1987 (10) TMI 20 - HC - Income Tax

Summary

Issues:
Challenge to the constitutionality of section 40 of the Kerala Agricultural Income-tax Act, 1950 regarding the power of the assessing authority to fix the time for payment of tax assessed. Imposition of penalty for non-compliance with the demand.

Analysis:
The petitioners contested the constitutionality of section 40 of the Act, arguing that it violates article 14 of the Constitution by granting unguided power to the assessing authority to determine the time for tax payment. The section specifies that failure to pay tax as per the notice of demand renders the assessee in default. The proviso allows the Agricultural Income-tax Officer discretion not to treat the assessee as in default during an appeal under section 31. The court noted that the liability for tax payment is established by the assessment order, and the notice of demand merely informs the assessee of the payment deadline set by the assessing authority. The discretion to fix the payment time is not an unbridled power but a means to ensure timely tax payment. The court found no merit in the challenge against the validity of section 40.

In a specific case (O. P. No. 2826 of 1987), a penalty was imposed for non-payment of tax within the short deadline provided in the notice of demand. The court emphasized that the time granted for payment should be reasonable and not oppressive to the assessee. Comparing it to the Income-tax Act, 1961, where a 35-day payment period is standard, the court highlighted that any misuse of power by the assessing authority can be rectified by higher authorities or through judicial intervention. The court deemed the penalty imposition in this case an abuse of power and quashed the order. It stressed that assessees are entitled to a reasonable time for tax payment, and it is the duty of the assessing authority to set a fair deadline in the notice of demand.

O. P. No. 2826 of 1987 was allowed partially, with the penalty order being quashed. The other petitions were dismissed, with each party bearing their respective costs.