Fee for late-filing of ITR is not penalty but a charge for extra service: HC

K. Nirai Mathi Azhagan Vs Union of India (Madras High Court)

Conclusion: Fees for late filing of income tax returns under section 234F  was a fixed charge not a penalty for the extra service which the Department had to provide due to the late filing of the Income Tax return.

Held: Assessee had challenged section 234F on the ground that it was a penalty guised as a fee and secondly, there was no service provided for by the authorities and therefore, fee was not leviable for the simple reason that for levy of fee, there should be an element of quid pro quo. Assessee relied on a judgment of the Hon’ble Supreme Court in KUNNATHAT THATEHUNNI MOOPIL NAIR, ETC., Vs. STATE OF KERALA AND ANOTHER {(1961) 3 SCR – 77}. Revenue contended that there was an obligation on the Income-tax Department to process an income-tax return within specified period from the date of filing thus, the fee under Section 234F was a fixed charge for the extra service which the Department had to provide due to the late filing of the return. It was held the element of quid pro quo strict senso was not always a sine qua non of a fee. Nonetheless, the fee under Section 234F was charged for delay in submitting the return of income beyond the prescribed time, which was privilege to allow late filing of the return. Department was justified in holding that the object of the provision was thus intended to ensure proper and timely filing of return. The gravamen of the offence was failure to submit the return within a stipulated time. Therefore, the classification of all such defaulters as one class was a reasonable classification and did not offend Article 14 of the Constitution of India.

FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT