TMI Blog2020 (3) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... hat Section 234 (E) of the Act is not a penalty. Penalty is levied under Section 271 (H) and is not automatic. Penalty is levied only when tax is deducted at source along with interest fee is not deposited and statement is not filed within one year. If the above two conditions are satisfied, then penalty is not leviable. On the other hand, Section 234 (E) of the Act is only a late fee at the rate of ₹ 200/- per day. As held in the judgments relied above, Section 234 (E) of the Act is purely compensatory and is a special benefit to the advantage of the assessee as well for belatedly filing the TDS statement. The revenue is right in contending that Section 234 (E) of the Act is meant to ensure that assessee files the statement in time, so that the Department can clear the returns of the persons connected with the assessee, i.e., from whom tax has been deducted at source without any delay and accurately with increasing or overloading the burden of the department. A provision can be held unconstitutional only when the legislature was incompetent to bring out the legislation or that it offends some provision of the Constitution or when it is manifestly arbitrary. . The Parliame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-Section (3) of Section 206 C which is to be delivered or caused to be delivered for tax deducted at source or tax collected at source, as the case may be, on or after the 1st day of July, 2012. 4 . The petitioner contends that Section 234 E of the Income Tax Act is penalty in the shape of a fee. It is submitted that prior to the introduction of Section 234 E, penalty for non-filing of the TDS statements was ₹ 100/- per day as provided for under Section 272 A (2) (K) of the Act. It is submitted that Section 234 E deals with the fee payable for default in filing TDS statement on 1/7/2012. According to the petitioner, the prescribed form for filing TDS statement did not have a provision for payment of fine for default and the fee under Section 234 E of the Act can be collected only from 1/6/2015. It is submitted that Section 200 A of the Act was amended by insertion of Clause (c) to enable collection of fee under Section 234 in the form prescribed under Section 200 (3) and processed under Section 200 (A) of the Act. 5. The petitioners have given a tabular chart to demonstrate as to how Section 234 E is a penalty disguised as a fee. Sl. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e benefit conferred and any way, as stated above, it could not have been applied retrospectively. 8. Petitioner states that the present Section 234 E as a fee for default in furnishing TDS statements with an incrementally increasing fee for every continuing day in default is not justifiable and as stated above Section 234 (E) is in fact a penalty in the guise of a fee. The challenge is inter alia on following grounds: (a). Section 234 E is a verbatim transformation of an earlier applicable/existing penalty provision (Section 272 A (2) (k) and its proviso. (b). Section 234 E has the very same characteristics seen only in other penalty provisions under the same Act (Income Tax Act, 1961) like Section 271 FA, 271 FB, 271 GB and Section 272 A (2); (c). Section 234 E has been purportedly inserted under Finance Bill, 2012 for Deterrence which is not a purpose recognised by either the Constitution or the law laid down by the Hon'ble Supreme Court; (d). Section 234 E is being described as a Fee for Default in filing TDS statement as seen in Section Heading which is in direct conflict with the laws of criminal jurisprudence; (e). The fee that is sought to be colle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that service is being provided for accepting belated returns. It is therefore stated that the fee is nothing but a penalty in the guise of a fee. 11. Petitioner further points out that with no penalty payable for the delay in filing TDS statement within the expiry of one year from prescribed period, a fee to enable filing within that one year period (i.e., after the prescribed period and within one year from trhe prescribed period) cannot be said to confer a privilege which in any case already existed (ability to file TDS statement without any penalty even when there could be difficulty caused to IT/Revenue) and thus there is no privilege conferred on the petitioner/deductee for which the fee under Section 234 E is purportedly collected. 12. It is further submitted that with an existing penalty for delay in filing TDS statement u/s 271H, Section 234 E being a mere verbatim transformation of an earlier existing penalty u/s 271 A(2)(k) now under a different nomenclature of Fee and thus a penalty disguised as a Fee making it in effect a double penalty (in addition to Sec.271H) for the same default, in violation of Article 20(2) of the Constitution. 13. It is submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no penalty shall be levied if the person proves that after paying tax deducted or collected along with fee and interest if any to the credit of the Central Government, he had delivered the statement referred to in sub- Section 3 of Section 200 or the provisio to sub-Section (3) of Section 206 (C) before the expiry of a period of one year. It is therefore, submitted that principles of natural justice is inbuilt in Section 271 (H) of the Act whereas 234 (E) of the Act only provides for a late fee of ₹ 200/- per day till the statement is filed. 17. It is further submitted that under the Income Tax Act, there is an obligation on the Income-Tax Department to process an income- tax return within specified period from the date of the filing. The department can process the income tax return of a person on whose behalf tax has been deducted only when the information relating to the details of tax deducted is furnished by the deductor in a TDS statement within the prescribed time. The timely processing of returns is the bedrock of an efficient tax administration system. The Courts through various judgments have also called upon the department to look into the aspect of timely proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y paying a fee of ₹ 200/- per day. 21. The distinction between Sections 234 (E) and 271 (H) of the Act is that Section 234 (E) is not in lieu of penalty. Both are independent levies. Section 271 (H) of the Act provides that penalty would not be levied if the tax with fee and interest is paid and statement is filed within one year from the due on date. Section 234 (E) provides for payment at the rate of ₹ 200/- per day for every day's delay. Section 234 (E) cannot be called as a penalty for which there is a separate provision. The legislature has power to levy fee for services provided and to levy penalty is a deterrent. The prompt submission of statements makes it easier for the tax authorities to correlate the returns of other persons, on whose behalf tax has been deducted at source. 22. It is submitted that unless and until the Department receives the details of tax deduction through TDS statements, timely processing of Income Tax returns, having claim of TDS, is not possible. The authorities are facing difficulties when they process IT returns of the assessees having claim of TDS without giving credit for TDS because delay in filing statement. This resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure took note of the fact that a substantial number of deductors were not furnishing their TDS retun/statements 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 information in time and which he was statutorily bound to furnish. It is in this light, and to compensate for the additional work burden forced upon the Department, that a fee was sought to be levied under section 234E of the Act. Looking at this from this perspective, we are clearly of the view that section 234E of the Act 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. 15. As stated earlier, due to late submission of TDS statements means the Department is burdened with extra work which is otherwise not VRD 11 of 19 WP771/14 required if the TDS statements were furnished within the prescribed time. This fee is for the payment of the additional burden forced upon the Department. A person deducting the tax (the deductor), is allowed to file his TDS statement beyond the prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange Board of India [(2001) 3 SCC 482] after considering a large number of authorities, has held that much ice has melted in the Himalayas after the rendering of the earlier judgments as there was a sea change in the judicial thinking as to the difference between a tax and a fee since then. Placing reliance on the following judgments of this Court in the last 20 years, namely, Sreenivasa General Traders v.State of A.P. [(1983) 4 SCC 353] , City Corpn. of Calicut v. Thachambalath Sadasivan[(1985) 2 SCC 112 : 1985 SCC (Tax) 211] , Sirsilk Ltd. v. Textiles Committee [1989 Supp (1) SCC 168 : 1989 SCC (Tax) 219] , Commr. Secy. to Govt., Commercial Taxes Religious Endowments Deptt. v. Sree Murugan Financing Corpn. [(1992) 3 SCC 488] , Secy. to Govt. of Madras v. P.R.Sriramulu [(1996) 1 SCC 345] , Vam Organic Chemicals Ltd. v. State of 3 (2005) 2 SCC 345 VRD 13 of 19 WP771/14 U.P. [(1997) 2 SCC 715], Research Foundation for Science, Technology Ecology v. Ministry of Agriculture [(1999) 1 SCC 655] andSecunderabad Hyderabad Hotel Owners' Assn. v. Hyderabad Municipal Corpn.[(1999) 2 SCC 274] it was held that the traditional concept of quid pro quo in a fee has undergone considerab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation of delay also to be wholly without any merit. 24. We are in complete agreement with the aforesaid judgment. As stated by the Hon'ble Supreme Court, in SONA CHANDI OAL COMMITTEE AND OTHERS Vs. STATE OF MAHARASHTRA {(2005) 2 SCC 345, levy does not cease to be a fee merely because there is an element of compulsion or coerciveness present in or not, nor is it a postulate of a fee that it must have a direct relation to the actual service rendered by the authority to each individual who obtains the benefit of the service. 25. It is also well settled that there need not be a mathematical precision between the fee levied and the service rendered. A similar issue arose in Delhi High Court. A Division Bench of Delhi High Court in BISWAJIT DAS Vs. Union of India {(2019) 103 TAXMANN.COM 290 (DELHI), while dealing with the constitutionality of the said Section, upheld Section 238 (E) of the Act. Relevant paragraphs are extracted hereunder:- 27. Upon a conspectus of the above, it is clear that the fee imposed under Section 234E is levied towards regularisation of the delay in filing of a TDS return or statement, since the Income Tax Department has to expend e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee under the Act, such assessee would be entitled to receive in addition to the amount of refund of tax, simple interest at the rate of one-half percent for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which refund is granted as indicated in sub-Section (1)(a) of the Act. A bare perusal of Section 271H which came to be inserted by Finance Act, 2012 with effect from 01.07.2012 would indicate it provides for levy of penalty for failure to furnish statements of tax deducted at source under Section 200(3) or under proviso to Section 206C or for furnishing incorrect information. As per sub- Section (2), penalty will be not less than ₹ 10,000/- and it may extend upto ₹ 1,00,000/-. Section 273B indicates that no penalty shall be imposable on the person or the assessee for any failure referred to in the said provision if he proves that there was reasonable cause for such failure. Section 273B has also been amended by adding Section 271H and as already noticed under Section 271H(2)(k) penalty can be imposed for failure to furnish statement within prescribed time. However, by incorporating Section 271H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of where the assessee would be entitled to refund and on account of delay occurring due to non delivery of TDS statements by the deductors, it would result in delay in extending the credit of TDS to the person on whose behalf tax is deducted and consequently it would result in delayed issuance of refunds to the deductee or raising of consequential demands against the deductee which otherwise would not have been raised. In this lengthy and unwarranted process it may erode the confidence reposed by the tax payer on the department. Last but not the least, it would result in financial burden to the Government namely on account of late payment of refund interest is to be paid on such refunds and it would also result in cash flow crunch, especially for business entities. 27. Similarly, High Court of Kerala in GURU SMARAKA SANGAM UPPER PRIMARY SCHOOL Vs. Union of India {(2017) 77 TAXMANN.COM 244 (Kerala) has upheld the constitutional validity of Section 200 of the Act, by relying on the judgment of RASHMIKANT KUNDALIA Vs. UNION OF INDIA {(2015) 54 TAXMANN.COM 200 (Bombay) and LAKSHMINIRMAN BANGALORE (P) LTD Vs. DEPUTY COMMISSIONER OF INCOME TAX, GHAZIABAD {(2015) 60 TAXMAN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tending that Section 234 (E) of the Act is not a penalty. Penalty is levied under Section 271 (H) and is not automatic. Penalty is levied only when tax is deducted at source along with interest fee is not deposited and statement is not filed within one year. If the above two conditions are satisfied, then penalty is not leviable. On the other hand, Section 234 (E) of the Act is only a late fee at the rate of ₹ 200/- per day. As held in the judgments relied above, Section 234 (E) of the Act is purely compensatory and is a special benefit to the advantage of the assessee as well for belatedly filing the TDS statement. The revenue is right in contending that Section 234 (E) of the Act is meant to ensure that assessee files the statement in time, so that the Department can clear the returns of the persons connected with the assessee, i.e., from whom tax has been deducted at source without any delay and accurately with increasing or overloading the burden of the department. 33. A provision can be held unconstitutional only when the legislature was incompetent to bring out the legislation or that it offends some provision of the Constitution or when it is manifestly arbitrary. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be observed by the Court and greater latitude must be given to the legislature while adjudging the constitutionality of the statute because the Court does not consist of economic or administrative experts. It has no expertise in these matters, and in this age of specialisation when policies have to be laid down with great care after consulting the specialists in the field, it will be wholly unwise for the Court to encroach into the domain of the executive or legislative (sic legislature) and try to enforce its own views and perceptions.? 34. The Parliament is competent to pass legislation on Taxes in Income under Entry 82 of the List I to the Seventh Schedule. Section 234 F is not violative of any of the other provisions of Income Tax Act or the Constitution of India. Nothing has been shown as to how the Section is manifestly arbitrary for it to be struck down. 35. I n view of the above, W.P.Nos.13331, 13118 and 13377 of 2019 fail and are hereby dismissed. Since the levy is constitutional, the challenge to the demand notices also fail. Accordingly, W.P.Nos.13114, 13337 and 13379 of 2019 are also dismissed . No costs. Consequently, the connected Miscellaneous Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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