KRISHNA BHATTA Vs. AGRICULTURAL INCOME TAX OFFICER

JUDGEMENT

(1.) OUR learned brother, Kochu Thommen J., felt that the decision in O.P. No. 901 of 1967 (See infra p. 29) requires reconsideration and, therefore, referred this case to a Division Bench. The question raised in this case is of some importance. The Agrl. I.T. Act, 1950, provides, in Section 41(1), for the imposition of penalty when an assessee under that Act is in default in payment of agricultural income-tax. On such default, the Agrl. ITO may, in his discretion, direct that in addition to the amount of the arrears a sum not exceeding that amount shall be recovered from the assessee by way of penalty. There is no time-limit specified in the Act for passing an order imposing penalty. Sub-section (4) of Section 41 provides that no proceeding for the recovery of any sum payable under the Act shall be commenced after the expiration of three years from the last day fixed for payment in the notice of demand served under Section 30 or where the assessee has been treated as not being in default under the proviso to Sub-section (1) of Section 40 pending his appeal, after the expiration of three years from the date on which the appeal was decided. Therefore, by virtue of Sub-section (4), the tax.imposed on an assessee becomes irrecoverable after the period specified in Sub-section (4) and, similarly, if penalty is imposed, such penalty becomes irrecoverable after the period specified in Sub-section (4), In a case, where the tax imposed has become irrecoverable by lapse of time, if after many years, the assessing authority chooses to impose penalty, could such an imposition be validly attacked ? That is the question before us. The period is about 16 years after the demand. Despite the absence of a period specified in Section 41 as that within which penalty could be imposed, could penalty be imposed beyond a reasonable period ? If not, is a period of 16 years a reasonable period ? These are the questions raised in this original petition.

(2.) THE assessee in this case was assessed to agricultural income-tax for 1958-59, by order dated February 10, 1960, and a demand notice for Rs. 2,787.54 was served on the assessee. Out of this a sum of Rs. 1,082.97 was paid by the assessee and the balance of Rs. 1,705.57 was in arrears. By a notice dated February 5, 1965, the assessee was informed by the first respondent that he was proposing to levy penalty for non-payment of tax. THE liability for payment of penalty was disputed by the petitioner. He also contended that recovery of tax had become barred. THEreafter, a notice dated July 1, 1965, copy of which is Ex. P-3 was issued to the petitioner proposing imposition of penalty of 50% of the tax for non-payment. That too was objected to by the petitioner. Nothing seems to have happened on the basis of that notice. Yet, another notice, Ex. P-4 dated October 4, 1972, was issued by the first respondent to the petitioner proposing to levy a penalty equal to the amount of the tax for non-payment of the tax. THEre is no mention in Ex. P-4 of the earlier proposal to levy penalty at 50% of the tax and the action taken thereon. Evidently no action seems to have been taken pursuant to the earlier notices. Nothing happened thereafter for a long time. Ultimately, by Ex. P-5 order dated June 21, 1976, a penalty equal to the tax in default was imposed. THE petitioner thereupon filed a revision to the second respondent, the Dy. Commissioner (Appeals). THE Dy. Commissioner took the view that the recovery of tax had become barred but the petitioner was in default and in view of the observations in O.P. No. 901 of 1967 of this court (see infra p. 29), it must be taken that there was no embargo in imposing penalty merely because of the lapse of a long time after the assessment. THErefore, the revision was dismissed. It is Ex. P-5 order as confirmed by Ex. P-7 that is challenged in this original petition.

(3.) OUR attention has been drawn to the decision of the Supreme Court in Swastik Oil Mills Ltd. v. H. B. Munshi [1968] 21 STC 383, by the learned counsel, Sri Dharmadan, appearing for the respondents, in support of his contention that where no period of limitation is specified in the statute it is not for the court to read a period of limitation to hold that proceedings taken by an authority are not validly taken. The question that arose before the Supreme Court in that case concerned the propriety of commencing proceedings by way of suo motu revision under Section 31 of the Bombay Sales Tax Act (3 of 1953), to reopen the assessment for the period from April 1, 1948, to March 31, 1950, and 1st April, 1950, to 31st March, 1951. Notice was issued on 7th January, 1963. There were several contentions raised as to the validity of the notice, one of them being that a notice issued after a long period ought not to be considered as valid. The court noticed that Section 31 of the Bombay Sales Tax Act did not lay down any limitation for the exercise of the power of revision by a Deputy Commissioner suo motu. The court was not prepared to accept the case that such limitation must be necessarily read into the Act. The question which is before us is different. The following observations in the judgment of the Bombay High Court which is seen in the same report at p. 389 (of 21 STC) have been brought to our notice by the learned counsel for the petitioner :