2004 (2) TMI 20 - HC - Income Tax

Karnataka Agricultural Income-tax Act, 1957 Belated payment - justification on the part of the respondent in calling upon the assessee to pay penalty on Rs. 33,706 which had been paid on August 20, 2002, by invoking the provisions of section 42 - The amount demanded to be payable by the petitioner though 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. - 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

Issues:
1. Justification for calling upon the assessee to pay penalty under section 42 of the Karnataka Agricultural Income-tax Act, 1957.
2. Authority or jurisdiction to levy penalty under section 42.
3. Enabling provision under the Act to levy penalty on the amount paid.
4. Delay in payment and justification for levying penalty.
5. Interpretation of statutory provisions and determination of penalty.
6. Nature of penalty under section 42 as compensatory payment.

Analysis:
1. The petitioner, an assessee under the Karnataka Agricultural Income-tax Act, opted for composition payment for the assessment year 2000-01. The controversy arose when the Assistant Commissioner called upon the assessee to pay a penalty for delayed payment of a certain amount. The petitioner contested the justification of imposing the penalty under section 42 of the Act, arguing that the relevant provisions were not followed or attracted in this case.

2. The petitioner's counsel contended that the respondent lacked the authority to levy the penalty under section 42 since there was no specific provision in the Act enabling such penalty on the amount paid by the assessee. It was argued that without a clear legal basis for the penalty, the demand for payment should be quashed.

3. The Government Pleader pointed out that the delay in payment by the petitioner justified the imposition of the penalty under section 42. It was highlighted that the petitioner had accepted the liability for the amount and paid the differential sum after a significant delay, making the penalty inevitable according to the Act.

4. The court examined the provisions of the Act, particularly section 42, and concluded that there was sufficient justification for invoking the penalty/interest under this section. The court rejected the petitioner's argument that without a specific order followed by a demand, the penalty should not be levied, emphasizing the automatic determination of default under section 42 in cases like the present one.

5. The judgment delved into the interpretation of statutory provisions regarding composition payment and the timeline for payment by the assessee. It was established that the petitioner's delayed payment constituted non-compliance, leading to the conclusion that the assessee was a defaulter within the meaning of section 42 of the Act.

6. Regarding the nature of the penalty under section 42, the court clarified that it functions as a compensatory payment to offset the revenue loss due to delayed remittance of tax liability. The statutory determination of the penalty amount indicated that it was not discretionary but a mandated compensatory payment, justifying the respondent's demand for payment.

In conclusion, the court dismissed the writ petition, upholding the respondent's authority to demand the penalty under section 42 of the Act. The judgment emphasized the statutory provisions and the automatic determination of default in cases of delayed payment, affirming the validity of the penalty as a compensatory measure.

← Previous Next →