CAIT Vs. PARUKUTTY AMMA

JUDGEMENT

(1.) Four questions have been referred to us by the Agricultural Income Tax Appellate Tribunal which read as follows:

(2.) No notice was issued to the assessee before the penalty was imposed under S.41(1) of the Agricultural Income Tax Act, 1950.

(3.) In order to conclude that an assessee has been in default certain facts will have first to be ascertained. In cases where there have been no appeals from the assessment order the issue of a demand notice under S.30 of the Act will have to be proved. That notice should have been shown to have fixed a time for payment. That notice should have been served on the assessee. The assessee can be said to be in default only if payment had not been made within the time stipulated in the notice and in cases where no time had been specified in the notice, only on or after the first day of the second month following the date of service of the notice. In cases where there have been appeals the question whether the assessee is in default depends upon the terms of the appellate order which may permit payment of the tax imposed by instalments. We therefore consider that before it is concluded by the officer empowered to impose the penalty that an assessee had been in default, the assessee should have been given an opportunity to state his case relating to the basic facts that have to be established. The principles of natural justice require that this should be done. Apart from this the power conferred by S.41(1) is a discretionary power. Perhaps this is a more important aspect. This means that the officer is not bound to impose the penalty. He will have to exercise his judicial discretion in regard to the question. The default may be a technical default. The payment of the tax might have been made the next day after the date on which it was due. There might be justifiable reasons for the delayed payment of tax. If the officer is informed about such circumstances he may not impose the penalty or only impose a nominal penalty. So in all the circumstances it will be proper, just and fair if before penalty is imposed an opportunity is granted to the assessee to state which he has to say. This appears to us to be the proper view to take on the section, which is penal in character.