K. Tauseef Ali Vs. Assistant Commissioner of Agricultural Income-tax - Court Judgment

D.V. Shylendra Kumar, J.

1. The petitioner is an assessee under the provisions of the Karnataka Agricultural Income-tax Act, 1957. For the assessment year 1999-2000, the assessee opted for payment of tax by way of composition in respect of his agricultural land as provided under section 66 of the Act and paid a sum of Rs. 53,107 on July 31, 1999, on the premise that the extent of his holding was 48 acres 33 guntas. It is not in dispute that the assessee grows coffee in his land. For the subsequent year, i.e., for the year 2000-01, while filing Form No. 23 the petitioner has indicated that his extent of holding is not 48 acres 33 guntas but a lesser extent and accordingly sought to pay a lesser amount of tax by way of composition. The assessee paid a sum of Rs. 16,650 on August 7, 2000.

2. The Assistant Commissioner of Agricultural Income-tax by a notice dated March 20, 2002, purporting to be under Section 19(2) read with Section 66 of the Act called upon the assessee to indicate as to why he should not be directed to make payment of a sum of Rs. 61,812 being the composition fee on the premise that his holding was to the extent of 53 acres 33 guntas.

3. The assessee filed his reply as per his reply dated March 27, 2002, wherein he pointed out that in view of certain transactions amongst the brothers he had declared the lesser extent, particularly a holding of only 26 acres, etc.

4. However, the first respondent by his order dated April 27, 2002 (copy at annexure D), determined the composition amount payable by the petitioner to be the same amount as he had indicated for the year 1999-2000 at Rs. 53,107 and not the amount proposed and mentioned in his letter dated March 27, 2002, and as such called upon the assessees to pay the difference amount between this amount and the sum of Rs. 16,650 which the assessee had paid while filing Form No. 23. Such amount of Rs. 36,457 was not disputed by the assessee and it is the case of the assessee that the amount has been paid now.

5. The controversy that is sought to be agitated in this writ petition is as to the conduct on the part of the respondent in calling upon the assessee to pay penalty/interest on this difference amount of Rs. 36,457 by invoking the provisions of Section 42 of the Act.

6. Sri Parthasarathy, learned counsel for the petitioner, submits that the respondent has no authority or jurisdiction to levy interest under Section 42 of the Act in respect of a sum of Rs. 36,457 representing the difference between the amount that was actually payable by the assessee and the amount that had been actually paid by the assessee for the year 2000-01. The submission of learned counsel for the petitioner is that Section 42 is a provision for recovery of the arrears of tax when the assessee becomes a defaulter in payment of tax or any other amount due under the Act ; that such a person is made liable to pay penalty under Sub-clause (a) to Section 42(1)(ii) of the Act and in the present case the provisions of Section 41(1) or Section 41(2) had not been followed nor attracted ; that there was no occasion for the respondent to determine the difference amount envisaged under Section 42. Learned counsel also submits that there is no other enabling provision under the Act to levy such a penalty on the amount of Rs. 36,457 and as such when no provision had been made under the Act itself for levy of penalty or interest in respect of such amount the respondent cannot call upon the petitioner to pay this penalty.

7. Learned counsel submits that the amount being in the nature of penalty as mentioned in the provisions, it is not open to the respondent to levy such amount without due authority of law de hors the provisions of the Act and therefore submits that the demand for payment of this penalty amount as per annexure E is liable to be quashed.

8. The statement of objections has been filed on behalf of the respondent. It is, inter alia, asserted that there was a delay on the part of the petitioner in making payment of the amount due under Section 66(5) read with Rule 32(2) and within the stipulated time as per Section 18(1) of the Act that the assessee having paid the difference amount in respect of his actual liability only on April 9, 2002, i.e., almost after one year and nine months after opting for payment by composition, the assessee was liable to pay the penalty as contemplated under Section 42 of the Act and, therefore, there was every justification to levy and demand the penalty amount and the same cannot be quashed.

9. The learned Government pleader has also pointed out that the petitioner in fact having opted for composition by accepting the holding to be 48 acres 33 guntas as determined for the year 1999-2000 and had on such premise paid the amount of Rs. 53,107 on July 31, 1999, and that such determination holds good for the subsequent two years also unless by a proper procedure and order it has been redetermined. It is submitted that as in the instant case the petitioner has ultimately accepted and admitted his liability for the payment of this amount of Rs. 53,107 and having without any demur paid the difference amount of Rs. 36,457 on April 9, 2002, it was inevitable for the respondent to call upon the assessee to make payment of penalty under Section 42 of the Act, for the period between July 31, 1999, and April 9, 2002, on the differential amount of Rs. 36,457.

10. After hearing learned counsel for the petitioner and the learned Government pleader and after perusing the respective pleadings and the provisions of the Act, I am of the view that there is every justification on the part of the respondent in invoking the provisions of Section 42 of the Act and calling upon the petitioner to pay the penalty/interest envisaged under this provision.

11. Though Sri Parthasarathi, learned counsel for the petitioner, has contended that when once a situation contemplated under Section 42(1)(ii)(a) has not occurred there is no justification to levy any penalty under Section 42 particularly as there was no order followed by a demand, in which event only the period between the last date provided for payment under the demand notice and the actual date of payment can be the period for which penalty can be raised.

12. I am of the view that it is not necessary in the present case particularly as it is a case of an assessee who had opted Section 66 and not a case of an assessee having filed a return under Section 18 of the Act in respect of which return the Assessing Officer should have passed an assessment order under Section 19 of the Act.

13. The assessee had opted for composition even in respect of the earlier years and the amount of tax payable on composition had already been determined. By a reading of the provisions of Section 66 read with Rule 32(2) and Form No. 23 with the provisions of Section 18(1) it becomes obvious that the assessee is required to pay the compensation amount by or before July 31 of the year in respect of which he had opted for composition. In the present case, the assessee was required to make payment of Rs. 53,107 by or before July 31, 2000. On the other hand, the assessee actually paid a sum of Rs. 16,650 only on August 17, 2000, and has paid the balance of Rs. 36,457 on April 9, 2002. To this extent there is definitely non-compliance. A reading of the provision of Section 66 shows that it automatically implies that the assessee was a defaulter during this period as understood in Section 42 of the Act and the defaulting period was on and after July 31, 1999, and up to April 9, 2002, when the assessee made payment of the deficit. In a case where the assessee opts for payment of tax by way of composition the period envisaged under Sub-clause (a) of Clause (ii) of Sub-section (1) of Section 42 gets automatically determined by the statutory operation, to be the period between July 31 of the year and the date of payment of the amount sought to be paid by way of composition. This is so because there being no assessment order, there is no occasion for issue of the demand notice indicating the upper limit for payment of time based on the assessment order, beyond which period the assessee becomes a defaulter. In a case where the assessee opts for composition such assessee becomes a defaulter if the amount of composition is not paid by or before July 31. There is no dispute that the petitioner had not paid the admitted amount that is determined and payable by the assessee by way of composition by or before July 31. There cannot be any escape from the conclusion that the assessee was a defaulter in the present case within the meaning of Section 42 of the Act. If the assessee is a defaulter the requirement of Section 42(1)(ii) automatically gets attracted by the operation of statutory provisions themselves.

14. The amount demanded to be payable by the petitioner though it is called a penalty, if one looks at the scheme of the provisions of Section 42 of the Act, it is obvious that the amount is in the nature of a compensatory payment to compensate the Revenue for the loss due to the delayed remittance of a tax liability quantified and indicated to be payable within a permitted time. The amount so payable is also statutorily determined and is not left to the discretion of the authority demanding payment.

15. Therefore, I am of the view that the provisions of Section 42 are attracted and there is nothing wrong on the part of the respondent in demanding the assessee to make payment of penalty/interest under this provision and in raising the demand as per annexure E. The contentions urged on behalf of the petitioner are accordingly rejected. The writ petition fails and is dismissed.

16. The learned Government pleader is permitted to file her memo of appearance within four weeks.