The fee sought to be levied under section 234E for late filing of TDS return is not a tax that is sought to be levied on the deductor. If the section does not empower the AO to condone the delay for furnishing of TDS return, then the said section shall not stand onerous.

Facts of the case:

Petitioner, a practicing Chartered Accountant, challenged the constitutional validity of section 234E.

Section 234E – Levy of Fees:

• Failure to submit e-TDS Statement on time will result in fees on the deductor.
• If you delay or forget to file your e-TDS Statement, fees of Rs. 200 per day will be levied on the deductor, as long as TDS Statement is not filed.
• The levied amount of fee is not supposed to exceed the TDS deductibles.
• Prior to filing of TDS Statement such fee should be paid and it should be reflected in the TDS Statement.

The petitioner argued that 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. In the absence thereof, the said section seeks to collect tax in the guise of a fee.

He further submitted that the provisions of section 234E were extremely onerous as the AO was not vested with any power to condone the delay in filing the TDS return and there was also no provision of appeal against order of AO.

It was held that:

The High Court held that the the Income Tax Department is under obligation to process the income tax returns within the specified period. If the information of TDS is not furnished by the deductor, the department cannot accurately process the return.

If the income tax returns having refund claims were not processed in a timely manner, it would result in delay in issuing refunds or raising of infructuous demands. Late payment of refund also affects the government financially as the Government has to pay interest for delay in granting the refunds.

To avoid such interest payment, furnishing of TDS returns within the prescribed time frame is necessary. The legislature viewed that the TDS return was not furnished within the due date. This led to an additional work burden upon the Department due to the fault of the deductor. To compensate for the additional work burdened upon the Department, a fee was sought to be levied under section 234E. Thus, Section 234E is a fee which is charged for the extra service which the Department has to provide due to the late filing of the TDS statements.

Even if right of appeal is not there in the statute, the aggrieved person could anytime approach to the Court under Article 226/ 227 of the Constitution of India, as the case may be. Therefore, the Court held that merely because no remedy of appeal was provided for, the provisions of section 234E were onerous.

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