1981 (1) TMI 45 - HC - Income Tax

Summary

Issues Involved:
1. Validity of imposing penalty after a long delay.
2. Reasonableness of the period for imposing penalty in the absence of a statutory time limit.

Summary:

1. Validity of Imposing Penalty After a Long Delay:
The primary issue was whether the imposition of a penalty by the Agricultural Income Tax Officer (Agrl. ITO) after a significant delay (16 years in this case) is valid. The court noted that while the Agrl. I.T. Act, 1950, u/s 41(1) allows for the imposition of a penalty when an assessee defaults on payment, it does not specify a time limit for such imposition. However, u/s 41(4), no proceeding for recovery of any sum payable under the Act shall commence after three years from the last day fixed for payment in the notice of demand. The court questioned whether a penalty could be imposed after the tax itself had become irrecoverable due to the lapse of time.

2. Reasonableness of the Period for Imposing Penalty:
The court examined whether a penalty could be imposed beyond a reasonable period, even in the absence of a statutory time limit. It was highlighted that the power conferred under a statute must be exercised within a reasonable time. The court referenced several precedents, including the Supreme Court's decision in Swastik Oil Mills Ltd. v. H. B. Munshi, which emphasized that while no period of limitation is specified, the power must be exercised within a reasonable time to avoid prejudice and hardship to the assessee. The court concluded that an inordinate delay of 16 years without any explanation is unreasonable and invalidates the penalty.

Conclusion:
The court quashed the penalty imposed by the assessing authority (Ex. P-5) and confirmed by the revisional authority (Ex. P-7), citing the unreasonable delay and lack of explanation for such delay. The court emphasized that the absence of a statutory time limit does not permit indefinite delays in exercising the power to impose penalties. The application for leave to appeal to the Supreme Court was refused, as no substantial question of law of general importance was found.