The processing centre has charged Rs 200 a day on every TDS statement we filed late, including quarters going back to 2012, and there is a s.201 order and a penalty notice on top - what do I attack, and in what order?
The client is a private limited company providing facilities management services, about Rs 9,40,00,000 of turnover, forty staff, assessed at Indore. Its accountant resigned on 30 June 2024 and the replacement joined only on 4 November 2024; in the four months between, nobody held the TRACES login or the digital signature. The quarterly statements for FY 2024-25 all went in late: Q1 and Q2 on 19 December 2024, Q3 on 27 February 2025 and Q4 on 12 June 2025. Cleaning up the TAN, the new accountant found that three statements had never been filed at all - Q1 and Q2 of FY 2012-13 and Q1 of FY 2013-14 - and filed them on 22 May 2026. On 6 August 2026 a single intimation under s.200A raised Rs 8,46,200: fee under s.234E of Rs 5,71,000 across the seven quarters, interest under s.201(1A) of Rs 74,300 on TDS deposited late, and short deduction of Rs 2,00,900. On 14 August 2026 a separate order under s.201(1) and s.201(1A) for FY 2024-25 treated the company as an assessee in default on that Rs 2,00,900, the officer taking payments to a manpower agency under s.194J where the company had deducted at 2 per cent under s.194C. A show-cause from the Joint Commissioner for the three old quarters followed on 28 August 2026. The company holds the resignation and appointment letters, the TRACES acknowledgements and justification reports, and confirmation that the manpower agency returned the income.
Do not reply to the intimation as one thing. Split it into the s.234E fee, the s.201(1A) interest and the short-deduction demand, because they are three levies with three different answers and only one of them is really contestable; then split the fee again at 1 June 2015, because the three old quarters stand on an entirely different footing from the four recent ones. Then settle which High Court is the jurisdictional High Court for this assessee, because on the pre-June-2015 fee that single fact decides the case. Download the TRACES justification report for every quarter the same week - it is the only document showing how each fee was computed and whether it has been capped.
The fee is Rs 200 for every day the failure continues, but it is capped at the amount of tax deductible or collectible for that quarter, and there is no waiver machinery for it anywhere in the Act. Interest under s.201(1A) is a different levy for a different default - 1 per cent a month where you failed to deduct, 1.5 per cent a month where you deducted and paid late - and it is not touched by anything you say about the statement. On a quarter with small TDS and a thirteen-year delay the uncapped daily computation runs to lakhs, so the cap does a great deal of work here and getting it applied is arithmetic. Where the justification report shows fee above the quarter's TDS, that is a mistake apparent from the record and s.154 will correct it.
This is where the fee is actually attacked and the courts have divided squarely. The Karnataka High Court in Fatheraj Singhvi held that the fee could not be charged through a s.200A intimation for a period before clause (c) was inserted in s.200A(1) with effect from 1 June 2015. The Gujarat High Court in Rajesh Kourani held the opposite - that s.234E is itself the charging provision and s.200A no more than machinery, that machinery cannot override a charge, and that the Revenue could always compute and collect the fee from 1 July 2012. The Madras High Court in Conceria International set the two against each other and expressly declined to follow Karnataka. The Kerala High Court in Sajeev Mathew went the other way and quashed a consolidated demand to the extent it charged fee for periods up to 1 June 2015, leaving the rest standing. The library marks all of these as entries on which High Courts differ, and that is the point: there is no settled answer, only a jurisdiction.
Where the jurisdictional High Court is Karnataka, the Bangalore Bench has deleted the fee for all nine quarters before it, holding that its own High Court binds notwithstanding that the Commissioner (Appeals) preferred the Gujarat view. That is a Tribunal order and binds nobody, but the proposition it applies is not controversial and it is the cleanest statement of it in this collection. Indore is in Madhya Pradesh and nothing in this library shows that High Court ruling on the point, so the second line has to be run: where two non-jurisdictional High Courts differ and the jurisdictional one has not spoken, the Mumbai Bench has adopted the view favourable to the assessee. Both grounds go in together - the primary plea that no binding decision goes against the assessee, and the alternative that on a genuine conflict the favourable view is taken.
Section 273B is a non obstante provision that bars a penalty where the person proves reasonable cause, but it reaches only the provisions it names, and the burden of proving the cause is on the assessee rather than on the officer to disprove it. Section 234E is not in that list, because what it imposes is a fee and not a penalty - which is exactly why the Bombay High Court was able to uphold it as a charge for the additional departmental work rather than as a punishment. The library records in terms that there is no waiver machinery for the fee. The resignation, the four-month gap and the appointment letter are a real answer to s.271H and to s.272A(2)(k), and they should be deployed there; putting them into the appeal against the fee dilutes the only ground that can win it.
The two regimes split on the date of deduction, not the date of filing. For tax deducted or collected before 1 July 2012 the penalty is under s.272A(2)(k) at Rs 100 for every day of default, capped by the proviso at the amount of tax deductible or collectible. For tax deducted on or after that date it is s.271H, between Rs 10,000 and Rs 1,00,000, with the escape in s.271H(3) where the tax with fee and interest has been paid and the statement delivered within one year of the prescribed time. On these dates Q1 of FY 2012-13 covers deductions made before 1 July 2012 and is a s.272A(2)(k) quarter; the other two are s.271H quarters, and s.271H(3) is closed to them because the statements went in roughly thirteen years late. Both sections are within s.273B, so the reasonable-cause defence lives here and not against the fee.
The short deduction makes the company an assessee in default only to the extent of the shortfall, which is why the demand is Rs 2,00,900 and not the whole payment. The characterisation fight - whether a manpower supply contract is work under s.194C or the application of professional or technical expertise under s.194J - asks what the payee actually supplied, and a standardised facility available to everyone reads as work while a service tailored to the individual user reads as professional. But the complete answer is cheaper: the first proviso to s.201(1) takes the assessee out of default altogether once the accountant's certificate in Form 26A shows that the resident payee filed a return, included the sum and paid the tax, which the manpower agency here has confirmed it did. Interest under s.201(1A) still runs, but a Bench has held it runs only to the date the payee furnished his return, not to the date the deductor eventually pays.
Section 246A is an exhaustive list and both of these orders are on it - a s.200A intimation and an order treating a deductor as an assessee in default under s.201 are separately appealable, and so is any s.154 order that comes back. They are different orders with different grounds and they need different appeals: folding the fee into the s.201 appeal loses the fee ground and muddles the s.201 ground. Rectification and appeal are alternatives, not a sequence, and a pending s.154 does not extend the appeal period by a day. On these dates the intimation of 6 August 2026 and the order of 14 August 2026 each carry their own thirty days from service.
The s.201(1A) interest of Rs 74,300 is itself the record that deducted tax reached the Government late, and that is the whole ingredient of the offence: it is complete once tax deducted is not credited to the Government within the prescribed time, and depositing it afterwards with interest is a civil consequence that does not wipe out the default. Directors identified as principal officers can properly be arrayed with the company. This is not a reason to panic, but it is a reason to know the price: under the compounding guidelines of 17 October 2024 the charge for a s.276B offence is 1.5 per cent per month or part of a month of the tax in default, computed from the date of deduction to the date of deposit. Tell the client that number before a prosecution notice arrives rather than after.
The four FY 2024-25 quarters of fee are lost - the fee is capped, not waivable, and nothing in the file answers it. The three pre-June-2015 quarters are a genuine contest whose outcome follows the jurisdiction almost entirely: deleted in Karnataka and Kerala, confirmed in Gujarat and Tamil Nadu, and elsewhere usually confirmed by the officer and by the Commissioner (Appeals) and then argued at the Tribunal, where the assessee-favourable view is often taken. The cap correction on the old quarters is generally obtained on rectification and is frequently the largest single reduction in the demand. The s.201 demand normally goes once Form 26A is accepted, with the s.201(1A) interest surviving. The s.271H and s.272A(2)(k) penalties are usually reduced rather than deleted, cause being accepted for the recent quarters and refused for the old ones.
