Income tax department can not recover penalty from tax payer for late filing of TDS returns."

INDORE: If you have been asked by the I-T department to pay late fee for filing TDS return later than the due date, then read this. It's likely to help thousands of taxpayers, who have been served demand note from I-T department. In Bhopal alone, 1500 taxpayers have received notices.

Effective from July 1, 2012, the I-T department has made it mandatory to pay late fee to the tune of Rs 200 per day since the due date, in case of late filing of TDS returns by imposition of new ruling under section (u/s 234E) . However, the department can't recover the late fee from taxpayers for the same. The reason being that I-T department is not authorized to do so u/s 204 and 200A of I-T Act.1

The affected taxpayers only need to approach the I-T commissioner (CIT), appeals for getting their penalty waived off. It assumes significance in the view of the fact that the department has served demand notes to thousands of taxpayers across the country, valued at Rs 500-700 crore, as per an estimate.

As per I-T norm, all the taxpayers, having an annual income of more than Rs 1 crore turnover, need to pay due TDS monthly and file TDS return for the same on a quarterly basis. Still, people often forget file the TDS return in time and hence the department's act.

A practising CA in Indore, Vijay Goenka is one such affected person, who has received a demand notice from the department for paying Rs 23,000 as late fee for defaulting on TDS, at the rate of Rs 200 per day since the due date. However, Goenka said such penalty can't be recovered under any of the existing law and hence he has decided to go for appeal.

Chairperson of Bhopal chapter of ICAI, Sunita Baheti, said, "The department can't recover money in this way as per law." Another CA in Indore, Ritesh Gupta, said, "There is no need for taxpayers to pay the late fee."

A city-based TDS expert, Manish Dafaria, said, "There is no section in the I-T Act, which empowers the department to recover the penalty for late filing of TDS returns."

Pankaj Agrawal from Ambala also confirmed of having received one such notification by the department, said, "In any way, I-T can't be recover late fee" Similar notices have been issued to taxpayers in Kolkata and Gurgaon too.

"If any notice is issued by way of processing u/s 200A, then apply for rectification of mistake u/s 154 of the Act or directly file an appeal before CIT (Appeals)," said joint secretary of All India Federation of Tax Practitioners, Rajesh Mehta.

Talking to ToI, I-T commissioner (appeals), Keshav Saxena, said he was also expecting such appeals from the affected taxpayers.