P.I. John vs State of Kerala and Others

V.V. Kamat, J.—This is a revision application u/s 78 of the Agricultural Income Tax Act, 1991, against an order of the Deputy Com missioner (Appeals), Agricultural Income Tax and Sales tax, Kollam, dated September 30, 1991, whereby the appellate authority dealing with the penalty proceedings, while confirming the proceedings modified its levy as the taxing officer had imposed it for the period prior to the filing of the return. The question that comes up for consideration and consequent decision before us is as to whether there can be any interference with the order of imposition of penalty as such.

The year in question is 1980-81. Rupees 46,960 was the declared net income in regard thereto on the basis of the return dated September 18, 1980. However, it is undisputed that as per the position of law, the petitioner did not remit the tax due on the admitted income which was the basis for the initiation of notice of proceeding u/s 17A(3) of the Act which was served on the petitioner on December 30, 1986. The order of the trial authority dated June 14, 1990, states that there was no contest to the said notice as no objections were filed against the proposal. The trial authority imposed penalty of Rs. 18,666 for default in remitting advance tax along with the return for the year 1980-81. It is the contention before us that the return in question was prepared actually on August 20, 1980. As against the statutory requirement of filing of return and remitting the due tax on the admitted income came on the statute book with effect from August 19, 1980 (a day earlier), which was published in the Gazette on August 20, 1980, coincidentally on the same day when it is contended that return was prepared for despatch by post. It is alleged therein that there was no wilful negligence.

There is also no factual dispute that the due tax on the admitted income amounting to Rs. 15,323 is paid on March 19, 1986, on the basis of annexure "D" to this revision.

In spite of this position sought to be placed on record in this revision application, it would be worthwhile to refer to what is submitted before the first appellate authority. Only two aspects were pressed in the context, and they are, firstly, that the liability arose on August 19, 1980, for the first time requiring remittance of due tax on admitted income and, therefore, the petitioner did not know, and, secondly, that the penalty is imposed by the impugned order (annexure "B") dated June 14, 1990, after a period of ten years. It is contended before the first appellate authority that there is a bar of limitation and, therefore, the imposition would not be sustain-able.

Learned counsel strenuously submitted that the power of imposition of penalty is a power to be exercised on the basis of judicial discretion in regard thereto and as a consequence the two factors are such that judicial discretion in regard thereto would be in favour of the petitioner.

Seeing the contentions urged before the first appellate authority, it would be at once clear that what is sought to be contended now before us on the strength of annexure "C" that the return was sent by post does not find any mention, nor is the facet in regard thereto that by annexure "C" objections were lodged and to that extent the statement of the trial authority that the petitioner did not file any objection against the proposal so far are also found to be conspicuous by their absence as contentions before the first appellate authority. It must be stated that the entire order of the first appellate authority shows that nothing of the kind was even sought for or even attempted to be urged.

In the first instance, it would be seen that once a default in compliance with the provisions of the statute ensuing penal consequences is established, nothing more is required, because the important aspect that flows as a legislative intent from the penal provisions is the emphasis on the fact of loss of revenue due for the period in question and the provision of penalty though containing ah element of coercion is a civil consequence under the situation. The plain language of the relevant statutory provision (Section 17A) of the Agricultural Income Tax Act, 1950, is available through the relevant statutory provision and it is Section 17A(3) of the said Act. It is necessary to be reproduced and it is as follows :

" 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."

It would thus be seen, from the language of the provision under consideration, that failure of payment of tax due on admitted amount of income leaves no discretion in the situation as regards the recovery as specified therein by way of penalty. What is required under the circumstances by the said statutory provision is that before such levy the person has to be given a reasonable opportunity of being heard.

Although in a different context dealing with the situation of penalty u/s 271(1)(a) of the Income Tax Act, the Supreme Court in Gujarat Travancore Agency, Cochin Vs. Commissioner of Income Tax, Kerala, Ernakulam, has observed that the intention is to create a civil obligation and, therefore, the need to establish the element of mens rea cannot be seen through and as a consequence it is tersely observed that there is nothing in the provision that requires an obligation to consider or see the ingredients of mens rea in the concerned statutory provisions. These are the observations, it must be noted, in the context of affirming the decision of this court in CIT v. Gujarat Travancore Agency [1976] 105 ITR 149. After placing reliance on the apt passage from Corpus Juris Secundum, volume 85, paragraph 1023, at page 580, to the effect that penalty for a tax delinquency is a civil obligation, remedial and coercive in its nature, and therefore, is totally different from the penalty for a crime or a fine or forfeiture in the nature of a punishment for the violation of criminal or penal laws. Thus the position that there is total absence of discretion is more than established as stated above.

Apart therefrom even if we propose to take up the situation on the assumption that we have some discretion, the two factors of lack of knowledge and delay as pleaded are not also supported by necessary and inevitable details in regard thereto, firstly, if lack of knowledge with regard to the statutory provision, having come on the statute on August 19, 1980, is required to be considered, we do not know as to whether as far as the assessee is concerned with regard to the subsequent years up to the issuance of the notice in question on December 30, 1980, the subsequent returns were also filed unaccompanied by remittance of due tax on admitted incomes for the subsequent years. With regard to the second aspect of delay of ten years, it will have to be seen that the action was initiated in 1986. This would also be seen by the self-admitted position by the petitioner-assessee that the amount of tax due on the admitted income in question is paid by him on March 19, 1986. Thus, the factual material would show that the two grounds urged in support of the use of discretion, apart from the fact that necessary details that are inevitable are away from the record and also, in addition, many of the aspects, as stated above, have not been urged, even on their own merit as they are, they cannot be said to have been established. This is on the assumption that we have any discretion in the matter.

For all the above reasons, the revision case stands dismissed. Order accordingly.