Delay in Filing Appeals Condoned Due to Divergent Views on Section 234E Interest

Gopuram Enterprises Pvt Ltd. Vs ITO (Madras High Court)

Legal uncertainty over Sec 234E acknowledged: Delay in Appeals condoned by Madras HC

The judgment pertains to a batch appeals filed by assessee against a common order passed by the ITAT which  had dismissed the appeals solely on the ground of delay in filing, without examining the merits of the case. The company approached the Madras High Court seeking condonation of delay and a direction for the ITAT to adjudicate the matter substantively. The appeals relate to the levy of interest u/s 234E, which concerns fees for delay in filing TDS returns.

The substantial questions of law   admitted for consideration by the HC are whether the Tribunal was right by not  :

a) condoning the delay, either it is inordinate delay or delay for few days, ignoring the settled laws.

b) condoning the delay, taking into account Sec 234 E is effective from 01/06/2015, whereas in the given case, the Assessment Year is 2013-14.

c) considered that, no prejudice to the other side will occur by condoning the delay.

The High Court categorized the appeals into two groups(1)  Where delay was significant (ranging up to 2408 days) and undisputed. ( 2) Where the Department disputed the delay, but the assessee claimed a shorter delay (260 days), computed from the date of receipt of rectified statements issued u/s 154.

Upon reviewing the facts, the Court held that the delay in the second  group was indeed to be computed from the date of the rectified order, and thus, the assessee’s calculation of a 260-day delay was correct.

Court noted that   the issue on merits, relating to the levy of interest u/s 234E   was pending before various judicial fora such as different Benches of the ITAT and High Courts. Divergent views had been taken in regard to the validity of the levy as well as the effective date of levy.Hence, the appellant was in a dilemma as to whether to file the statutory appeals or await a finality of the matter before the Supreme Court.  Ultimately, and decided based on legal advice, it had chosen to file the statutory appeals belatedly. The Tribunal has rejected the explanation on the ground that it is not bonafide and unsubstantiated since no evidence had been placed by the appellant in regard to the legal advice sought.  The stand of the appellant, regarding divergence of views on the levy of interest u/s 234E is not incorrect. Hence, we differ with the view of the Tribunal that the appellant has not acted bonafide. There is nothing to indicate that the appellant was not acting bonafide and the appellant does not, in any event, stand to gain by virtue of not challenging the orders adverse to it. Incidentally the periods for which interest u/s 234E has been levied are all prior to 01.06.2015 when that provision was inserted into the Statute.

The High Court condoned the delay in all the appeals &  remanded the matters back to the ITAT for fresh hearing on merits. This judgment underscores the importance of a pragmatic and equitable approach to delay condonation, especially in tax matters involving complex legal interpretations and procedural nuances.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The following substantial questions of law have been admitted for consideration:

‘a) Whether on the facts and in the circumstances of the case, the Tribunal was right by not condoning the delay, either it is inordinate delay or delay for few days, ignoring the settled laws.

b) Whether on the facts and in the circumstances of the case, the Tribunal was right by not condoning the delay, taking into account Section 234 E of the Act is effective from 01/06/2015, whereas in the given case, the Assessment Year is 2013-14.

c) Whether on the facts and in the circumstances of the case, the Tribunal was right by not considered that, no prejudice to the other side will occur by condoning the delay.’

2. This is a batch of 18 appeals challenging common order dated 31.01.2023 of the Income Tax Appellate Tribunal (Tribunal/ITAT) dismissing the appeals as being belated and rejecting the request for condonation of delay. The assessment years (AYs) relate to 2013-14 [TCA.Nos.374, 375, 389 & 390 of 2023], 2014-15 [TCA.Nos.376, 378, 379, 380, 382, 384, 387 & 388 of 2023] and 2015-16 [TCA.Nos.373, 377, 381, 383, 385 & 386 of 2023].

3. The issue that arises for consideration on merits in all the appeals relates to the levy of interest under Section 234E of the Income Tax Act, 1961 (in short ‘Act’).

4. Having heard Mr.R.Devaraj, learned counsel for the appellant/assessee and Dr.B.Ramaswamy, learned Senior Standing Counsel for the Income Tax Department, we find that the appeals may be grouped into two kinds. In nine (9) appeals there is no dispute with regard to the computation of delay, as the same has been rightly computed from the date of statement issued under Section 200A of the Act. Those appeals are tabulated below:

Tabulation A

5. In the second group of nine (9) cases, the appellant has computed the delay at 260 days. However, according to the revenue, the delay is far higher, ranging between 1808 to 2410 days. Those appeals are tabulated below:

Tabulation B

6. On a perusal of appeals in Tabulation B, we concur with the computation of delay per the assessee. In all these cases, after receipt of statement under Section 200A of the Act, the assessee has filed petitions under Section 154 seeking rectification of delay and subsequently statements under Section 200A read with Section 154 have been issued which had been challenged by way of appeal, albeit belatedly.

7. Thus, in these circumstances, the delay would run only from date of service of the statement as rectified under Section 154 of the Act and not from date of original statement issued under Section 200A. Hence, the delay in all cases in Tabulation B per the assessee is accepted at 260 days.

8. The reason for the delay is that the issue on merits, relating to the levy of interest under Section 234E of the Act was pending before various judicial Fora such as different Benches of the ITAT and High Courts. Divergent views had been taken in regard to the validity of the levy as well as the effective date of levy.

9. Hence, the appellant was in a dilemma as to whether to file the statutory appeals or await a finality of the matter before the Supreme Court. Ultimately, and decided based on legal advice, it had chosen to file the statutory appeals belatedly. The Tribunal has rejected the explanation on the ground that it is not bonafide and unsubstantiated since no evidence had been placed by the appellant in regard to the legal advice sought.

10. The stand of the appellant, regarding divergence of views on the levy of interest under Section 234E is not incorrect. Hence, we differ with the view of the Tribunal that the appellant has not acted bonafide. There is nothing to indicate that the appellant was not acting bonafide and the appellant does not, in any event, stand to gain by virtue of not challenging the orders adverse to it. Incidentally the periods for which interest under Section 234E has been levied are all prior to 01.06.2015 when that provision was inserted into the Statute.

11. In this light of the matter, we condone the delay in filing appeals before the Tribunal, and restore the matters to the file of the Tribunal for hearing on merits, on 06.05.2025. No notice need be issued to the assessee separately in this regard.

12. Tax Case (Appeals) are allowed by way of remand. No costs.

Connected miscellaneous petitions are closed.