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2020 (2) TMI 425 - HC - Income TaxLevy of Fee u/s 234F for default in furnishing return of income u/s 139(1) - constitutional validity - violation of article 14 - Classification of all defaulters as one class - HELD THAT - It is well settled that it is not necessary that there must be mathematical precision between the fee paid and service rendered. All that is necessary is a reasonable relationship between fee charged and the services rendered. A burden of fee for an additional exercise by the revenue compels the assessee to exercise promptitude or otherwise pay an additional fee. The legislature intent is not to arbitrarily burden the assessee by realising something extra but to call upon the assessee to share the burden of extra exercise due to delay on his part. The department is correct in contending that the acts of an assessee in discharging his entire tax liability to the Government by way of Advance Tax, TDS, self assessment, etc., is set at naught if the same is not intimated to the Government in time by filing of return of income in order to enable to cross verify the same and complete the assessment within the period of limitation and in order to ensure that such acts of an assessee in discharging his entire tax liability bear fruits, a regulatory mechanism in the form of Section 234 F has been inserted in the statute book and the same cannot be termed as illogical or harsh. Section 234F is not violative of any of the other provisions of Income Tax Act or the Constitution of India. Nothing has been shown as to how the Section is manifestly arbitrary for it to be struck down. It is well settled that if it is a charge for service rendered by the commercial agency and the amount of fee levied is based on the expenses incurred by the Government rendering the fee. Unlike the tax which is compulsory extraction of money, enforceable by law and not in return of any services rendered. The distinction between the tax and the fee is that tax is levied as a part of common burden while fee is payment for a special benefit of privilege. Fee confers some advantage and is a return of consideration for services rendered. The element of quid pro quo strict senso is not always a sine qua non of a fee. Nonetheless, the fee under Section 234 F is charged for delay in submitting the return of income beyond the prescribed time, which is privilege to allow late filing of the return. The revenue is justified in holding that the object of the provision is thus intended to ensure proper and timely filing of return. The gravamen of the offence is failure to submit the return within a stipulated time. So far as these persons are concerned, they form a class by themselves. Whether a person is richer comparatively than the other has no relevance to this classification. Therefore, the classification of all such defaulters as one class is a reasonable classification and does not offend Article 14 of the Constitution of India. W.P. dismissed.
Issues Involved:
1. Constitutionality of Section 234(F) of the Income Tax Act, 1961. 2. Whether Section 234(F) imposes a penalty disguised as a fee. 3. Whether the levy of fee under Section 234(F) requires an element of quid pro quo. 4. Whether Section 234(F) violates Article 14 of the Constitution of India. Issue-wise Detailed Analysis: 1. Constitutionality of Section 234(F) of the Income Tax Act, 1961: The writ petition challenges the vires of Section 234(F) of the Income Tax Act, 1961. The court noted that the Income Tax Act is a complete code in itself, prescribing time limits for payment of tax, processing of returns, and refunds. The court emphasized that a provision could be held unconstitutional only if the legislature was incompetent to enact it, it offends some constitutional provision, or it is manifestly arbitrary. The Supreme Court in the case of Government of Andhra Pradesh Vs. Smt.P.Laxmi Devi stated that a statute should be upheld unless it clearly violates a constitutional provision. The court concluded that Parliament is competent to pass legislation on taxes on income under Entry 82 of List I of the Seventh Schedule and that Section 234(F) does not violate any provisions of the Income Tax Act or the Constitution of India. 2. Whether Section 234(F) imposes a penalty disguised as a fee: The petitioner argued that Section 234(F) is a penalty disguised as a fee, citing the Supreme Court judgment in Kunnathat Thatehunni Moopil Nair Vs. State of Kerala and Another. The court, however, distinguished between a tax and a fee, noting that while a tax is a compulsory extraction of money not in return for any services rendered, a fee is a charge for a specific benefit or privilege. The court cited the Supreme Court's decision in Sona Chandi Oal Committee Vs. State of Maharashtra, which held that the traditional concept of quid pro quo in a fee has undergone considerable transformation. The court concluded that Section 234(F) is not a penalty but a fee for the privilege of late filing of returns. 3. Whether the levy of fee under Section 234(F) requires an element of quid pro quo: The petitioner argued that the fee under Section 234(F) is invalid as there is no service provided by the authorities, and for a fee to be valid, there should be an element of quid pro quo. The court, however, noted that it is well settled that there need not be mathematical precision between the fee paid and the service rendered; a reasonable relationship is sufficient. The court cited the Supreme Court's decision in Sreenivasa General Traders Vs. State of Andhra Pradesh, which held that the element of quid pro quo in the strict sense is not always a sine qua non for a fee. The court concluded that the fee under Section 234(F) is justified as it is a charge for the extra service provided by the Income Tax Department due to the late filing of returns. 4. Whether Section 234(F) violates Article 14 of the Constitution of India: The petitioner argued that Section 234(F) is discriminatory and violates Article 14 of the Constitution of India. The court, however, noted that the classification of all defaulters as one class is reasonable and does not offend Article 14. The court cited the Supreme Court's decision in Jindal Stainless Steel Vs. State of Haryana, which explained the difference between a tax, a fee, and a compensatory tax. The court concluded that the object of Section 234(F) is to ensure proper and timely filing of returns, and the classification of defaulters as a separate class is reasonable and justified. Conclusion: The court dismissed the writ petition, upholding the constitutionality of Section 234(F) of the Income Tax Act, 1961. The court found that the fee under Section 234(F) is not a penalty but a charge for the privilege of late filing of returns, and there is a reasonable relationship between the fee charged and the services rendered. The court also held that Section 234(F) does not violate Article 14 of the Constitution of India. Consequently, the connected Miscellaneous Petition No.21628 of 2018 was closed.
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