In a notable judgment, the Madras High Court has upheld the constitutionality of Section 234F of the Income Tax Act 1961, which prescribed fees for delayed submission of returns.
The validity of this provision, inserted as per Finance Act 2018, was challenged on the ground that the "fee" for delayed returns was a "penalty" in disguise. According to the petitioners, the charges prescribed in the section were in the nature of "penalty", and therefore it can be imposed only after a fact-finding procedure. It was also contended that the charges cannot be termed as "fee" as there was no element of 'quid pro quo'.
A division bench comprising Chief Justice A P Sahi and Justice Subramonium Prasad did not agree with the contention. The bench held that there was an element of service when the department permits delayed submission of returns.
"Permitting filing of returns after the date is a privilege. The authorities have to correlate the returns of various assessment in order to finalise the refunds and for that it has to deploy personnel. It cannot be said that no services is rendered accepting the returns after the due date", the bench said.
It was further held :
"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 Court held that the provision cannot be termed as "illogical or harsh" as it ensures timely submission of returns.
"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", the bench said.
Case detailsTitle : K Nirai Mathi Azhagan v Union of India and anotherCase No : WP(c) No. 18314/2018Bench : CJ A P Sahi, Justice Subramonium PrasadAppearances : Adv S Santhosh (for petitioner), ASG G Rajagopalan, Hema Muralikrishnan
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