Skip to content


Commissioner of Agricultural Income-tax Vs. Smt. P. Parukutti Amma - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference No. 29 (Agrl.) of 1974
Judge
Reported in[1976]105ITR79(Ker)
ActsKerala Agricultural Income Tax Act, 1950 - Sections 40, 41 and 41(1)
AppellantCommissioner of Agricultural Income-tax
RespondentSmt. P. Parukutti Amma
Appellant AdvocateGovernment Pleader
Respondent AdvocateNone
Cases ReferredJ. K. Iron & Steel Co. Ltd. v. Commissioner of Income
Excerpt:
.....the tribunal was justified in holding that the penalty under section 41(1) of the agricultural income-tax act, 1950, has not been validly levied ? 2. whether, on the facts and circumstances of the case, the tribunal was justified in holding that the issue of a notice is a condition precedent for the levy of penalty under section 41(1) of the agricultural income-tax act, 1950? 3. whether, on the facts and circumstances of the case, the principles of natural justice are violated in view of the provisions in section 41(1) of the agricultural income-tax act, 1950 ? 4. is not the reasoning and conclusion of the appellate tribunal vitiated due to non-advertence of the crucial fact that there was no motion or application by the assessee in the instant case, under section 40, to treat him as..........income-tax act, 1950? 3. whether, on the facts and circumstances of the case, the principles of natural justice are violated in view of the provisions in section 41(1) of the agricultural income-tax act, 1950 ? 4. is not the reasoning and conclusion of the appellate tribunal vitiated due to non-advertence of the crucial fact that there was no motion or application by the assessee in the instant case, under section 40, to treat him as not in default pending the appeal ?' 2. all these questions are connected and have to be answered on the interpretation to be placed on section 41(1) of the agricultural income-tax act,1950. to understand the scope of the section it is necessary to read section 40 as well. the two sections are extracted in the appendix to thisjudgment. 3. no notice was.....
Judgment:

Govindan Nair, C.J.

1. Four questions have been referred to us by the Agricultural Income-tax Appellate Tribunal which read as follows :

' 1. Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the penalty under Section 41(1) of the Agricultural Income-tax Act, 1950, has not been validly levied ?

2. Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the issue of a notice is a condition precedent for the levy of penalty under Section 41(1) of the Agricultural Income-tax Act, 1950?

3. Whether, on the facts and circumstances of the case, the principles of natural justice are violated in view of the provisions in Section 41(1) of the Agricultural Income-tax Act, 1950 ?

4. Is not the reasoning and conclusion of the Appellate Tribunal vitiated due to non-advertence of the crucial fact that there was no motion or application by the assessee in the instant case, under Section 40, to treat him as not in default pending the appeal ?'

2. All these questions are connected and have to be answered on the interpretation to be placed on Section 41(1) of the Agricultural Income-tax Act,1950. To understand the scope of the section it is necessary to read Section 40 as well. The two sections are extracted in the appendix to thisjudgment.

3. No notice was issued to the assessee before the penalty was imposed under Section 41(1)of the Agricultural Income-tax Act, 1950.

4. In order to conclude that an assessee has been in default certain facts will have first to be ascertained. In cases where there have been no appeals from the assessment order the issue of a demand notice under Section 30 of the Act will have to be proved. That notice should have been shown to have fixed a time for payment. That notice should have been served on the assessee. The assessee can be said to be in default only if payment had not been made within the time stipulated in the notice and in cases where no time had been specified in the notice, only on or after the first day of the second month following the date of service of the notice. In cases where there have been appeals the question whether the assessee is in default depends upon the terms of the appellate order which may permit payment of the tax imposed by instalments. We, therefore, consider that before it is concluded by the officer empowered to impose the penalty that an assessee had been is default, the assessee should have been given an opportunity to state his case relating to the basic facts that have to be established. The principles of natural justice require that this should be done. Apart from this the power conferred by Section 41(1) is a discretionary power. Perhaps this is a more important aspect. This means that the officer is not bound to impose the penalty. He will have to exercise his judicial discretion in regard to the question. The default may be a technical default. The payment of the tax might have been made the next day after the date on which it was due. There might be justifiable reasons for the delayed payment of tax. If the officer is informed aboutsuch circumstances he may not impose the penalty or only impose a nominal penalty. So in all the circumstances it will be proper, just and fair if before penalty is imposed an opportunity is granted to the assessee to state what he has to say. This appears to us to be the proper view to take on the section, which is penal in character.

5. Counsel for the revenue has brought to our notice the decision of the Allahabad High Court in J. K. Iron & Steel Co. Ltd. v. Commissioner of Income-tax. The decision supports the contention that has been urged by counsel that a notice is unnecessary. But we have to mention that even this judgment while holding so has expressed the view that it is desirable that a notice should be issued. Obedience to the principles of natural justice is as much obligatory as compliance with the provisions of a statute. A statute may tone down or change the scope and ambit of the general rules of natural justice. But unless we are able to spell out from the statutory provisions the particular procedure to be followed for complying with the principles of natural justice, the requirement that no man shall be condemned without being heard will have to be insisted upon. We are not able to find anything from the wording of the particular section or from that of the other sections or from the scheme of the Act which imply that the principles of natural justice need not be complied with before penalty is imposed. With great respect to the learned judges who have rendered the judgment in J. K. Iron & Steel Co. Ltd. v. Commissioner of Income-tax, : [1967]63ITR97(All) we are unable to agree with the view taken therein. We think the principles of natural justice demand that a notice should be issued to the assessee before penalty under Section 41(1) is imposed.

6. In the light of the above, we answer question Nos. 1 and 2 in the affirmative that is in favour of the assessee and against the department. We answer question No. 3 also in the affirmative and question No. 4 in the negative.

7. The assessee has not appeared before us. We direct the parties to bear their respective costs.

8. A copy of this judgment under the seal of the court and the signature of the Registrar will be sent to the Agricultural Income-tax Appellate Tribunal, Trivandrum.

Appendix

'40. Recovery of tax and penalties.--Any amount specified as payable in a notice of demand under Section 30 or an order under Sections 31, 32 or 33 shall be paid in such number of instalments, within such time, at such place and to such person, as may be specified in the notice or order, or if a time is not so specified, then on or before the first day of the second month following the date of the service of the notice or order and any assessee failing so to pay shall be deemed to be in default:

Provided that, when an assessee has presented an appeal under Section 31, the Agricultural Income-tax Officer may in his discretion treat the assessee as not being in default so long as such appeal is undisposed of.

41. Mode and time of recovery.--(1) When an assessee is in default in making a payment of agricultural income-tax, the Agricultural Income-tax Officer may in his discretion direct that, in addition to the amount of the arrears, a sum not exceeding that amount shall be recovered from the assessee by way of penalty. '


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //