D.J. Jagannadha Raju, J.
1. This is an original petition filed by an assessee under the Kerala Agricultural Income-tax Act, 1950 (hereinafter called the 'Act'), to quash exhibit P-4 order dated March 9, 1988, passed under Section 17A(3) and to quash the order passed in revision exhibit P-6 confirming exhibit P-4 order.
2. The short facts relevant for decision of this original petition are as follows : The petitioner is a registered company and is an assessee under the Act. For the assessment year 1987-88, it had to file a return on or before June 1, 1987, as per Section 17(1) of the Act. On May 28, 1987, it had applied under Section 65 for extension of time for filing the return up to September 15, 1987. No communication was received for exhibit P-1 application filed under Section 65 and the assessee was under the impression that its request was granted. Then, on August 22, 1987, a return was filed paying the admitted tax of Rs. 7,11,669 on the basis of self-assessment. The petitioner was surprised when he received exhibit P-2 notice dated December 22, 1987, asking it to explain why penalty should not be levied under Section 17A(3) for the delay in payment of the tax and failure to file the return on June 1, 1987. Elaborate objections under exhibit P-3 were filed on December 25, 1987. Without a proper consideration of exhibit P-3 objections, and the correct legal position, exhibit P-4 order was passed levying a penalty of Rs. 42,700. This order was passed on January 9, 1987. Immediately exhibit P-3 revision was filed on March 22, 1987, before the Commissioner, Board of Revenue. The Commissioner as per his order, exhibit P-6, rejected the revision and confirmed the order in exhibit P-4, Hence, this original petition is filed to quash exhibit P-4 and exhibit P-6 order confirming exhibit P-4.
3. It is contended on behalf of the petitioner that, under the scheme of the Act, there is no power for levying penalty under Section 17A(3), when, in fact, the admitted tax is paid before the return is filed and when proof of payment of the admitted tax is filed along with the return. It is of no consequence as far as Section 17A(3) is concerned whether the return was filed on the due date or on a date subsequent to the due date. Section 17A(3) is of limited application and it only deals with cases of nonpayment of the admitted tax and delayed and partial payment of the admitted tax. Shri Premjit Nagendran, arguing the case very ably for the petitioner, relied upon the scheme of the Act and the relevant sections and a few decisions under the Income-tax Act to substantiate his contentions.
4. On behalf of the State, the Government Pleader contends that Section 17A is specifically brought into existence to introduce the system of advance payment of admitted tax. That provision cannot be utilised for the purpose of filing the return late and thus defeat the object of introducing Section 17A. The Government Pleader contends that, under Section 17A(3), it is open to the Revenue to impose a penalty even in cases where the return is filed late and the admitted tax is paid.
5. The crucial question that arises for consideration in this case is whether, in exercise of the powers under Section 17A(3), it is open to the Revenue to levy a penalty when the petitioner pays the admitted tax on the basis of self-assessment and produces proof of the same along with the return when the return is filed after the due date, namely, June 1, of the concerned year.
6. The point : To understand the contentions of the respective parties, it would be necessary to examine the scheme of the Act and the significance of the different provisions. It should be remembered that the Act was first brought into force in 1950. Subsequently, it underwent several amendments. Originally, Section 17A was not on the statute book. It was introduced by way of Amendment Act 17 of 1980, with effect from April 1, 1980. Section 17A has been introduced for the purpose of introducing the system of paying admitted tax along with the return : see the Statement of Objects and Reasons for Act 17 of 1980 printed at page 1847 of the book 'The Agricultural Income-tax Act, 1950' by N. Sugathan and S. Soman, 1985 Edn. Prior to this system being introduced into the Act, there was no provision whereby a penalty of 2% on the admitted tax could be imposed in the cases of filing a return late. We have to examine the provisions of the Act in the light of the change brought in with effect from April 1, 1980.
7. If we examine the scheme of the Act, we find that, under Section 17(1), an assessee has the liability to file a return on or before June 1, if the agricultural income exceeds the maximum amount which is not chargeable to agricultural income-tax. Under Section 17(2), the Agricultural Income-tax Officer is empowered to issue a notice to a person if the Agricultural Income-tax Officer is of the opinion that the person's income renders him liable to file a return. Under Section 17(3), if a person has not furnished a return within the time allowed by Section 17(1) or within the time granted under the notice issued under Section 17(2) or, having furnished the return, discovers any omission or wrong statement therein, then he may furnish a return or a revised return at any time before the assessment is made. Thus, it is clear that the primary obligation is on the assessee to file a return on or before June 1. Under Section 17(3), in cases where he fails to furnish a return or when he discovers a mistake or omission in the return filed, he can furnish a return or a revised return at any time before the assessment is made. The language of Section 17(3) clearly indicates that the Act contemplates filing of returns late as well as filing of revised returns. What exactly is the action to be taken in such cases is provided for in the other sections. For instance, Section 65 empowers the Agricultural Income-tax Officer to extend the time for filing a return on an application by an assessee. In the present case, the assessee filed the application, exhibit P-1, on May 28, 1987, giving genuine reasons as to why time for filing the return is to be extended up to September 15, 1987. It should also be remembered that this application under Section 65 was filed before the due date for the filing of the return under Section 17(1). If the Agricultural Income-tax Officer extends the time as prayed for, there is no question or possibility of taking any action in the present case. It is the claim of the assessee that in this case no orders were passed on exhibit P-1 application and so it was under the impression that its request had been allowed. Let us assume for a moment for the sake of argument that the application is rejected, then what consequences would follow have to be considered. If the application is rejected, the liability to file the return on or before June 1 is there, and then the return filed on August 22, 1987 would be a case of filing a return late under Section 17(3). For such a delayed filing of the return, it is open to the Department to take action under Section 52 and impose a fine which may extend to Rs. 5 for every day during which the default continues. It is also open to the Department to prosecute under Section 53. It is also open to take action under Section 10(1) and direct payment of penalty. There is no provision by which a penalty of 2% per month could be imposed.
8. Section 17A is the most important section and this section which was introduced by Act 17 of 1980 is a complete code in itself regarding the system of self-assessment and advance payment of tax. The section reads as follows :
'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 a 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.'
9. Sub-section (1) of Section 17A stipulates that the person who is liable to furnish a return shall pay the total tax on the admitted agricultural income shown in the return. The return should also be accompanied by proof of payment of the tax. Sub-section (2) provides for reckoning the amount paid under Sub-section (1) towards the regular assessment once the regular assessment is made under Section 18. Sub-section (3) contemplates two contingencies where the penalty as stipulated under the section is to be levied. The first contingency is where the person fails to pay the admitted tax and the second contingency is where any part of the admitted tax is not paid. In such cases, the assessing authority may direct that a sum equal to 2 per cent. of the tax not paid or part of the tax not paid shall be recovered from him by way of penalty for every month during which the default continues. The proviso to Sub-section (3) contemplates that, before levying penalty under Sub-section (3), a reasonable opportunity should be given to the assessee. Sub-section (4) deals with the procedure for recovering the tax due or the penalty due.
10. From the language of Section 17A, it is quite clear that the power to impose penalty under Section 17A(3) is limited to the non-payment of the admitted tax as per the return and the non-payment of the part, of the admitted tax. The right under Section 17A(3) does not extend to levying a penalty in cases of filing a delayed return and thus delaying the payment. There is absolutely no reference to cases of filing a return after the due date. It should be remembered that there is no reference to delayed filing of the returns in this section, because Section 17(3) specifically provides for filing a return later than the due date and for filing a revised return after the due date. The consequences that follow for delayed filing of a return and for filing a revised return are different. They do not come within the ambit of Section 17A. In this context, it would be relevant to refer to Section 140A of the Income-tax Act which was in force at the time of passing the Amendment Act 17 of 1980. Sub-section (3) of Section 140A, as it stood then, is identical to Section 17A(3) of the Agricultural Income-tax Act. It should be remembered that, in the Statement of Objects and Reasons, the Finance Minister categorically stated that as regards the rates of agricultural income-tax, it would be brought on par with the Central income-tax rates, and that the system of paying admitted tax along with the return would be introduced. So, the Legislature actually engrafted into the State Act Section 140A(3) of the Income-tax Act as it then existed.
11. There are a few other indications in the scheme of the Act to show that Section 17A(3) cannot be invoked for penalising a person who files the return after the due date. Those indications are as follows. If the authority extends the time for filing the return under Section 65, no action can be taken against the assessee for filing the return after the due date. Action under Section 20(1), 52 and 53 cannot be taken. Neither can a fine or penalty be imposed, nor can he be prosecuted. Under the scheme of the Act, sanctions or consequences provided for delayed filing of the returns are only in Sections 20(1), 52 and 53. As far as Section 17A is concerned, it only deals with the system of self-assessment and payment of the admitted tax. As long as the admitted tax is paid before filing the return and proof of payment of the admitted tax is produced along with the return, no action can be taken to levy any penalty under Section 17A(3).
12. The decisions cited under the Income-tax Act clearly show that, in cases where no orders were passed on the application for extension of time for filing the return, the assessee is justified in construing the silence as sanction of his request. The decision in Lachman Chaturbhuj Java v. R. G. Nitsure : [1981]132ITR631(Bom) clearly lays down that the assessee is justified in assuming that the silence on the part of the Department is consent and that the time is extended till December, 1970, to file the returns. The decision in CIT v. Gordhanbhai Jethabhai : [1983]142ITR84(Guj) held that when an application for extension of time for filing the return was not disposed of by the Income-tax Officer, the assessee could have reasonably entertained the belief that his application was granted by the Income-tax Officer. If, under such belief, he did not furnish the returns in time, it could not be said that there was no reasonable cause for not furnishing the returns in time. Penalty could not, therefore, be imposed under Section 271(1)(a). The principle of these two decisions would apply to the facts of our case, The decision in K. Sampangirama Raju v. Fifth ITO : [1988]173ITR609(KAR) clearly lays down that penalty is leviable under the said proviso for any failure to pay the tax or any part of it along with the return furnished. As indicated earlier, Section 17A is a complete code in itself, and Sub-section (3) only contemplates the levying of penalty for non-payment of the admitted tax or for non-payment of the part of a admitted tax at the time of filing the returns.
13. Reliance is placed upon Samogiri P. Ltd. v. Agrl. ITO : [1990]181ITR532(Ker) , but I am not discussing this decision in detail because it is represented during the course of arguments that an appeal filed against this decision is pending before the IVth Court and that the appeal is not yet admitted, as a petition to condone the delay is still pending.
14. Considering the scheme of the Act and the provisions, it is quite clear that Section 17A(3) cannot be utilised for levying a penalty in cases where the entire admitted tax is paid, if the return is filed late. It is open to the Department to take action under the other provisions of the Act for the filing of the late return. On the facts of this particular case, as the Department failed to pass orders on exhibit P-1 application, the Department is precluded from taking action against the assessee for delay in the filing of the return.
15. After having recorded my conclusions regarding the scheme of the Act, it would be proper for me to point out how exactly the mistake arose in the impugned orders, exhibits P-4 and P-6. In exhibit P-4 order dated March 9, 1988, while discussing the legal aspects, the Inspecting Assistant Commissioner failed to notice the existence of Section 17(3) and what consequential action is to be taken for simple cases of delayed filing of the return. The order also indicates that the Inspecting Assistant Commissioner was treating as if Section 17(1) and Section 17A should be considered together, and he treated Section 17(1) as part and parcel of Section 17A. Similarly, in exhibit P-6, the Commissioner read Sections 17 and 17A together but he failed to notice Section 17(3). The conclusion of the Commissioner that Section 17A(3) would apply if tax is not paid on the due date is against the provisions of Section 17(3) and Section 65, It is also opposed to the scheme of the provisions for levying penalty, fine and prosecution provided under Sections 20(1), 52 and 53. The authorities went wrong in their interpretation of the law. The error is apparent from the record.
16. For the various reasons given above, the original petition is allowed and exhibit P-4 order and exhibit P-6 order confirming exhibit P-4 order are hereby quashed. The petitioner will be entitled to its costs, advocate's fee fixed at Rs. 1,000.