Section 201(1) of the Income Tax Act
Income-tax Act, 2025: s.398
Section 201(1) falls under section 201 of the Income-tax Act, 1961, which corresponds to section 398 (Consequences of failure to deduct or pay or, collect or pay) of the Income-tax Act, 2025.
Read section 398 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 201(1) is Kourani v. Union OF India (83 Taxmann.com 137), cited in 1,708 of the 3,835 judgments on BharatTax that turn on this section.
Leading authorities on Section 201(1)
The fee under Section 234E for late filing of TDS/TCS statements cannot be levied retrospectively by processing an intimation under Section 200A for defaults occurring before the amendment allowing such processing.
A fee under Section 234E cannot be levied or adjusted in an intimation under Section 200A for TDS statements pertaining to periods prior to June 1, 2015, as the enabling amendment to Section 200A(1)(c) came into effect only from that date.
Section 234E, levying late fees for delayed filing of TDS statements under section 200(3), is constitutionally valid and constitutes a compensatory fee, not a punitive penalty. Before treating any person as an assessee-in-default, an opportunity of being heard must be provided.
Tax must be deducted at source from payments made to a non-resident under Section 195 only if such payment is chargeable to tax in India. The Assessing Officer bears the onus to establish that the payments made are indeed chargeable to tax under the Income Tax Act.
The deductor cannot be treated as an assessee-in-default under Section 201(1) if the deductee has already paid the tax or offered the impugned receipts in their return of income. However, interest under Section 201(1A) for delayed deposit of tax can still be levied up to the date of filing of the return of income by the deductee.
Late fees under section 234E can only be levied prospectively from June 1, 2015. Levying late fees for periods prior to this date is not permissible.
The imposition of fees for late filing of TDS/TCS returns prior to the Finance Act, 2015 amendments was not illegal, and the Rajasthan High Court found no justification to interfere with such compensatory fees.
The second proviso to Section 40(a)(ia), introduced by the Finance Act, 2012, is curative and applies retrospectively from April 1, 2005. Consequently, if the recipient of a payment has filed their return and paid taxes on the amount from which tax was not deducted at source, the payer's expenditure cannot be disallowed under Section 40(a)(ia).
The Madras High Court has upheld the validity of the levy of fees under Section 234E and penalties under Section 271H, finding the charging provision to be Section 234E, with the power to levy existing from 01/07/2012.
