Court allows review petition against Income Tax Act Section 234E penalty, reinstating for further examination

The review petition challenging the constitutional validity of Section 234E of the Income Tax Act, 1961, was allowed. The court reinstated the original petition for further examination, noting that the penalty under Section 234E was considered a fee and did not meet legal prerequisites. The case was listed for final hearing before the Roster Bench.

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Issues: Review of judgment concerning constitutional validity of Section 234E of the Income Tax Act, 1961.

Analysis:
1. The petition sought a review of a judgment dismissing W.P. (C) 9410 of 2014. The petitioner challenged the constitutional validity of Section 234E of the Income Tax Act, 1961, and the consequential orders issued by tax authorities.
2. The main contention was against the imposition of a uniform penalty of Rs. 200 per day for late filing of statements under Section 234E (1) of the Act. The petitioner argued that this provision, in force from 1st July 2012 to 1st October 2014, removed judicial discretion and imposed penalties without considering genuine reasons for delays.
3. Additionally, the petitioner highlighted that the penalty demanded under Section 234E (1) exceeded the TDS amount, and he could also be liable under Section 271H of the Act for the same default.
4. The petitioner argued that despite being termed a "fee," the penalty under Section 234E was, in fact, a penalty in nature. He aimed to distinguish previous judgments from other High Courts that upheld the validity of Section 234E.
5. The review judgment acknowledged that the challenge to Section 234E was based on its classification as a fee and not meeting the legal prerequisites. It noted that certain points raised in the petition were not fully considered during oral arguments but warranted a detailed examination.
6. Consequently, the review petition was allowed, and W.P. (C) 9410 of 2014 was reinstated for further examination. The interim order from 24th December 2014 was reinstated, and the case was listed for final hearing on 26th July 2019 before the Roster Bench.

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