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Mary Issac Vs. Inspecting Assistant Commissioner - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberO.P. Nos. 3751, 3752 and 4414 of 1982
Judge
Reported in[1987]163ITR341(Ker)
ActsKerala Agricultural Income Tax Act, 1950 - Sections 17A(3); Income Tax Act, 1961 - Sections 140A(3)
AppellantMary Issac
Respondentinspecting Assistant Commissioner
Appellant Advocate P.C. Chacko, Adv.
Respondent AdvocateGovernment Pleader
Excerpt:
direct taxation - penalty - section 17a (3) of kerala agricultural income tax act, 1950 and section 140a (3) of income tax act, 1961 - section 17a (3) imposes penalty for non payment of tax - petition to declare section 17a (3) ultra vires and void - issue raised before various high courts - in view of precedents by various high courts sections 17a (3) cannot be declared ultra vires and void. - - exhibit p-2 notice dated may 11, 1982, served on the petitioners, required them to pay the admitted tax and also informed them that on failure to pay the admitted tax, a penalty under section 17a(3) will be levied. exhibit p-2 is only a notice affording extension of time till may 25, 1982. it is only on failure to pay the sum on or before the said date, levy of penalty under section 17a(3)..........or section 35 shall pay before furnishing the return the amount of tax on the total agricultural income admitted in the return and the return shall be accompanied by proof of payment of such tax.(2) after regular assessment under section 18 has been made, any amount paid under sub-section (1) shall be deemed to have been paid towards such regular assessment.(3) if any person fails to pay the tax or any part thereof in accordance with the provisions of sub-section (1), the assessing authority may direct that a sum equal to two per cent. of such tax or part thereof, as the case may be, shall be recovered from him by way of penalty for every month during which the default continues : provided that, before levying any such penalty, the person shall be given a reasonable opportunity of.....
Judgment:

K.S. Paripoornan, J.

1. In these original petitions, certain common questions of law arise for consideration. The petitioners are assessees to agricultural income-tax. They are partners of M/s. Pambra Coffee Plantations, Sultan Battery. The proceedings impugned in these original petitions relate to the assessment year 1980-81. According to the petitioners, the relevant accounting period regarding agricultural income from M/s. Pambra Coffee Plantations is July 1, 1978, to June 30, 1979, and regarding income from other properties (Rubber Plantations), it is from April 1, 1979, to March 31, 1980. The petitioners submitted their returns for the year 1980-81 on September 29, 1980. Section 17A was inserted in the Agricultural Income-tax Act, by Kerala Act 17 of 1980. Section 2 of the said Act gave retrospective effect to the provision from April 1, 1980. The newly enacted provision required the assessees to pay the admitted tax as per the returns. The return should be accompanied by proof of payment of such tax. Admittedly, the petitioners did not comply with the same. The 1st respondent-assessing authority issued exhibit P-1 order dated March 30, 1982, demanding payment of such admitted tax on or before April30, 1982. The petitioners applied for time for payment by communication datedApril 26, 1982. By exhibit P-2 dated May 11, 1982, the 1st respondent gaveextension of time up to May 25, 1982, and also informed the petitioners that ifthe admitted tax as per the returns is not paid on or before the said date, apenalty will be levied under Section 17A(3) of the Agricultural Income-tax Act.These original petitions are filed praying (a) to declare that Section 17A(3) ofthe Agricultural Income-tax Act as ultra vires and void ; (b) to quash exhibitsP-1 and P-2 and for other reliefs. Since the challenge in these original petitionscentre round Section 17A of the Agricultural Income tax Act, introduced by Act17 of 1980, it will be useful to extract the same :

'17A. Self-assessment. -- (1) Every person liable to furnish a return under Section 17 or Section 35 shall pay before furnishing the return the amount of tax on the total agricultural income admitted in the return and the return shall be accompanied by proof of payment of such tax.

(2) After regular assessment under Section 18 has been made, any amount paid under Sub-section (1) shall be deemed to have been paid towards such regular assessment.

(3) If any person fails to pay the tax or any part thereof in accordance with the provisions of Sub-section (1), the assessing authority may direct that a sum equal to two per cent. of such tax or part thereof, as the case may be, shall be recovered from him by way of penalty for every month during which the default continues :

Provided that, before levying any such penalty, the person shall be given a reasonable opportunity of being heard. (4) When any tax is due under this section or any penalty is due in consequence of any order passed under this section, the assessing authority shall serve on the person a notice of demand in the prescribed form specifying the sum so payable.'

2. The analogous provision that is relied on in this case is Section 140A of the Income-tax Act, 1961. That section was originally inserted by the Finance Act, 1964, with effect from April 1, 1964. Later it was substituted by the Taxation Laws (Amendment) Act 1970, with effect from April 1, 1971. It was still later amended and substituted by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. Though the said section underwent changes from time to time, the import of the said section, so far as it is relevant to construe Section 17A of the Agricultural Income-tax Act and the contentions raised herein are substantially similar. At present section, 140A is as follows :

'140A. Self-assessment. -- (1) Where any tax is payable on the basis of any return required to be furnished under Section 139 or Section 148, after taking into account the amount of tax, if any, already paid under any provision of this Act, the assessee shall be liable to pay such tax before furnishing the return and the return shall be accompanied by proof of payment of such tax.

(2) After a regular assessment under Section 143 or Section 144 has been made, any amount paid under Sub-section (1) shall be deemed to have been paid towards such regular assessment.

(3) If any assessee fails to pay the tax or any part thereof in accordance with the provisions of Sub-section (1), the Income-tax Officer-may direct that a sum equal to two per cent. of such tax or part thereof, as the case may be, shall be recovered from him by way of penalty for every month during which the default continues : Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard.'

3. Counsel for the petitioners, Mr. P.C. Chacko, vehemently contended that Section 17A(3) of the Agricultural Income-tax Act is ultra vires and void. According to counsel, the said provision is similar to Section 140A(3) of the Income-tax Act, 1961, which was held to be violative of Article 19(1)(f) of the Constitution by a Bench of the Madras High Court in the decision A.M. Sali Maricar v. ITO : [1973]90ITR116(Mad) (The court considered Section 140A of the Income-tax Act, 1961, as the section stood originally as inserted by Finance Act, 1964). For the reasons stated therein, Section 17A(3) of the Agricultural Income-tax Act is violative of Article 300A of the Constitution and so infirm. Government Pleader, Mr. Divakaran Pillai, controverted the above proposition and brought, to my notice the decision of the Calcutta High Court, Gunny Exporters Pvt. Ltd. v. ITO [1976] Tax LR 603, the decision of the Andhra Pradesh High Court, Kashiram v. ITO : [1977]107ITR825(AP) , the decision of the Madhya Pradesh High Court, CIT v. Vrajlal Manilal & Co. : [1981]127ITR512(MP) and the decision of the Jammu and Kashmir High Court, Seva Ram v. ITO (The Andhra Pradesh, Madhya Pradesh and Jammu and Kashmir High Courts considered the provisions of Section 140A of the Act as it stood after the Taxation Laws (Amendment) Act, 1970, whereas the Madras & Calcutta High Court considered the provisions in the Act as inserted by Finance Act, 1964). Counsel for the Revenue forcibly submitted that the reasoning and conclusion in the aforesaid four decisions dissenting from the Madras view, are more reasonable and should be accepted and in that view, Section 17A(3) of the Agricultural Income-tax Act is valid and legal. I see considerable force in the contention advanced by the Revenue. For the reasons stated in the decision of the Calcutta, Andhra Pradesh, Madhya Pradesh and Jammu and Kashmir High Courts referred to above, I am of the opinion that Section 17A(3) is not ultra vires or infirm as contended by counsel for the petitioners. I would respectfully adopt the reasoning of the High Courts of Calcutta, Andhra Pradesh, Madhya Pradesh and Jammu and Kashmir in preference to the decision of the Madras High Court referred to above.

4. On merits, the rival contentions of the parties covered a wide range. In my opinion, it is not necessary to advert to or adjudicate all such issues at present. It is premature to adjudicate these issues raised by the parties. Exhibit P-l is an order directing the petitioners to pay the admitted tax as per the returns. The petitioner's counsel did not dispute the said proposition. There cannot be any attack on exhibit P-1 order. That required only payment of admitted tax. It is warranted by the terms of Section 17A(1) of the Act which is not challenged. Exhibit P-2 notice dated May 11, 1982, served on the petitioners, required them to pay the admitted tax and also informed them that on failure to pay the admitted tax, a penalty under Section 17A(3) will be levied. The petitioners are bound to pay the admitted tax as per the returns. They did not do so as envisaged by Section 17A(1) of the Act. The returns themselves were filed long after the Act was published--only on August 29, 1980. This is a vital aspect. As to whether for the non-payment of the admitted tax along with the returns in these cases, the assessing authority may levy a penalty under Section 17A(3) of the Act does not arise for consideration at present. Exhibit P-2 is only a notice affording extension of time till May 25, 1982. It is only on failure to pay the sum on or before the said date, levy of penalty under Section 17A(3) of the Act was threatened. Prima facie, Section 17A(3) appears to be a discretionary power. The petitioners have got an opportunity to be heard under the proviso to Section 17A(3) of the Act. It is open to the petitioners to file their objections or explanations therefor, if any, and plead that no penalty is exigible or is to be levied even for non-payment of the admitted tax due, as per the returns when the penalty proposed as per exhibit P-2 is sought to be levied That stage has not reached at present.

5. In the light of the conclusion that Section 17A(3) is valid and intra vires, 1 do not find any error of law or other infirmity in exhibits P-1 and P-2. Both exhibits P-1 and P-2 are valid and legal. The assessing authority was justified in proceeding as he did in exhibits P-l and P-2. It is open to the petitioners to plead and prove before the assessing authority as and when proceedings for levy of penalty under Section 17A(3) is pursued or penalty itself is levied, that the said step is not warranted on the facts of the case or is otherwise unreasonable and unjustified.

6. The original petitions are disposed of with the above observations. There shall be no order as to costs.


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