TaxTMI 
TaxTMI 
2020 (3) TMI 608
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....lobal Consulting Private Limited, Qatalys Software Technologies Private Limited and Jeans Park (India) Private Limited, challenging the demand notices raised by the fifth respondent against them under Section 234 E along with Section 220 (2) and 201 (1) (A) of the Income Tax Act, 1961. 3. Section 234 E, the vires of which is under challenge:- 234 - E of the Income Tax Act reads thus:- Fee for default in furnishing statements - (1) Without prejudice to the provisions of the Act, where a person fails to deliver or cause to be delivered a statement within the time prescribed in sub-section (3) of Section 200 or the proviso to sub- Section (3) of Section 206 C,he shall be liable to pay, by way of fee, a sum of two hundred rupees for every day during which the failure continues. (2). The amount of fee referred to in sub-section (1) shall not exceed the amount of tax deductible or collectible, as the case may be. (3). The amount of fee referred to in sub-Section 91) shall be paid before delivering or causing to be delivered a statement in accordance with sub-Section (3) of Section 200 or the proviso to sub-Section (3) of Section 206 C. (4). The provisions of this Section shall ....
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....ty for hearing need be given. 7. According to the petitioner, 234 (E) is an unreasonable restriction on trading business and thus violates Article 19 (1) (g) of the Constitution of India. It is also stated that fee can be levied only for the service rendered as a compensatory fee or for any privilege that conferred which is in the nature of regulatory fee. 234 E which levies a fee on delayed payment of TDS statement is neither compensatory fee nor is a regulatory fee. It is also submitted that there is no relationship between levy of fee and the service that is sought to be rendered on the contrary it is submited that since no service has been rendered, fee should not be leviable at all. Petitioner also states that fee has no correlation to the benefit conferred and any way, as stated above, it could not have been applied retrospectively. 8. Petitioner states that the present Section 234 E as a fee for default in furnishing TDS statements with an incrementally increasing fee for every continuing day in default is not justifiable and as stated above Section 234 (E) is in fact a "penalty" in the guise of a fee. The challenge is inter alia on following grounds: (a). Section 234 E....
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....s when there is no difficulty caused to the Income Tax Department/Revenue, there can be no service that Income Tax can render to the deductor who was in default of filing TDS statement within prescribed time but has filed the same well within the time before which Assessees/Deductees can file their assessment for tax liability and tax refund. It is submitted that even with failure to file TDS statement within prescribed time, there will be cases that will cause difficulty to IT/Revenue (when the delayed filing is not completed before March 31st or May 31st depending on whether TDS has been deducted in the last quarter) and in those cases there will be no difficulty to Income Tax Department /Revenue and therefore it cannot be said that service is being provided for accepting belated returns. It is therefore stated that the fee is nothing but a penalty in the guise of a fee. 11. Petitioner further points out that with no penalty payable for the delay in filing TDS statement within the expiry of one year from prescribed period, a fee to enable filing within that one year period (i.e., after the prescribed period and within one year from trhe prescribed period) cannot be said to confe....
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....e reason that the assessee is allowed to file TDS statement beyond the prescribed period of time and this fee regularises the late filing of TDS. It is contended that Section 234 of the Act, is only for accepting the TDS statement beyond the period of time and Section 271 (H) imposes the penalty of such late filing of statements. Section 271 (H) has been introduced to prevent belated filing whereas Section 234 (E) is to regularise late payment of fee. 16. It is further submitted that there can be two provisions, one imposing a penalty and the other imposing a fee. Under Section 271 (H) of the Act, penalty is not less than Rs. 10,000/- which may be extended upto Rs. 1 lakh. Section 271 (H) (3) provides that no penalty shall be levied if the person proves that after paying tax deducted or collected along with fee and interest if any to the credit of the Central Government, he had delivered the statement referred to in sub- Section 3 of Section 200 or the provisio to sub-Section (3) of Section 206 (C) before the expiry of a period of one year. It is therefore, submitted that principles of natural justice is inbuilt in Section 271 (H) of the Act whereas 234 (E) of the Act only provide....
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....ductor in the TDS statement. It is therefore the contention of the Revenue that if there is a delay in grant of credit then it will result in granting refund of the tax deducted on behalf of the deductee by the deductor along with interest at the rate of half a percent every month which is a loss of revenue to the department on account of the lapse of filing the statements by the deductor. 20. Section 234 (E) of the Act provides that where a person fails to deliver a statement within the time prescribed, then he shall be liable to pay by way of a fee, a sum of Rs. 200/- for every day during which the failure continues. The Act therefore, provides that late submission of fee is regularised by paying a fee of Rs. 200/- per day. 21. The distinction between Sections 234 (E) and 271 (H) of the Act is that Section 234 (E) is not in lieu of penalty. Both are independent levies. Section 271 (H) of the Act provides that penalty would not be levied if the tax with fee and interest is paid and statement is filed within one year from the due on date. Section 234 (E) provides for payment at the rate of Rs. 200/- per day for every day's delay. Section 234 (E) cannot be called as a penalty ....
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....und claims, are not processed in a timely manner, then (i) a delay occurs in the granting of credit of TDS to the person on whose behalf tax is deducted (the deductee) and consequently leads to delay in issuing refunds to the deductee, or raising of infructuous demands against the deductee; (ii) the confidence of a general taxpayer on the tax administration is eroded; (iii) VRD 10 of 19 WP771/14 the late payment of refund affects the Government financially as the Government has to pay interest for delay in granting the refunds; and (iv) the delay in receipt of refunds results into a cash flow crunch, especially for business entities. 14. We find that the Legislature took note of the fact that a substantial number of deductors were not furnishing their TDS retun/statements within the prescribed time frame which was absolutely essential. This led to an additional work burden upon the Department due to the fault of the deductor by not furnishing the information in time and which he was statutorily bound to furnish. It is in this light, and to compensate for the additional work burden forced upon the Department, that a fee was sought to be levied under section 234E of the Act. Lookin....
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.... the services rendered, such relationship need not be mathematical one even casual co-relationship in all that is necessary. The view of the Apex Court in (2005) 2 SCC 345 (referred to by the learned Tribunal at page 14 of the impugned judgement) removed all the doubts on this issue." (emphasis supplied) 17. It would also be apposite to refer to the observations of the Supreme Court in the case Sona Chandi Oal Committee v. State of Maharashtra3, and which judgement has been referred to by the Calcutta High Court. The Supreme Court, in paragraph 22 stated thus:- "22. A three-Judge Bench of this Court in B.S.E. Brokers' Forum v. Securities and Exchange Board of India [(2001) 3 SCC 482] after considering a large number of authorities, has held that much ice has melted in the Himalayas after the rendering of the earlier judgments as there was a sea change in the judicial thinking as to the difference between a tax and a fee since then. Placing reliance on the following judgments of this Court in the last 20 years, namely, Sreenivasa General Traders v.State of A.P. [(1983) 4 SCC 353] , City Corpn. of Calicut v. Thachambalath Sadasivan[(1985) 2 SCC 112 : 1985 SCC (Tax) 211] , S....
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....eal is not a matter of right but is a creature of the statute, and if the Legislature deems it fit not to provide a remedy of appeal, so be it. Even in VRD 14 of 19 WP771/14 such a scenario it is not as if the aggrieved party is left remediless. Such aggrieved person can always approach this Court in its extra ordinary equitable jurisdiction under Article 226 / 227 of the Constitution of India, as the case may be. We therefore cannot agree with the argument of the Petitioners that simply because no remedy of appeal is provided for, the provisions of section 234E are onerous. Similarly, on the same parity of reasoning, we find the argument regarding condonation of delay also to be wholly without any merit." 24. We are in complete agreement with the aforesaid judgment. As stated by the Hon'ble Supreme Court, in SONA CHANDI OAL COMMITTEE AND OTHERS Vs. STATE OF MAHARASHTRA {(2005) 2 SCC - 345, levy does not cease to be a fee merely because there is an element of compulsion or coerciveness present in or not, nor is it a postulate of a fee that it must have a direct relation to the actual service rendered by the authority to each individual who obtains the benefit of the service. ....
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....ction 234E is in fact fee or penalty or compensatory tax, it could be seen from Section 199 of the Act that any deduction made in accordance with Section 200 to Section 206 would be treated as a payment of tax on behalf of the person from whose income the deduction was made. An assessee while computing his income for being assessed under self assessment as provided under Section 140A will construe the deductions made on his behalf as a component in his return of income for claiming deduction in the payment of tax. A bare perusal of Section 244A of the Act would indicate that where refund of any amount becomes due to the assessee under the Act, such assessee would be entitled to receive in addition to the amount of refund of tax, simple interest at the rate of one-half percent for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which refund is granted as indicated in sub-Section (1)(a) of the Act. A bare perusal of Section 271H which came to be inserted by Finance Act, 2012 with effect from 01.07.2012 would indicate it provides for levy of penalty for failure to furnish statements of tax deducted at source under ....
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....e a statutory obligation is cast on the department to process the said return of income within the specified period from the date of filing. If for want of details such return of income not being processed or assessment order not being framed or would be stalled or in other words the return of income filed by an assessee on whose behalf the tax has already been deducted by the deductor is not furnished within the prescribed time by such deductor, it would consequently have cascading effect namely, it would stall the processing of the return of income filed by the deductee. In a given case, there might be instances of where the assessee would be entitled to refund and on account of delay occurring due to non delivery of TDS statements by the deductors, it would result in delay in extending the credit of TDS to the person on whose behalf tax is deducted and consequently it would result in delayed issuance of refunds to the deductee or raising of consequential demands against the deductee which otherwise would not have been raised. In this lengthy and unwarranted process it may erode the confidence reposed by the tax payer on the department. Last but not the least, it would result in ....
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....ctivity like trade and commerce as the criterion of its operation and if the effect of the operation of the enactment is to impede trade and commerce then Article 301 is violated?. 31. It is also noted that a Hon'ble Division Bench of High Court of Punjab, in Dr.AMRIT LAL MANGAL Vs. UNION OF INDIA {(2015) 62 TAXMANN.COM 310 (PUNJAB & HARYANA), and a Hon'ble Division Bench of High Court of Rajasthan in DUNDLOD SHIKSHAN SANSTHAN Vs. UNION OF INDIA {(2015) 63 TAXMANN.COM 243 (RAJASTHAN) has also upheld the validity of Section 234 (E) of the Act. 32. Revenue is right in contending that Section 234 (E) of the Act is not a penalty. Penalty is levied under Section 271 (H) and is not automatic. Penalty is levied only when tax is deducted at source along with interest fee is not deposited and statement is not filed within one year. If the above two conditions are satisfied, then penalty is not leviable. On the other hand, Section 234 (E) of the Act is only a late fee at the rate of Rs. 200/- per day. As held in the judgments relied above, Section 234 (E) of the Act is purely compensatory and is a special benefit to the advantage of the assessee as well for belatedly filing the TDS....