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Case Law Details

Case Name : Rashmikant Kundalia Vs UOI (Bombay High Court)
Appeal Number : WRIT PETITION NO.771 OF 2014
Date of Judgement/Order : 09/02/2015
Related Assessment Year :
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Petitioners have challenged the constitutional validity of section 234E of the Income Tax Act, 1961. Section 234E seeks to levy a fee of Rs.200/- per day (subject to certain other conditions as set out therein) inter alia on a person who deducts Tax at Source (TDS) and then fails to deliver or cause to be delivered the TDS return/statements to the authorities within the prescribed period.

Petitioner No.1 is a practising Chartered Accountant who has received several notices under section 200A of the Act that were served by the Revenue on his various clients. According to the Petitioners, section 234E is ultra vires and violative of Article 14 of the Constitution of India and therefore deserves to be struck down by this Court. Consequently, even the notices issued by the Revenue ought to be set aside.


To challenge the constitutional validity of section 234E, the main thrust of the argument of the Petitioners was that what was sought to be levied under the said section was a “fee” which necessarily could be levied only for a service that was rendered, failing which the levy of such a fee was unconstitutional. It was argued that a “fee” is known in the commercial and legal world to be a recompense of some service or some special service performed, and it cannot be collected for any dis-service or default. The learned counsel for the Petitioners submitted that by using the word “fee”, the Legislature has not stated what is the nature of service being provided for filing the return belatedly. The learned counsel submitted that compensation for dis-service was essentially in the  nature of a penalty, and since the 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 or any special service. In the absence thereof, the said section seeks to collect tax in the guise of  a fee, was the submission. 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. In the instant case, it was submitted that the Petitioners were providing a honorary service to the Union of India by deducting the tax of other assessees and therafter depositing the same with the Revenue. In such a situation, they could not be made liable for any delay in filing the TDS return/statements, was the submission.

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    According to my understanding Section 234E refers to sub-Section (3) of Section 200. This section in turn requires inter alia that tax deductor after paying the tax deducted within the prescribed time shall prepare and file the TDS return wiithin the prescribed time. Section 200(3) and Rule 30 refer to payment of tax and then filing of TDS return. Section 206 (which is not drawn into Section 234E) refers to Tax deduction and filing of TDS return. Though the prescribed time lilmit under section 206 and Section 200(3) are one and the same, since section 234E refers to sub-section (3) of section 200, the inference is that the penalty under section 234E shall be imposed only in cases of delay of furnishing of TDS return after the tax is paid to the credit of Central Government, and not in cases of delay till such payment is made. The cases of delay in filing return are governed by section 206. A logic can be read into this analogy. After paying the tax deducted to the credit of the central government, that government cannot know on whose behalf the TDS is received by it till TDS return is filed. If there is no credit at all the responsibility of the Central Government does not exist vis-a-vis the TDS claimant as it has not received the payment and the procedure of issuing TDS certificate has no relevance in this electronic era where credit reflected in Form 26 AS only is recognised. In the absence of such credit the TDS claimant has recourse to the deductor only. But the department is too envious of implementing this provision to its advantage for the alluring tax collections under this Section 234E.

  2. M.Siva Shankar says:

    Let IT department charge for regularising but regularising must not be a burden and it must not deter a true adhere of the act(it must not discourage true adherence of the act). Further min 60 days time must be to file quarterly returns or quarterly returns must be changed halfyearly returns.

  3. Dinesh R Rai says:

    in my opinion period of return submission i.e. 15 of the month is insufficient. it should be raised to at least end of next month like a govt. deductors.


    1- NSDL is still making changes in the RPU versions and bring the changes just after the quarter end and provide the software in between 1st and 15th of the month in which C.D. is being prepared.
    2- Many Institutions after deducting tax make a draft of that amount which will take at-least one day after the end of the quarter and which can not be the 1st of Jan in practical.

    3-The Draft is send by any messenger to the District H.Q. or where the draft for I T purposes is received along with the challan which will take at-least one day. Then after two to three days again a messenger will be sent to collect it.
    4- It means that the Institution receives the challan receipt by 5th of the month and will make statements accordingly and will give it to any professionals.

    5-In all the professionals does not receives the statements to be prepared before 6th or 7th of the month .
    6- If all the papers are correct but the figure is to be punched manually say for 200 deductees then the time will be taken 1 or 2 days.
    7-After validating the file Form 27A will be generated and the institution will be informed and they again will send a messenger to bring Form 27A for sign & seal.
    8- The signed 27A will reach the professional after a minimum of 2 days.
    9-The the profeessional will take the FVU File along-with the FORM 27A and go to the NSDL Centre.to File itand there you sit or stand according to the circumstances . Your number will come after PAN applicatios and C.D.files which have come earlier , sometime there occur server problem.
    So when all things are prompt then only you can submit one C.D. by 12th to 14th.
    10-On 15th of October 2014 when there was election in Maharashtra then the server of Gaya Bihar was not functioning from about 12 P.M. to 5.30 P.M. resulting in non filing of e-tds that day and which was filed on the next day which resulted in levy of late filling fee of Rs.200/-.
    11-The matter should be presented more effectively after placing all the circumstances by the petitioners in the High Court.

  5. Rajesh,Mumbai says:

    Why there is No penalty if Department does not issue refund in time. There should be time limit of say 3 months after Due date (of filing return) else a penalty of Rs. 200/- per day of delay should be imposed.

    Department uses Tax payer’s funds and pay only 6% Pa interest and that too is not paid correctly.On the other side, Department charges interest at 12 to 18% and in some cases (Like TDS late payment) it is charged exorbitantly.

    The laws must be same for tax payers as well as for Department.

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