. The levy is, however, limited to the cases of late filing, i.e., the default, for which the fee is levied. Why, one may ask, to no answer, i.e., in the Revenue’s said replies, or the explanation introducing the levy in the statute. Inasmuch as the service, i.e., the processing of the returns/statements, is the same, one would have expected a uniform levy irrespective of the date of processing and, thus, independent of the date of filing the statement which is to be subject to processing, which would only be in a chronological order, i.e., the returns being processed in the sequence of their filing. No charge however being levied unless there is a delayed filing, is it not, one may ask, then, an admission that the fee seeks to, or penalizes, the delayed filing? This is as a nexus with cost, a pre-requisite for a fee, would obtain either way. The Apex Court in Om Prakash Agarwal v. Giri Raj Kishori & Ors. [1987] 164 ITR 376 (SC) clarified that, as an imperative, a fee, to qualify as one, the relevant provision must ex facie reflect the correlation with the expense incurred by the Government in rendering the service for which the fee is being levied. Then, again, what, one may ask, is the basis of a daily increase therein? And which, nowhere explained, again breaks down on the anvil of the nexus with the cost incurred for the same service being provided, i.e., processing of the return, which is to be established. That is, a constant, daily, increase in the cost incurred on processing – a service itself found independent of the date of its performance, is hard to justify. One would have rather expected it to be slated for increase, hinging it with the inflation index, over time, or after every few years, taking into account the increase in cost. On the contrary, inasmuch as a person may file several incorrect statements in time, to no levy, which becomes leviable only on the filing of the delayed return and, further, as we understand, only where the same is correct, does not agree with the stated purpose of the levy which, without doubt, is to be satisfied for the same to be regarded as a fee. to 994/Coch/2022 (AYs : 2016-17 to 2019-20) Commissioner for Govt. Examinations v. Dy. CIT 5.6 The Revenue choosing to recover the processing cost only in case of delayed filing of the relevant return/statement/s, is by itself a clear indicator of the levy being a deterrent measure geared toward filing the same in time, and its daily increase, imposing an increasing burden, further endorses and corroborates the said inference. Characterizing, thus, the default, as a continuing one, provides for an inbuilt disincentive. The inference of penal nature becomes irresistible in the wake of levy increasing in a linear proportion to time, while administrative cost would remain constant or nearly so. The delay in filing the statements sure leads to the unwanted result in delaying the deductor’s tax return, but then that is precisely what the measure is being ascribed as, i.e., toward providing a deterrent by providing for a proportional levy, which cannot be justified in terms of a fee, a term explained, inter alia, in Om Prakash Agarwal v. Giri Raj Kishori & Ors. (supra). Why, the said levy was, prior to its incorporation in the statute-book as s. 234E, on the statute in the form of s. 272A(2)(k), a penal provision, of which section 234E is a verbatim reproduction. Could therefore one may ask there be any doubt that the provision, particularly considering an incremental levy with reference to the delay, is principally penal, i.e., insofar as defining the default, and the quantification of the ‘fee’ thereagainst is concerned. The same, thus, is, a penalty in the guise of a fee. And which, if it was necessary, proves what is being stated herein. The charge of it being, even if to that extent, penal in nature, is, thus, unmistakable.

5.7 We may next discuss the consequence of levy being, even if in part, penal in nature. The same, firstly, would have to be segregated into its compensatory and penal parts; the former being based on the criterion suggested by the Apex Court for it being regarded as a fee. This, we may add, would only be on first meeting the objection of the processing cost – which the fee is ostensibly toward, being not recovered where a statement, correct or even incorrect, is filed in time. And, further, only on the basis of some empirical data on cost being furnished by the Revenue. to 994/Coch/2022 (AYs : 2016-17 to 2019-20) Commissioner for Govt. Examinations v. Dy. CIT Two, to the extent it is penal in nature, i.e., as a deterrent measure to disincentivise incompliant, and promote compliant, behavior, the same would be subject to being saved on a reasonable cause/s being shown, which of course must extend to the entire period of default for a full relief there-from.

5.8 We have carried the matter thus far, only in discharging our duty in expressing our honest and independent view on the subject matter under appeal. This Tribunal, itself a creation of the statute, has no power to decide on the vires of any provision of the Act. That apart, the same stands, on challenge, upheld by the constitutional Courts, including the Hon’ble jurisdictional High Court (Olari Little Flower Kuries P. Ltd. v. UoI (134 taxmann.com 111 (Ker)). A decision on merits by us, would thus have to be necessarily governed by the provision as it stands, i.e., without travelling to its constitutionality. As afore-stated, no infirmity in the computation of the levy stands pointed out by the assessee at any stage, with the processing being after the date of amendment in s.200A, authorizing it w.e.f. 01/6/2015.