Today, On 24th January, Chief Justice of India (CJI) Sanjiv Khanna stated that the PIL challenging the TDS system is not maintainable under Article 32 of the Constitution. The Supreme Court dismissed the petition but granted the petitioner the liberty to approach the High Court under Article 226. The PIL had raised concerns over the constitutional validity of TDS provisions and their financial implications on taxpayers.
New Delhi: The Supreme Court dismissed a public interest litigation (PIL) on Friday that sought to declare the Tax Deducted at Source (TDS) system as arbitrary, irrational, and unconstitutional.
The bench, led by Chief Justice of India (CJI) Sanjiv Khanna and Justice Sanjay Kumar, declined to consider the petition but suggested that the petitioner could seek relief from the High Court.
CJI Khanna stated,
“Sorry, we will not entertain. It is very badly drafted. You can move the High Court. Some judgments have upheld it. Sorry. We will not entertain. Dismissed.”
Also Read: BREAKING | Constitutional Violations: PIL In Supreme Court Seeks Abolition Of TDS System
Also Remarked further,
“PIL against the TDS System is Not maintainable under Article 32 of the Constitution. Hence, Court permitted to move High Court under Article 226“
The petition was submitted by advocate and Bharatiya Janata Party (BJP) leader Ashwini Kumar Upadhyay, who expressed concerns regarding the administrative and financial burdens placed on TDS assesses.
The TDS system established to combat tax evasion. It requires a person (the deductor) to withhold tax when making payments, such as salaries or rents, that exceed a certain threshold. The deductor must remit the deducted tax to the government, which later refunds it after the assessees file their income tax returns.
In his petition, Upadhyay argued that the technical and regulatory framework surrounding TDS is overly complex, often necessitating specialized legal and financial knowledge that most assesses do not possess. He claimed this results in an unfair transfer of sovereign responsibilities from the government to private citizens, lacking adequate resources or legal safeguards.
He pointed out that illiterate or economically disadvantaged assesses who struggle to navigate this technical landscape experience undue hardship and harassment, undermining the Constitutional guarantee of equality.
He contended that the TDS system effectively imposes an indirect tax burden on assesses without explicit legislative approval, rendering it unconstitutional and against public interest.
Upadhyay further argued that this system amounts to forced labor for TDS assesses, asserting:
“The government does not lack the resources to directly collect taxes through its tax department. Still, it transfers the responsibility to TDS assesses without remuneration.”
He highlighted that many taxpayers, especially in rural and economically weaker areas, often forfeit their rightful refunds, resulting in unwarranted enrichment for the government.
He suggested viable alternatives for monitoring tax compliance, such as enhancing the annual information return (AIR) system and requiring detailed reports of taxable payments above specified thresholds, allowing the tax department to identify defaulters more effectively.
While acknowledging that the TDS system ensures a steady revenue stream for the government, he proposed transitioning to a monthly advance tax system instead of a quarterly one to alleviate the compliance burden on TDS assesses. He also advocated for improvements in automated systems and direct tax recovery mechanisms through technology and data analytics to enhance compliance with tax regulations.
The petition was filed through advocate Ashwani Kumar Dubey.
Case Title: Ashwini Kumar Upadhyay v. Union of India and ors