Is the provision u/s 234E for levying late fee for delay in filing of TDS returns constitutional?? As per the provisions of the law, if the Deductor is charged penalty u/s 234E, this penalty cannot be waived off and has to be paid to the IT Department using challan no. 281. Levy of fees u/s 234E shall be under the following circumstances:

• Failure to submit e-TDS Statement on time will result in fees on the Deductor.
• Delay to file the e-TDS Statement, fees of Rs. 200 per day will be levied on the Deductor, as long as TDS Statement is not filed.
• The amount of levy should not exceed the amount of TDS.
• Such fees should be paid prior to filing of TDS Statement and it should be reflected in the TDS Statement.

This provision however, has been challenged in the Kerala High Court on the grounds that there is no section in the IT Act which empowers the department to recover the penalty for late filing of TDS returns. With effect from July 1, 2012, the IT Department has made it mandatory to pay late fee of Rs. 200 per day since the due date, in case of late filing of TDS returns by imposition of new ruling u/s 234E. However the department can’t recover the late fee from taxpayers for the same. The reason being that IT Department is not authorized to do so u/s 204 and 200A of the IT act. The levy in nature of “fee” has been challenged as illegal, arbitrary, unreasonable, invalid and unconstitutional in a writ petition filed by a lower primary school in Kerala. A large number of assessees are receiving demand notice from department for late filing of TDS return. The department has served demand notice to thousands of taxpayers across the country, valued at Rs. 500-700 crore as estimated. The Kerala High Court has acknowledged and admitted the writ petition and has granted 2 months stay order to all the proceedings initiated against the petitioner under Section 234E of the Income Tax Act. Also, the standing counsel for the IT Department has taken notice for all the respondents in the writ petition. The concerned assessees receiving such notices must approach the IT Commissioner (CIT), Appeals for getting their penalty waived off. A practicing CA in Indore, being one such affected person, who has received a demand notice from the department for paying Rs 23,000 as late fee for defaulting on TDS, at the rate of Rs 200 per day since the due date. However, the affected assessee said such penalty can’t be recovered under any of the existing law and hence he has decided to go for appeal. In fact, the IT Commissioner (Appeals) also admitted that he was expecting such appeals from the affected taxpayers. To conclude, it will be of great relief if the petition is upheld and judgment in favour of the cause is passed. Remedies for such notices: Option I:

• Accept the demand
• Pay the amount
• Send in a reply to the CPC, Bangalore with a CC to the Assessing Officer by providing him the copy of late payment interest challan as deposited in bank and copy of receipt of revised return, specifying in the reply to update their records and delete the demand. This will help on not receiving further notices on the same issue.

Option II: Reject the demand. Do not pay the amount. Send reply to the AO on the following grounds: 1) Provisions of Sec. 234E made applicable w.e.f. 1st July, 2012 states that “ Amount of late fee shall be paid before delivering a TDS statement”, It means that any late fee should have been deposited just at the time of delivering TDS statement and not later than this. The authorized TIN- NSDL centre which accepted the TDS statement also accepted these without late fee, as well as the software utility of the TDS department itself accepted these without late fee. Once the TDS statement has been accepted without late fee, then such late fee cannot be recovered later on. TDS statement late fee cannot be recovered for F.Y. 2012-13, as it is not collected at the time of delivering TDS statement to the department. 2) It is also relevant to note that the law has not made any person responsible, to deposit late fee, in case of default in depositing late fee along with TDS statement, which can be inferred from the provisions of Sec. 204 of the act which specifically states as under: “Sec. 204 of the Act, for the purposes of [the foregoing provisions of this Chapter] and section 285, the expression “person responsible for paying” means—

• in the case of payments of income chargeable under the head “Salaries”, other than payments by the Central Government or the Government of a State, the employer himself or, if the employer is a company, the company itself, including the principal officer thereof;

• in the case of payments of income chargeable under the head “Interest on securities”, other than payments made by or on behalf of the Central Government or the Government of a State, the local authority, corporation or company, including the principal officer thereof; [(iia) in the case of any sum payable to a non-resident Indian, being any sum representing consideration for the transfer by him of any foreign exchange asset, which is not a short-term capital asset, the [authorised person] responsible for remitting such sum to the non-resident Indian or for crediting such sum to his Non-resident (External) Account maintained in accordance with [the Foreign Exchange Management Act, 1999 (42 of 1999)], and any rules made thereunder;]

• [in the case of credit, or, as the case may be, payment] of any other sum chargeable under the provisions of this Act, the payer himself, or, if the payer is a company, the company itself including the principal officer thereof;

• in the case of credit, or as the case may be, payment of any sum chargeable under the provisions of this Act made by or on behalf of the Central Government or the Government of a State, the drawing and disbursing officer or any other person, by whatever name called, responsible for crediting, or as the case may be, paying such sum.]” Section 204 particularly states that says that “for the purposes of Sec. 190 to Sec. 203 and for Sec. 285 of the Act the following persons would be responsible”, so it is clear that for the purpose of Sec. 234E none of the person has been made responsible, therefore if any late fee is due and not deposited along with the TDS statement none can be held responsible to deposit it.

3) Demand of late fee cannot be raised also by way of processing of TDS statement, because provisions of Sec. 200A of the act does not cover default in payment of late fee u/s 234E, except any arithmetical error, or incorrect claim, or default in payment of interest, any TDS payable or refundable etc. Option III: The affected asseessee can also file a writ petition in his respective State Court referring to the interim order given by the Kerala High Court on the matter. However, the judgment of Kerala High Court is not binding on any other State Court so the matter may also be taken to the Apex Court for the same. The Apex Court shall pass its final judgment on the matter which will be of binding nature on all the Courts. In view of the above it can be hereby opined that late fee cannot be recovered later on by way of any notice, neither notice of demand U/s 156 can be issued for this. On receiving the application the AO has to pass an amendment order within 6 months from the end of the month in which the said application is received or he may reject the application within such time. If he rejects your abovementioned arguments with reasons not acceptable to you then you can go for an appeal.