Madras High Court
Madras High Court
Litigation News

Facilitating late-filing of Income Tax returns is service: Madras HC upholds Section 234 (F) of IT Act prescribing Fee for default in timely filing of returns

“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 High Court observed.

Meera Emmanuel

The Madras High Court recently upheld Section 234 (F) of the Income Tax Act, 1961, which prescribes the late fee to be paid for failing to file income tax returns on time.

The provision was challenged on the ground that it prescribes a penalty disguised as a fee. Further, the petitioner had argued that the fee was being levied even though there was no corresponding service. It was contended that for a fee to be prescribed, there should be an element of quid pro quo.

The Bench of Chief Justice AP Sahi and Subramonium Prasad, however, disagreed. Rather, the Court found merit in the arguments advanced by the State authorities that the “service” involved is facility allowing late-payers to file their income returns beyond the prescribed date. As stated in the judgment,

The Act facilitates delay in payment of tax beyond the prescribed time limit, which is nothing but a service or a benefit extended to the assessee.
Madras High Court

The Court further explained,

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…

… 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 added that, "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.”

Taking note of the Government's submission that timely filing of income tax returns is necessary for efficient administration, the Court also pointed out that the provision is intended to ensure that such timely filing is done. The Bench opined, that the same cannot be termed as illogical or harsh, given that,

“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."

Madras High Court

The High Court, therefore, dismissed the writ petition, concluding that,

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.”

Advocate S Santhosh appeared for the petitioner. Additional Solicitor General G Rajagopalan appeared for the Union of India and Advocate Hema Muralikrishnan appeared for the Central Board of Direct Taxes.

[Read the Judgment]

K Nirai Mathi Azhagan v UOI - Madras HC Judgment.pdf
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