Kerala H.C : The petitioners in these O. Ps. are all assessees to agricultural income-tax under the Kerala Agrl. IT Act, 1950.

High Court Of Kerala

Smt. Achamma Kuriakose & Anr. vs. State Of Kerala

Section 220

P.C. Balakrishan Menon, J.

Original Petn. No. 2531 of 1987

7th October, 1987

Counsel Appeared

M/s. S. Subramani, Jose Joseph, A.K. Jose & V.V. Ashok, for the Petitioners : Government Pleader, for the Respondents

P.C. BALAKRISHNA MENON, J.:

The petitioners in these O. Ps. are all assessees to agricultural income-tax under the Kerala Agrl. IT Act, 1950. Assessment orders have been passed in all these cases and notices of demand issued under s. 30 of the Act, fixing the time for payment of the tax assessed. As per s. 40 of the Act, the assessees shall be deemed to be in default if they do not pay the tax assessed in accordance with the notice of demand.

2. The petitioners challenge s. 40 as violative of Art. 14 of the Constitution as, according to them, the assessing authority is invested with unguided power to fix the time for payment of the tax assessed. Sub-s. (1) of s. 40 with its proviso is extracted below: ” Any amount specified as payable in a notice of demand under s. 30 or an order under ss. 31, 32 or 33 shall be paid in such number of instalments, within such time, at such place and to such person, as may be specified in the notice or order, or if a time is not so specified, then on or before the first day of the second month following the date of the service of the notice or order and any assessee failing so to pay shall be deemed to be in default: Provided that, when an assessee has presented an appeal under s. 31, the Agrl. ITO may in his discretion treat the assessee as not being in default so long as such appeal is undisposed of. “

It is clear from s. 40, sub-s. (1), that if no time is fixed for payment under the notice of demand under s. 30, the assessee gets time till the first day of the second month following the date of service of the notice of demand. Sec. 30 requires the Agrl. ITO to serve a notice of demand on the assessee in the prescribed form specifying the sum payable. Sec. 40 empowers the assessing authority to fix a time for payment. The argument against s. 40 is that it is open to the assessing authority to fix any shorter time for payment than what is indicated in the section itself and in the absence of any principle or guidance, the time to be fixed is left entirely to the whims and fancies of the officer. I do not see any substance in the argument. The liability for payment of tax is fixed by the, order of assessment. The notice of demand is an intimation to the assessee requiring him to pay the tax assessed within a time to be specified by the assessing authority. The proviso to sub-s. (1) enables the assessee, on filing an appeal under s. 31, to apply to the assessing authority not to treat him as in default during the pendency of the appeal and the assessing authority is invested with jurisdiction not to treat the assessee as in default. Subs. (1) of s. 40 allows a discretion to the assessing authority to fix the time for payment of the tax assessed. As earlier stated, once the liability is fixed by the order of assessment, it is a matter of discretion for the assessing authority to fix a time within which the liability is to be discharged by payment of the tax assessed. It is not an uncanalised power of treating the assessee as in default to enable the assessing authority to initiate penal proceedings against the assessee. If in any particular case the discretion is not exercised in a judicial manner, it is open to the higher authorities under the Act or in appropriate cases for this Court to interfere and set aside such orders of the assessing authority passed in abuse of his powers under sub-s. (1) of s. 40. I see no merit in the challenge against the validity of sub-s. (1) of s. 40. No orders of penalty had been passed in these cases except in O. P. No. 2826 of 1987. Exhibit P-1 dated March 11, 1987, in O. P. No. 2826 of 1987 is the order of assessment for the year 1986-87. A notice of demand, exhibit P-2, of the same date was served on the assessee on March 13, 1987, requiring him to pay the tax assessed on or before March 18, 1987. Exhibit P-3 dated March 18, 1987, is a further notice proposing to impose a penalty of Rs. 25,000 if the tax assessed is not paid within five days from the date of that notice. The assessee submitted his reply, exhibit P-4, on March 26, 1987, wherein it is stated that he proposes to file an appeal against the order of assessment. The assessee has raised a contention in exhibit P-4 that by the reason of the uncanalised power vested in the assessing authority under s. 40(1) of the Act, the section itself is unconstitutional and void. He has in exhibit P-4 made it abundantly clear to the assessing authority that the time granted for payment of the tax assessed is far too short and the notices, exhibits P-2 and P-3, amount to an abuse of the power of the assessing authority. The assessing authority, viz., the second respondent, by exhibit P-6 order dated March 27, 1987, rejected exhibit P-4 objection and on the same day passed exhibit P-5 order imposing a penalty of Rs. 25,000 on the assessee for his failure to remit the tax within the time specified in exhibit P-2.

As earlier stated, sub-s. (1) of s. 40 allows the assessing authority a discretion to fix the time for payment of the tax assessed. The section itself gives an indication as to the time to be allowed in the normal course. In the corresponding provisions in s. 220 of the IT Act, 1961, the assessee is required to pay the amount specified in a notice of demand within 35 days of the service of the notice. The proviso to sub-s. (1) of s. 220 of the Act empowers the ITO to fix a shorter time if he has reason to believe that it will be detrimental to the Revenue to allow the full period of 35 days. To fix a shorter period, he has also to obtain the previous approval of the IAC.

The time fixed for payment of the tax demanded should be reasonable and should not be oppressive against the assessee. Sec. 40 cannot be construed as an instrument of oppression in the hands of the assessing authority and any misuse of power by the assessing authority is liable to be set aside by the appellate or revisional authorities under the Act, as the case may be, or in appropriate cases by this Court under Art. 226 of the Constitution. The petitioner in O. P. No. 2826 of 1987 gets only five days’ time under the notice of demand, exhibit P-2, served on him on March 13, 1987. The assessing authority was not justified in granting such a short time for payment and in imposing a penalty for non-compliance with the demand. The order imposing penalty amounts to a clear abuse of power vested in the assessing authority. Exhibit P-5 order cannot, therefore, be sustained and it is accordingly quashed. In all other cases, no steps have been taken treating the respective assessees as in default. I need only state that the assessees are entitled to a reasonable time for payment of the tax assessed and it is the duty of the assessing authority to fix a reasonable time in the notice of demand for payment of the tax assessed. O. P. No. 2826 of 1987 is allowed to the extent indicated above. O. P. Nos. 2531, 4567, 4788, 7955 and 7959 of 1987 are dismissed. The parties will suffer their respective costs.

[Citation : 171 ITR 494]

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