The fee sought to be levied under section
234E is not a tax that is sought to be levied on the deductor. The provisions of
section 234E is not onerous on the ground that the section does not empower the
AO to condone the delay in late filing of the TDS return, or that no appeal is
provided for from an arbitrary order passed under section 234E
Facts :
a) Petitioner, a practicing
Chartered Accountant, challenged the constitutional validity of section 234E.
Section 234E seeks to levy a fee of Rs.200/- per day (subject to certain other
conditions) inter-alia on a person who deducts Tax at Source and then fails to
deliver or cause to be delivered the TDS return to the authorities within the
prescribed period.
b) He argued that legislature
had categorically termed the levy under section 234E of the Act as a "fee", it
necessarily could be levied only in the event the Government was providing any
service. In the absence thereof, the said section seeks to collect tax in the
guise of a fee. This, according to the learned counsel, was impermissible either
in common law or under the taxing statute, and encroached on the rights of life
and liberty of the citizens.
c) He further submitted that the
provisions of section 234E were extremely onerous as the AO was not vested with
any power to condone the delay in filing the TDS return and there was also no
provision of appeal against order of AO.
The High Court upheld the constitutional
validity of Section 234E and made following observations:
1) There is an obligation on the
Income Tax Department to process the income tax returns within the specified
period. Department cannot accurately process the return until information of TDS
is furnished by the deductor within the prescribed time.
2) If the income tax returns
having refund claims were not processed in a timely manner, it would result in
delay in issuing refunds or raising of infructuous demands. Late payment of
refund also affects the government financially as the Government has to pay
interest for delay in granting the refunds.
3) The Legislature took note of
the fact that a substantial number of deductors were not furnishing their TDS
returns within the prescribed time frame which was absolutely essential. This
led to an additional work burden upon the Department due to the fault of the
deductor by not furnishing the TDS returns in time. It was in this backdrop, and
to compensate for the additional work burdened upon the Department, that a fee
was sought to be levied under section 234E. Thus, section 234E is not punitive
in nature but a fee which is a fixed charge for the extra service which the
Department has to provide due to the late filing of the TDS statements.
4) A right of appeal is not a
matter of right but is a creature of the statute, and if the Legislature deems
it fit not to provide a remedy of appeal, so be it. Even in such a scenario it
was not as if the aggrieved party was left remediless. Such aggrieved person
could always approach this Court in its extra ordinary equitable jurisdiction
under Article 226 / 227 of the Constitution of India, as the case may be.
Therefore, we do not agree with the argument of the Petitioners that simply
because no remedy of appeal was provided for, the provisions of section 234E
were onerous. - Rashmikant Kundalia v. Union of India (2015) 54
taxmann.com 200 (Bombay)
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