Samogiri Pvt. Ltd. vs Agricultural Income Tax Officer and Another

K.P. Radhakrishna Menon, J.—The assessee is the petitioner. The year of assessment is 1981-82.

Failure to pay the tax in accordance with Sub-section (1) of Section 17A of the Kerala Agricultural Income Tax Act (for short "the Act"), resulted in the assessing authority issuing exhibit P-2 order directing the petitioner to pay a sum of Rs. 1,30,100 as penalty. The operative portion of the order reads :

"A sum of Rs. 1,30,100 (Rs. One lakh thirty thousand and one hundred only) is imposed as penalty u/s 17A(3) for the default in payment of admitted tax for the period from June 1, 1981, to February 28, 1987, at the rate of 2 per cent (per month) on Rs. 94,275.50."

Facts relevant and requisite to dispose of the dispute arising for consideration lie in a narrow compass. The return for the assessment year was filed on December 4, 1986. The admitted tax was paid on February 28, 1987. The period of default in paying the admitted tax before filing the return as contemplated under Sub-section (1) of Section 17A for the purpose of levying penalty under Sub-section (3), therefore, will be only from December 4, 1986, to February 28, 1987, learned counsel for the petitioner submits. The penalty, under Sub-section (3), however, cannot be levied unless it be that the petitioner is liable to pay the tax, counsel argues. So, the question that arises for consideration is, whether the assessing authority was justified in levying the penalty u/s 17A(3) for the period from June 1, 1981, to February 28, 1987.

To get at the answer to the question, it is necessary to comprehend the content of Section 17A(1) and (3).

Before we consider the scope of this section, it is relevant to focus our attention on the incidental question. Is it mandatory for the person whose total agricultural income during the previous year exceeded the maximum amount which is not chargeable to agricultural Income Tax, to furnish the return before the expiry of the time stipulated under Sub-sections (1) and (2) of Section 17 ? The answer is "No" because Sub-section (3) of Section 17 enables the person who has not furnished a return within the time allowed by or under Sub-section (1) or Sub-section (2) to furnish the return at any time before the assessment is made. Such a person, however, is not absolved from the liability for the penalty leviable u/s 20(1)(a) and (b) read with Clauses (c) and (d) of the proviso thereto. These provisions confer power on the authorities, made mention of therein, to impose the penalty contemplated thereunder on the person who, without reasonable cause, fails to furnish the return within the time allowed.

Having understood the position regarding the furnishing of the return by the person made mention of in Section 17 thus, let us consider the intention of the Legislature in enacting Section 17A. I shall now read these sub-sections.

"17A. Self-assessment.--(1) Every person liable to furnish a return u/s 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 ...

(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."

This section relates to payment of tax on self-assessment and matters incidental thereto. Sub-section (1) provides that the person who is liable to furnish the return u/s 17 or Section 35 (to make an assessment u/s 35, the assessing authority is required to follow the procedure prescribed u/s 17), is obliged to pay the amount of tax on the total income admitted in the return before furnishing the return. The return shall be accompanied by proof of payment of such tax. Failure to pay the tax in terms of Sub-section (1) entails levy of penalty contemplated under Sub-section (3). This sub-section provides that if the person fails to pay the tax in terms of Sub-section (1), the assessing authority may direct that a sum equal to 2% 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. The proviso says that before levying any such penalty, the person concerned shall be given a reasonable opportunity of being heard. The proviso to this sub-section would indicate that the levy of penalty under this section is not automatic on the commission of a default by the assessee. The word "may" used in the section read with the proviso necessarily implies that it is in the discretion of the assessing authority to levy the penalty. That means it is open to the assessing authority to levy penalty or not at all. It is also clear from the plain language employed in this sub-section that the penalty can be levied only if the person commits default in paying the tax in terms of Sub-section (1). Sub-section (1) will be attracted only if a person furnishes the return. We have already seen that it is not mandatory for an assessee to furnish the return. But if he decides to furnish the return, the return shall be accompanied by proof of payment of the tax on the basis of self-assessment. This, in short, is the scheme of Section 17A. Going by the scheme, the person made mention of in Sub-section (1) can be said to have committed the default in paying the tax only from the date on which he files the return which is not accompanied by the proof of payment of the tax. The penalty contemplated under Sub-section (3), therefore, can be levied only for the period between the date on which the person files the return and the date on which he pays the tax. To put it briefly, the period during which it can be said that the person is in default within the meaning of Sub-section (3) of Section 17A is the period from the date of the filing of the return to the actual date on which he pays the tax. In the case on hand the period of default, therefore, can be only from the period from December 4, 1986, the date of the filing of the return, and February 28, 1987, the date on which the tax was paid.

The above position notwithstanding, the assessing authority by exhibit P-2 has levied penalty for the period from June 1, 1981, till February 28, 1987, as if the date of the filing of the return was June 1, 1981. The order levying penalty for the period prior to December 4, 1986, therefore, is without jurisdiction.

The revisional authority, on an erroneous understanding of the law, has confirmed the order of the assessing authority by the order, exhibit P-7, under challenge. The order of the revisional authority, therefore, is liable to be set aside. I, accordingly, set aside the same.

However, it is made clear that the assessing authority can levy penalty u/s 17A(3) for the period from December 4, 1986, till the actual date of payment of the tax. The assessing authority shall refund the amount of Rs. 30,000 deposited by the petitioner pursuant to the directions of this court (see the order in C.M.P. 14890 of 1989) after adjusting the amounts due as penalty for the period from December 4, 1986, till the actual date of payment of the tax. The orders in this regard shall be passed as expeditiously as possible, in any event within two months from the date of receipt of a copy of this judgment.

The original petition is allowed to the extent indicated above. Issue photostat copy on usual terms.