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Judgment
P.N. Ravindran, J.—The petitioner is an assessee on the files of the first respondent. By Exhibit PI order passed on 27-3-1985, the first respondent assessed the petitioner to pay the sum of Rs. 11,961.50, Rs. 25,324.20 and Rs. 32,712.90 as agricultural Income Tax for the assessment years 1978-79, 1979-80, and 1980-81 respectively. Exhibit PI order of assessment was passed u/s 18(3) of the Kerala Agricultural Income Tax Act, 1950 (hereinafter referred to as the "1950 Act" for short.) The petitioner challenged Exhibit PI order of assessment in three separate appeals filed before the Additional Appellate Assistant Commissioner. By Exhibit P2 order passed on 2-11-1985, the appellate authority granted cultivation expenses for the assessment years 1979-80 and 1980-81 and directed the assessing officer to modify Exhibit PI order of assessment accordingly. The petitioner thereupon filed second appeal before the Agricultural Tribunal, Palakkad and sought stay of collection of the tax. By Exhibit P3 order passed on 24-1-1986 the Tribunal granted stay of collection of the tax on the petitioner paying the sum of Rs. 2,000 each towards the tax demanded for the assessment years 1978-79, 1979-80 and 1980-81. As directed in Exhibit P3, the petitioner remitted the sum of Rs. 6,000 on 17-2-1986 by way of demand draft drawn in favour of the first respondent. The appeals filed by the petitioner before the Tribunal were thereafter heard and disposed of by Exhibit P5 order passed on 29-1-2000.
Pursuant to Exts. P2 and P5 orders, the assessing authority issued Exhibit P7 order dated 17-10-2000 giving effect to the direction issued by the first appellate authority and the Tribunal. By the time Exhibit P5 order was passed by the Tribunal, the 1950 Act was repealed and replaced by the Kerala Agrl. Income Tax Act, 1991 (hereinafter referred to as the "1991 Act" for short). The 1991 Act came into force on 1-4-1991. In Exhibit P7, the assessing officer levied interest on the tax assessed in terms of Section 37(4) of the 1991 Act. The interest levied was Rs. 930 for the assessment year 1978-79, Rs. 11,160 for the assessment year 1979-80 and Rs. 48,539 for the assessment year 1980-81. In Exhibit P7, the balance tax demanded for the assessment year 1978-79 was nil, for the assessment year 1979-80 was Rs. 3,921 and for the assessment year 1980-81 was Rs. 19,645. On receipt of Exhibit P7, the petitioner remitted the tax component amounting to Rs. 23,566 as can be seen from Exhibit P6 receipt dated 24-10-2000. This original petition was thereafter filed on 18-12-2000 challenging Exhibit P7 to the extent it levies interest on the tax for the assessment years 1978-79, 1979-80 and 1980-81. The petitioner has in this original petition prayed for the following reliefs:
(a) quash Exhibit P7 order to the extent it relates to levy of penal interest for the years 1978-79, 1979-80 and 1980-81 by issue of a writ of certiorari;
(b) issue a writ of mandamus forbearing the respondents from taking any further steps for the realisation of the penal interest levied as per Exhibit P7 order for the years 1978-79, 1979-80 and 1980-81 till the disposal of this original petition;
(c) declare that the petitioner is not liable to pay any penal interest for the years 1978-79, 1979-80 and 1980-81 in the circumstances of the case.
The petitioner contends that since the 1950 Act alone governs the assessment years in question no interest can be levied in the absence of a stipulation in the 1950 Act that where tax or penalty due is not paid in time, it will attract interest. The petitioner further contends that he had complied with the condition imposed in Exhibit P3 interim order passed by the Tribunal and that as no notice of demand had been issued under the provisions of the 1991 Act, as stipulated in Section 45(1) thereof, he cannot be deemed to be a person in default as stipulated in Section 62 thereof and therefore, the assessing officer was not justified in levying interest.
The first respondent has filed a counter affidavit contending inter alia that in view of Sub-section (3) of Section 99 of the 1991 Act, the respondents are entitled to complete the proceedings pending under the 1950 Act, regarding the assessment, levy, collection and recovery of the tax chargeable under the 1950 Act. Relying on Sub-section (4) of Section 99 of the 1991 Act, the respondents contend that the Tribunal was entitled to continue and decide the proceedings pending before it under the provisions of the 1950 Act. Relying on Sub-section (5) of Section 99 of the 1991 Act, the respondents contend that any arrears of tax or other amount pending can be collected and any recovery proceedings initiated or continued under the 1950 Act can be continued as if the levy, collection and recovery are made or are continuing under the provisions of the 1991 Act. The respondents also rely on Section 46(b) of the 1991 Act to contend that it is not necessary to serve a fresh notice of demand where the demand is reduced in appeal. The respondents therefore contend that though the demand made by the assessing officer was reduced by the Tribunal, it was not necessary to issue a notice of deftiand and as the amount demanded was paid only partly, the petitioner is liable to pay interest on the unpaid tax from the date of demand till the date of actual payment. As regards Section 62(2) of the 1991 Act, the respondents contend that 1991 Act is not applicable and that the only effect of the proviso to Sub-section (2) of Section 62 of the 1991 Act is to keep the coercive proceedings in abeyance.
I have considered the submissions made at the Bar by the learned Counsel appearing on either side. It is common ground that the 1991 Act does not apply to the assessment years 1978-79, 1979-80 and 1980-81. It is also not in dispute that under the provisions of the 1950 Act, interest was not leviable on the tax assessed by the assessing officer. Sub-sections (3) and (4) of Section 99 of the 1991 Act empowered the Tribunal to continue with and dispose of the appeal. Section 99(5) of the 1991 Act also empowers the respondents to levy and collect or recover the arrears of tax or other amount pending as on the date of the commencement of the 1991 Act. In the instant case, the assessment order and the first appellate order were passed while the 1950 Act was in force. The petitioner filed the second appeal in January, 1986 while 1950 Act was in force. By Exhibit P3 interim order passed on 24-1-1986, the Tribunal stayed the collection of the disputed tax on condition that the petitioner shall remit Rs. 2,000 each for the three assessment years within four weeks from the date of the order. The petitioner admittedly complied with the said condition. The second appeal filed by the petitioner was disposed of only on 29-1-2000 long after the 1991 Act came into force. In my considered opinion, the stand taken by the respondents is not tenable. Though Sub-sections (3) and (4) of Section 99 of the 1991 Act empower the Tribunal to dispose of the appeals, the Tribunal was bound to decide the appeals under the provisions of the 1950 Act. This is clear from Sub-section (4) of Section 99 of the 1991 Act. Therefore, the petitioners liability has to be decided with reference to the provisions of the 1950 Act. In my opinion, though Sub-section (5) of Section 99 of the 1991 Act enables initiation and continuance of proceedings to recover the arrears of tax or other amount due under the 1950 Act, such recovery can only be of a liability under the 1950 Act. The respondents admit that the 1991 Act does not apply to the assessment years in question. The respondents also do not dispute that under the 1950 Act, there was no provision to levy interest on the tax assessed, where there is delay in remittance of the tax assessed. Sub-section (4) of Section 37 of the 1991 Act regarding levy of interest does not admittedly apply to the assessment years in question. The petitioner was therefore not liable to pay tax in accordance with the provisions of the 1991 Act for the assessment years concerned. Under subs. (4) of Section 37 of the 1991 Act, interest is payable only if the assessee fails to pay the tax in accordance with Section 37 of the 1991 Act in pursuance to a demand issued u/s 45 of the 1991 Act. The respondents admit that no notice of demand under the 1991 Act was issued and served on the petitioner. As a matter of fact, they contend relying on Section 46(1)(b) of the 1991 Act that no demand is necessary where the demand is reduced in appeal I am, therefore, persuaded to agree with the petitioner that the levy of interest on the balance tax payable for the assessment years concerned was without the sanction or authority of law.
In the result, the original petition is allowed and Exhibit P7 to the extent it levies interest for the assessment years 1978-79, 1979-80 and 1980-81 is quashed. No costs.