I filed my TDS statement late and have been charged Rs.200 a day under section 234E — is that levy even constitutional when no service is given in return?
Yes. The Bombay High Court upheld section 234E on 9 February 2015. The levy is not punitive: it is a fixed charge for the extra work the Department must do because the statement came in late, and the deductor gets something in return — his late filing is regularised and he is allowed to file beyond the prescribed time. That is a privilege and a special service, so the charge is a fee and not a tax in disguise. The absence of a power to condone delay and of a right of appeal does not make the section onerous, a right of appeal being a creature of statute. The writ petition was dismissed.
Decided by the High Court (High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction; Mohit S. Shah CJ and B.P. Colabawalla J; judgment delivered by B.P. Colabawalla J. Reserved 29 January 2015, pronounced 9 February 2015) on 2015-02-09, reported as Writ Petition No. 771 of 2014, High Court of Judicature at Bombay. It bears on section 234E, section 200(3), section 200A of the Income Tax Act 1961, in TDS Defaults and How Tax Law Is Read matters.
Section 234E is met by every practitioner, and the constitutional argument against it — that a fee presupposes a service and none is rendered for filing late — is the obvious one. This judgment answers it and is the leading authority for the levy's validity. Two strands are worth carrying away. The first is the modern law of fees: quid pro quo in the strict sense is no longer a sine qua non, all that is needed is a reasonable relationship between the levy and the services rendered, and a person who receives a general benefit from the authority satisfies the requirement. The second is the standard of review: a statute is struck down only where the violation is so evident as to leave no doubt, and economic and regulatory legislation gets greater latitude than laws touching civil liberties, because the court has no expertise in economic matters.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The first petitioner is a practising chartered accountant whose clients had received several notices under section 200A. By a petition under Article 226 the petitioners challenged the constitutional validity of section 234E, inserted with effect from 1 July 2012, which makes a person who fails to deliver a statement within the time prescribed by section 200(3) or the proviso to section 206C(3) liable to pay a fee of Rs.200 for every day the failure continues, capped at the amount of tax deductible or collectible, and payable before the statement is delivered. They also sought a declaration that the section 200A notices were null and void. Their case was that a fee is a recompense for a service and cannot be collected for a disservice or default, that compensation for a disservice is in substance a penalty, and that what was really happening was the collection of a tax in the guise of a fee. They added that the section is onerous because the Assessing Officer cannot condone the delay and no appeal lies. The Additional Solicitor General defended the levy as compensating the Department for the additional work that late statements cause.
The petition was dismissed, the rule discharged and the parties left to bear their own costs. Section 234E does not violate any provision of the Constitution and is intra vires. The levy is not punitive but a fee — a fixed charge for the extra service the Department has to provide because of the late filing — and is not a tax in the guise of a fee. The absence of a power in the Assessing Officer to condone the delay, and the absence of an appeal, do not make the section onerous: a right of appeal is a creature of statute, and an aggrieved person is not left without a remedy since the extraordinary jurisdiction under Articles 226 and 227 remains available against an arbitrary order.
The Court began with what late filing does. A deductor must file quarterly statements of the tax he has deducted, and the Department cannot accurately process the deductee's return until it has them. Delay therefore has a cascading effect: credit for tax deducted is held up and refunds are delayed or infructuous demands raised, confidence in the administration is eroded, the Government pays interest on the delayed refunds, and the deductee suffers a cash flow crunch. A substantial number of deductors were not filing in time, which cast an additional burden on the Department through the deductor's own default. The fee was levied to compensate for that burden, and so is a fixed charge for extra service rather than a punishment. The Court added a second element of exchange: the deductor is allowed to file beyond the prescribed time provided he pays the fee, so his late filing is regularised — itself a privilege and a special service to him. The Calcutta High Court had reasoned the same way about the late fee under the West Bengal Value Added Tax Act in Howrah Tax Payers' Association. On the general law, the Court adopted Sona Chandi Oal Committee: quid pro quo has undergone considerable transformation, a regulatory fee does not lose its character because no service precedes it, and all that is required is a reasonable relationship between levy and services, a general benefit being enough. Finally, on the standard of review, the Court applied P. Laxmi Devi: a statute is invalid only if it clearly violates the Constitution in so evident a manner as to leave no doubt, of two possible views the one upholding validity must be preferred, and economic and regulatory legislation calls for judicial restraint because the court is not composed of economic experts.
Section 234E of the Act is not punitive in nature but a fee which is a fixed charge for the extra service which the Department has to provide due to the late filing of the TDS statements.
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Handle my notice → Ask a CA on WhatsAppYes. The Bombay High Court upheld section 234E on 9 February 2015. The levy is not punitive: it is a fixed charge for the extra work the Department must do because the statement came in late, and the deductor gets something in return — his late filing is regularised and he is allowed to file beyond the prescribed time. That is a privilege and a special service, so the charge is a fee and not a tax in disguise. The absence of a power to condone delay and of a right of appeal does not make the section onerous, a right of appeal being a creature of statute. The writ petition was dismissed. This was decided by the High Court (High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction; Mohit S. Shah CJ and B.P. Colabawalla J; judgment delivered by B.P. Colabawalla J. Reserved 29 January 2015, pronounced 9 February 2015) and bears on section 234E, section 200(3), section 200A of the Income Tax Act 1961. It is reported as Writ Petition No. 771 of 2014, High Court of Judicature at Bombay. Section 234E is met by every practitioner, and the constitutional argument against it — that a fee presupposes a service and none is rendered for filing late — is the obvious one. This judgment answers it and is the leading authority for the levy's validity. Two strands are worth carrying away. The first is the modern law of fees: quid pro quo in the strict sense is no longer a sine qua non, all that is needed is a reasonable relationship between the levy and the services rendered, and a person who receives a general benefit from the authority satisfies the requirement. The second is the standard of review: a statute is struck down only where the violation is so evident as to leave no doubt, and economic and regulatory legislation gets greater latitude than laws touching civil liberties, because the court has no expertise in economic matters. If it applies to you, the first step is this: Treat the section 234E charge as unavoidable once the statement is late, and pay it before delivering the statement — sub-section (3) requires that, and the Assessing Officer has no power to condone delay.
The first petitioner is a practising chartered accountant whose clients had received several notices under section 200A. By a petition under Article 226 the petitioners challenged the constitutional validity of section 234E, inserted with effect from 1 July 2012, which makes a person who fails to deliver a statement within the time prescribed by section 200(3) or the proviso to section 206C(3) liable to pay a fee of Rs.200 for every day the failure continues, capped at the amount of tax deductible or collectible, and payable before the statement is delivered. They also sought a declaration that the section 200A notices were null and void. Their case was that a fee is a recompense for a service and cannot be collected for a disservice or default, that compensation for a disservice is in substance a penalty, and that what was really happening was the collection of a tax in the guise of a fee. They added that the section is onerous because the Assessing Officer cannot condone the delay and no appeal lies. The Additional Solicitor General defended the levy as compensating the Department for the additional work that late statements cause. The matter was decided on 2015-02-09 by the High Court (High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction; Mohit S. Shah CJ and B.P. Colabawalla J; judgment delivered by B.P. Colabawalla J. Reserved 29 January 2015, pronounced 9 February 2015). On those facts the High Court held as follows. The petition was dismissed, the rule discharged and the parties left to bear their own costs. Section 234E does not violate any provision of the Constitution and is intra vires. The levy is not punitive but a fee — a fixed charge for the extra service the Department has to provide because of the late filing — and is not a tax in the guise of a fee. The absence of a power in the Assessing Officer to condone the delay, and the absence of an appeal, do not make the section onerous: a right of appeal is a creature of statute, and an aggrieved person is not left without a remedy since the extraordinary jurisdiction under Articles 226 and 227 remains available against an arbitrary order.
The Court began with what late filing does. A deductor must file quarterly statements of the tax he has deducted, and the Department cannot accurately process the deductee's return until it has them. Delay therefore has a cascading effect: credit for tax deducted is held up and refunds are delayed or infructuous demands raised, confidence in the administration is eroded, the Government pays interest on the delayed refunds, and the deductee suffers a cash flow crunch. A substantial number of deductors were not filing in time, which cast an additional burden on the Department through the deductor's own default. The fee was levied to compensate for that burden, and so is a fixed charge for extra service rather than a punishment. The Court added a second element of exchange: the deductor is allowed to file beyond the prescribed time provided he pays the fee, so his late filing is regularised — itself a privilege and a special service to him. The Calcutta High Court had reasoned the same way about the late fee under the West Bengal Value Added Tax Act in Howrah Tax Payers' Association. On the general law, the Court adopted Sona Chandi Oal Committee: quid pro quo has undergone considerable transformation, a regulatory fee does not lose its character because no service precedes it, and all that is required is a reasonable relationship between levy and services, a general benefit being enough. Finally, on the standard of review, the Court applied P. Laxmi Devi: a statute is invalid only if it clearly violates the Constitution in so evident a manner as to leave no doubt, of two possible views the one upholding validity must be preferred, and economic and regulatory legislation calls for judicial restraint because the court is not composed of economic experts. In the words reproduced by the source cited on this page: "Section 234E of the Act is not punitive in nature but a fee which is a fixed charge for the extra service which the Department has to provide due to the late filing of the TDS statements."
It was decided by the High Court on 2015-02-09 and is reported as Writ Petition No. 771 of 2014, High Court of Judicature at Bombay. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 234E, section 200(3), section 200A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The petition was dismissed, the rule discharged and the parties left to bear their own costs. Section 234E does not violate any provision of the Constitution and is intra vires. The levy is not punitive but a fee — a fixed charge for the extra service the Department has to provide because of the late filing — and is not a tax in the guise of a fee. The absence of a power in the Assessing Officer to condone the delay, and the absence of an appeal, do not make the section onerous: a right of appeal is a creature of statute, and an aggrieved person is not left without a remedy since the extraordinary jurisdiction under Articles 226 and 227 remains available against an arbitrary order. It arises in TDS Defaults and How Tax Law Is Read matters, on section 234E, section 200(3), section 200A of the Income Tax Act 1961, and was decided by High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction; Mohit S. Shah CJ and B.P. Colabawalla J; judgment delivered by B.P. Colabawalla J. Reserved 29 January 2015, pronounced 9 February 2015. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Check the cap: the fee cannot exceed the amount of tax deductible or collectible for the statement in question, and a demand above that figure is bad on the face of the section. Do not build a defence on the absence of an appeal; the Court held a right of appeal is a creature of statute, though it noted that Article 226 remains available against an arbitrary order. Keep the constitutional argument out of the reply — it has been decided against deductors here — and put your effort into the dates, the quarter in question and the arithmetic of the charge.
Still good law. Among superior courts the citator returns one decision, and it follows this judgment squarely. In Sree Narayana Guru Smaraka Sangam Upper Primary School v Union of India (Kerala High Court, 14 December 2016) the Bench set out the Bombay reasoning that the fee compensates the Department for the additional work burden caused by a late TDS statement, said at para 16 'This Court is in complete agreement with the view expressed by Mumbai High Court', and at para 24 concluded 'I do not think that a different view can be taken in the matter', dismissing the writ petitions and upholding section 234E. So the constitutional validity of section 234E now has the support of two High Courts and no High Court has been found taking the opposite view. No Supreme Court decision citing the judgment could be found and no pending challenge is traceable. Nothing overruling, doubting or confining it was found. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment decides only the constitutional validity of section 234E. It does not decide the separate, and much litigated, machinery question of whether section 200A as it then stood empowered the Assessing Officer to compute and demand the section 234E fee while processing a statement; the section 200A notices were challenged here only as consequential on the constitutional attack, and the judgment says nothing about the terms of section 200A. It also does not address the position for quarters before 1 July 2012. One inconsistency in the text: the cause title reads "Mr Rashmikant Kundalia and another", but paragraph 2 refers to notices issued to "Petitioner Nos. 2 and 3". No reporter citations were harvested; the writ petition number comes from the judgment's own heading. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The petition was dismissed, the rule discharged and the parties left to bear their own costs. Section 234E does not violate any provision of the Constitution and is intra vires. The levy is not punitive but a fee — a fixed charge for the extra service the Department has to provide because of the late filing — and is not a tax in the guise of a fee. The absence of a power in the Assessing Officer to condone the delay, and the absence of an appeal, do not make the section onerous: a right of appeal is a creature of statute, and an aggrieved person is not left without a remedy since the extraordinary jurisdiction under Articles 226 and 227 remains available against an arbitrary order.
TaxSphere, “Rashmikant Kundalia v Union of India”, https://taxnotice.vittsphere.com/caselaw/case/rashmikant-kundalia-v-union-of-india/ (validity last checked 2026-08-29)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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CPC has charged s.234E fee in a s.200A intimation for TDS quarters going back to 2010-11. My consultant says the Karnataka High Court struck that down. Does that help me in Tamil Nadu?
Is there High Court authority that the s.234E fee runs from 1 July 2012 whatever the 2015 amendment to s.200A did, and does paying the fee buy me out of s.271H penalty?
I have a single consolidated s.234E demand covering 2011-12 right through to 2021-22. Can the old part be knocked out, and can I do it by writ?
The CIT(A) has confirmed my pre-June-2015 s.234E fee by following the Gujarat High Court, even though my jurisdictional High Court has decided the other way. Is the Tribunal bound to follow my own High Court?
