Hon’ble Odisha High Court has granted stay on the recovery of Late fee charged Under Section 234E of the Income Tax Act,1961. In Separate cases Hon’ble Bombay, Rajashthan, Kerala and Karnataka High Court has already stayed the Recovery Proceeding U/s. 234E of the Income Tax Act,1961 till the final verdict in the case, and Now Odisha High Court Stays recovery of fees under section 234E . 

We earlier wrote on this topic. 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. Click here to read our earlier content on this.