Levy of Late Fee under Income Tax Act is not Ulra Vires to the Constitution: Kerala HC [Read Judgment]

Kerala High Court-Tax Exemption-taxscan

Recently, in Sree Narayana Guru Smaraka Sangam Upper Primary School v. Union of india & Anr, the Single bench of the Kerala High Court upheld the constitutional validity of Section 234 E of the Income Tax Act, 1961 as per which late fee can be imposed in case of “failure to deliver or caused to be delivered a statement within the time prescribed in Section 200(3) of the Income Tax Act, 1961.

In the instant case, the petitioners, a lower primary school in Kerala had made 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. As per 200(3) of the Income Tax Act, quarterly statement of TDS has to be filed in Form 24Q in respect of the salary for the corresponding quarter ending in June, September, December, March of every year.

The IT Department imposed fine on the petitioners in terms with the impugned section by finding that the petitioners failed to pay the same quarterly statement in Form 24Q in respect of the 2nd and 3rd quarter. The petitioners challenged the levy by filing a writ petition before the High court.

Before the single bench, the petitioners submitted that in terms of Section 273B, if the assessee was able to prove that there is reasonable and sufficient cause for the default or delay in filing TDS statement, penalty was not imposed. However, Section 234E provides for mandatory imposition of fine which is according to them is “arbitrary, unreasonable and in violation of Articles 14 & 19 (1)(g) of the Constitution of India. As there can be a genuine difficulty in uploading the TDS statement within the prescribed time and therefore imposing fee for delayed filing without being heard clearly amounts to arbitrariness.”

He bench noticed the decision of the Bombay High Court in the case Rashmikant Kundalia and ors v Union of India & ors, wherein it was held that “the late filing of TDS return/statement is regularised upon payment of the fee as set out in Section 234E of the Income Tax Act. This is nothing but a privilege and a special service to the deductor allowing him to file the TDS return/statement beyond the time prescribed by the Act or the Rules”. Hence, it was held that there is an element of quid pro quo for collecting the fee.

Dismissing the petition, Justice A.M Shaffique held that “The Bombay High Court has thereafter elaborated the consequences of delay in filing the statement. It is on account of the additional work burden which has fallen upon the department due to the fault of the deductor that a fee has been levied. I do ot think that a different view can be taken in the matter”.