2015 (9) TMI 807 - HC - Income Tax

Validity of fee levied u/s 234E - late filing of the TDS returns - Fee for default in furnishing statements - Held that - The constitutional validity of the statutory provision is not amenable to challenged on the ground that the performance insisted upon by the statutory provision is too onerous or that the statute does not leave sufficient time or does not allow reasonable cause to be considered for violation of the provision. In G.P. Singh s Principles of Statutory Interpretation, 9th Edn., 2004, p. 497, referring to a large number of judgments of the Federal Court and the Supreme Court, it was observed that for upholding the constitutionality of a statute, the Court can construe or interpret its general words narrowly or widely. The Court must make every effort to uphold the constitutional validity of a statute, even if that requires giving the statutory provision a strained meaning, or narrower or wider meaning, than what appears on the face of it. It is only when all efforts to do so fail should the Court declare a statute to be unconstitutional. In the present case, the fee was levied under section 200 for late filing of the returns, prior to the amendments made by the Finance Act, 2015 with effect from 1.6.2015 in Sections 200A, 246A and 272A providing for computation and appeal. We do not find that even prior to these amendments the imposition of fee was illegal. We do not in exercise of the power under Article 226 of the Constitution of India find any valid reasons or justification to interfere with the compensatory fees imposed for late filing of the TDS returns on flat rates. The absence of any provision for condonation of delay and the appeal prior to amendments also did not make the imposition of late fees by Section 234E to be ultra vires. - Appeal dismissed.

Issues:
Challenge to the constitutionality of Section 234E of the Income Tax Act, 1961.
Validity of late filing fee under Section 234E.
Availability of remedy through appeal against the order under Section 200A.
Justification for the levy of late filing fee.
Constitutional validity of the statutory provision.

Analysis:
1. Challenge to the constitutionality of Section 234E:
The petitioners sought relief by challenging the constitutionality of Section 234E of the Income Tax Act, 1961. The Bombay High Court had previously upheld the validity of this section, considering the late filing fee as a compensatory fee rather than a penalty. The fee was imposed on those failing to deliver TDS returns timely, compensating for the additional work burden on the Income Tax Department due to late filings. The fee was deemed necessary to maintain an efficient tax administration system, ensuring timely processing of returns and refunds.

2. Validity of late filing fee under Section 234E:
The court examined the nature of the late filing fee under Section 234E and concluded that it was compensatory in nature, not punitive. The fee was considered a fixed charge for the extra service required due to late filing of TDS statements. It was viewed as a privilege allowing deductors to file returns beyond the prescribed time upon payment of the fee. The court emphasized that the fee was not a tax but a charge for the additional burden imposed on the department due to delayed submissions.

3. Availability of remedy through appeal against the order under Section 200A:
Prior to the amendment by the Finance Act 2015, the absence of an appeal provision was cited as a challenge to the late filing fee under Section 234E. However, the court noted that the provision of appeal under Section 246A had been inserted post-amendment, rendering this argument invalid. With the availability of an appeal mechanism, the onerous nature of the fee was no longer a valid ground for challenging the section's vires.

4. Justification for the levy of late filing fee:
The Central Government and the Income Tax Department's reasons for inserting Section 200A were scrutinized. The petitioners argued that the fee lacked justification, especially in the absence of provisions for condonation of delay. Concerns were raised about the limited time available for filing TDS returns, potentially turning the fee into a penalty. However, the court upheld the compensatory nature of the fee, emphasizing its role in regulating timely submissions and maintaining tax administration efficiency.

5. Constitutional validity of the statutory provision:
The court highlighted the principles of statutory interpretation and the need to uphold the constitutionality of statutes. Even before the 2015 amendments, the imposition of late fees under Section 234E was deemed legal. The court found no valid reasons to interfere with the compensatory fees imposed for late filing of TDS returns, even in the absence of provisions for condonation of delay and appeal. Ultimately, the writ petition challenging the constitutionality of Section 234E was dismissed for lacking merit.

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