Case Law Details
Article is case study on constitutional validity of Section 234E of the Income Tax Act 1961 inserted by Finance Act, 2012 and covers all earlier judgments on the subject and is based on the Kerala High Court judgment in the case of Sree Narayana Guru Smaraka Sangam Upper Primary School Vs. Union Of India.
1. Petitioners in these cases primarily challenge the constitutional validity of Section 234E of the Income Tax Act 1961 , which was inserted by Finance Act, 2012.
2. Petitioner is a Lower Primary School and they were giving salary payments to the teaching and non-teaching staff of the school after Deducting Tax at Source (TDS) and the amount so collected is credited to the Income Tax Department. The petitioner has also been allotted with a number known as Tax Deduction and Collection Account Number (TAN). In terms of Section 200(3) of the Act, quarterly statement of TDS has to be filed in Form 24Q in respect of the salary for the corresponding quarter ending June/ September/ December/ March of every year. Petitioner submits that in respect of the quarter ending September 2012 and December 2012, TDS was collected and remitted in time. However, the statement in Form 24Q in respect of the 2nd and 3rd quarter was not filed in time. The due date for filing statement for the 2nd quarter was 15th October and the 3rd quarter was 15th January. The statement is to be filed online through the National Securities Depository Ltd. (NSDL). Even if the statements are made ready for uploading, it can be done only at the TIN Facilitation Centres (TFC) set up by NSDL and cannot be done by an individual or entity. The fee for e-filing of the statement and fee for other services rendered are paid by the deductors. Petitioner submits that on account of various factors beyond the control of the deductor, there was delay in uploading the details of statement within the stipulated time.
3. By Finance Act, 2012, Section 234E has been introduced to the Act with effect from 01.07.2012 by which a fine is being imposed for failure to deliver or caused to be delivered a statement within the time prescribed in Section 200(3). The fine is `200/- each for each days delay and the fee has to be paid before filing such statement. The Income Tax department has given to the petitioner a computer generated intimation under Section 200A of the Act demanding late fee under Section 234E for the 2nd and 3rd quarters amounting to `15,000/- and `12,400/- respectively for the delay in filing TDS statement. Exts. P1 and P2 are the said intimations.
4. It is contended that prior to insertion of Section 234E of the Act, the authority had the power to impose penalty of Rs. 100/- for each days delay in filing the TDS statement, in terms of Section 272A (2)(k) of the Act. However, the statute made it clear that before imposing of such penalty, the assessee should be given an opportunity of being heard. According to the petitioner, in terms of Section 273B, if the assessee is able to prove that there is reasonable and sufficient cause for the default, penalty shall not be imposed. However, by incorporating Section 234E, late fee has become mandatory and unless the late fee is paid along with the TDS statement, the deductor will not be in a position for filing TDS statement. Petitioner submits that at times there will be genuine difficulty in uploading the TDS statement within the time and therefore imposing fee for delayed filing without being heard clearly amounts to arbitrariness. Petitioner also contends that the levy of fee under Section 234E does not stand the test of Quid Pro Quo, it is discriminatory, unreasonable and therefore violative of Articles 14 & 19 (1)(g) of the Constitution of India. It is submitted that in so far as the fee under Section 234E is concerned, no services are rendered or no benefit or privilege is conferred to the assessee. It is further submitted that when TDS is deducted, normally it is remitted promptly to the Income Tax department. Even if there is delay in depositing the amount, interest is charged as provided under Section 201(1A) of the Act. Penalty proceedings are also prescribed under Section 221 of the Act for committing default in remitting the TDS or if there is delay in remitting without good and sufficient reasons. Therefore, when substantial provisions have already been incorporated to ensure payment of TDS in time, investing powers on the income tax authorities to levy fee for the delay in filing the statement without an opportunity to be heard is illegal.
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