The Income Tax Appellate Tribunal Delhi has held that a penalty under Section 234E of the Income Tax Act, 1961 cannot be levied when a TDS return is filed within the statutory deadline, and a subsequent filing is made solely due to a technical failure in the reflection of TDS credit in Form 26AS. The Tribunal emphasized that the purpose of Section 234E is to penalize deliberate or negligent delay, not administrative or systemic errors beyond the assessee’s control.
The Verdict
The assessee won. The Income Tax Appellate Tribunal Delhi deleted the penalty of Rs. 58,800 levied under Section 234E for late filing of Form 24Q. The core legal holding is that a duplicate TDS return filed after the due date, when the original return was submitted on time, does not attract penalty under Section 234E if the delay was caused by a portal glitch preventing TDS credit from appearing in Form 26AS. The Tribunal directed that no penalty be imposed in such circumstances.
Background & Facts
The assessee, Raja Tradelinks Pvt. Ltd., deducted TDS from employee salaries for the first quarter of FY 2021-22 and filed the required Form 24Q on 30 July 2021, well before the statutory due date of 31 July 2021. The department issued an acknowledgement confirming timely filing. However, employees reported that their TDS credits were not visible in their Form 26AS statements, leading them to demand re-filing. In response, the assessee filed a second Form 24Q on 2 July 2022, which was after the due date for that quarter.
The Assessing Officer imposed a fee of Rs. 58,800 under Section 234E for this second filing, treating it as a late submission. The Commissioner of Income Tax (Appeals) upheld the penalty, holding that the law does not distinguish between original and duplicate filings. The assessee appealed to the Tribunal, arguing that the second filing was not an act of delay but a corrective measure necessitated by a technical failure in the income tax portal.
The Legal Issue
The central question was whether Section 234E of the Income Tax Act, 1961 imposes a penalty for filing a duplicate TDS return after the due date, when the original return was filed on time and the duplicate was necessitated by a failure in the tax administration system to reflect the deduction in Form 26AS.
Arguments Presented
For the Petitioner
The assessee’s representative argued that Section 234E is a penal provision that must be strictly construed. The penalty applies only when there is a failure to file the return within the prescribed time. Here, the return was filed on time. The second filing was not an act of non-compliance but a response to a system failure. The assessee relied on the department’s own acknowledgement as proof of timely filing and cited principles of natural justice and equitable relief, asserting that penalizing a taxpayer for administrative glitches violates the spirit of the law.
For the Respondent
The Revenue contended that Section 234E is triggered by the act of filing a return after the due date, regardless of intent or prior compliance. The provision does not contain any exception for duplicate filings or technical errors. The Revenue relied on the literal wording of the statute and previous orders of lower authorities, arguing that the Tribunal must uphold the penalty to maintain procedural discipline in TDS compliance.
The Court's Analysis
The Tribunal rejected the Revenue’s literalist interpretation, emphasizing that Section 234E is not a strict liability provision but one that must be read in context of its purpose: to deter negligence or deliberate delay in filing. The Tribunal noted that the assessee had fulfilled its statutory obligation by filing the return on time, as confirmed by the department’s own system. The second filing was not an act of omission but a corrective step taken at the request of employees due to a known technical deficiency in the IT system.
"The levy of fee under Section 234E is not intended to penalize an assessee for a technical glitch in the department’s own portal, especially when the original return was filed within the stipulated time and the duplicate filing was necessitated by the non-reflection of TDS credit in Form 26AS."
The Tribunal distinguished this case from instances of genuine delay, where no return was filed at all or where the return was filed belatedly without any prior compliance. It held that imposing a penalty under these circumstances would be arbitrary and contrary to the principle of fairness under Article 14 of the Constitution. The Tribunal further observed that the department’s own systems must be held accountable for failures that impact taxpayer compliance.
What This Means For Similar Cases
This judgment establishes a significant precedent for taxpayers facing duplicate TDS filing requirements due to portal failures. Practitioners can now confidently argue that Section 234E penalties are inapplicable when the original return is timely filed and the duplicate is necessitated by a demonstrable system error preventing TDS credit reflection in Form 26AS. The ruling reinforces that statutory penalties must be proportionate and context-sensitive, not mechanically applied.
However, the scope is limited to cases where the original filing is verifiable through official acknowledgements and the duplicate filing is directly linked to employee complaints about non-reflection in Form 26AS. Taxpayers must retain proof of the first filing and evidence of the technical issue. This decision does not extend to cases where the first filing was itself late or where the duplicate was filed for reasons unrelated to system failure.
The judgment also places an implicit obligation on the Income Tax Department to resolve technical glitches promptly and to issue clarifications to taxpayers when Form 26AS discrepancies arise, to avoid unnecessary compliance burdens.
