LALITHADRI COFFEE ESTATE Vs. AGRICULTURAL INCOME TAX OFFICER

JUDGEMENT

(1.) WHAT precisely is the effect of an order of ad interim stay granted by a superior court, exercising writ jurisdiction, on the statutory liability of an assessee to pay penalty in the event of default in the payment of the amount of tax determined against it ? Does the interim stay against recovery of the dues extinguish even temporarily the liability of the assessee to pay or it only postpones the recovery process till such time the order is vacated or discharged ? In other words, does an interim order of stay provide a lasting defence or immunity to the assessee, against its being treated a defaulter, for the period during which any such order was in force, so as to protect it against the imposition of a penalty for non-payment of the amount during the said period ? These questions arise in this bunch of writ petitions, in the backdrop of near identical facts which may be stated immediately.

(2.) THE petitioners are assessees under the Karnataka Agricultural Income-tax Act, 1957. THEy appear to have been assessed to the payment of firm tax under the Act for different years which assessments and the consequential demands were brought under challenge by them in different writ petitions filed in this court. Interim orders of stay against the recovery of the amount of tax demanded from the petitioners were issued by this court, but with the eventual dismissal of the writ petitions, the said orders were also vacated. THEn followed notices, issued by the assessing authorities concerned, under section 42(1) and (2) of the Act, calling upon the petitioners to pay the amount of tax together with interest at the stipulated rates. THE petitioners objected to the demand of penalty by way of interest on the ground that the interim order issued by this court had stayed the recovery of the amount determined against them and, therefore, they could not be deemed to be defaulters under the Act so as to attract the imposition of a penalty by way of interest on the amount remaining unpaid. THE assessing authority did not find favour with this argument and on the authority of the judgment of the Supreme Court in Haji Lal Mohd. Biri Works v. State of U.P. [1973] 32 STC 496, held that the liability to pay interest was automatic and that an interim order of stay did not have the effect of preventing the running of interest under the Act. Aggrieved, the petitioners have come up to this court to contend that the view taken by the respondent-authority was not legally sound and that the demand raised should, therefore, be quashed.

(3.) THE argument advanced by Mr. Sarangan sounds attractive, but does not stand a closer scrutiny. It proceeds on a basic fallacy about the effect of an interim order of stay issued by this court. While it cannot be disputed that a writ court exercises an all-pervasive power to grant such relief as it may deem fit even in the teeth of a statutory provision, being interpreted by it, there is no sound or principled basis for holding that the very plenitude of the power or the superiority of the source from which the same flows should imply that all statutory provisions regardless of their purpose and setting should be deemed to have been obliterated during the period an interim order of stay from this court remains in force. As to what is the effect of an order of stay would depend upon the nature of the order issued, the purpose behind the issue thereof and the mischief which the same is meant to prevent. THEre may be cases where the operation of the statutory provision itself is stayed by the court, while there may be a much larger number in which a temporary protection against the proposed action, whether by way of recovery of taxes or otherwise is meant to be granted to the person aggrieved till such time the court examines in depth the merits of the challenge to the same. As to what would be the effect of an order of stay against the operation of a statutory provision is a question which does not fall for consideration in the present proceedings, for, admittedly, in these cases, the orders of stay which the petitioners have made the sheet anchor of their respective cases were not meant to nor did they purport to suspend the operation of any provision of the Karnataka Agricultural Income-tax Act, 1957. What these orders stayed were further proceedings in pursuance of the assessment orders impugned and the demand notices issued in consequence thereof.