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TMI Blog1985 (9) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer on August 31, 1982, issued a show-cause notice to the petitioner proposing to levy a penalty of Rs. 1,587.90 on the shortage of tax paid, to which he did not reply and file objections. On December 19, 1983, the Agricultural Income-tax Officer made an order imposing a penalty of Rs. 1,587.90 under section 18(2A)(b) of the Act against the petitioner. The petitioner has urged that section 18(2A)(b)of the Act had conferred unguided, uncanalised, uncontrolled and arbitrary powers to levy penalty and the same was violative of article 14 of the Constitution. The petitioner has urged that the order made on the assumption that the levy was compulsive, was illegal. The respondents have resisted the petition. Sri Kishore Mallya, learned advocate, has appeared for the petitioner in this and certain other connected cases that were heard today. We also heard Sriyuths G. Sarangan, S. P. Bhat, R. Daiveekan, K.A Hemaraj, learned advocates appearing for the petitioners, in the connected cases. Sri S. Rajendra Babu, learned Government advocate, has appeared for the respondents in this and the connected writ petitions. Sri Mallya contends that section 18(2A)(b) of the Act has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 19 of the Act does not exceed rupees ten thousand and in whose cases the levy of penalty cannot exceed Rs. 50. One more aspect, to which we will refer at a later stage in some detail, empowers the authority to consider the cause shown, drop or levy penalty with due regard to all the facts and circumstances of each case. The object with which section 18(2A)(b) has been enacted cannot be gathered from the Statement of Objects and Reasons accompanying the Bill that ultimately became the Act or the Notes on Clauses of the Bill also. But from the scheme and object of the provision, it appears to us that the legislative intent in enacting the same is to deter persons from filing wild returns (and for the State) to recover a reasonable compensation by way of penalty on the amount which had been found due to the State but has been earlier withheld by the assessee. We cannot say that those objects or principles are in any way unreasonable, arbitrary or unjust or suffer from the vice of excessive delegation or violate any articles of the Constitution at all. We are of the view that every one of the factors earlier analysed by us, each one by itself and in any event all of them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the same was served on January 20, 1983, directing him to show cause as to why penalty of Rs. 1,587-90 being 10% of the tax paid short should not believed. So far, the assessee has not responded to the said notice. Therefore, it is considered that the assessee has no objection for the proposed levy of penalty. Hence, in exercise of the powers vested in me under section 18(2A)(b) of the KAIT Act, 1957, 1 hereby levy a penalty of Rs. 1,587-90 which is to be paid into the State Bank of Mysore, Saklespur, on or before 19-12-81. Sd. (K. A. Uthappa) Agricultural Income-tax Officer, Hassan. " In the other cases also, the orders made by the other Agricultural Income-tax Officers are almost on the same lines. What is apparent from the above and the other orders is that the Agricultural Income-tax Officers taking the view that when the difference between the tax paid and tax payable on the final assessment was more than 25%, the levy of penalty was automatic and compulsive, have levied penalty against the petitioner and others. In other words, the Agricultural Income-tax Officers are of the view that section 18(2A)(b) of the Act did not confer on them any discretion. Whether this v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Hindustan Steel Ltd.'s case [1972] 83 ITR 26, the Supreme Court considering the scope of levy of penalty under section 9(1) read with section 25(1)(e) of the Orissa Sales Tax Act of 1947, to a case of a dealer who had failed to get himself registered under that Act, explained the principles that should be applied in construing penal provisions in these words (page 29): " Under the Act, penalty may be imposed for failure to register as dealer: section 9(1) read with section 25(l)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on consideration of all the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng upon the circumstances of each case." We are of the view that these principles, except to the extent of quantum of penalty leviable, govern the construction of section 18(2A)(b) of the Act. On the application of the principles, enunciated in the above case, it follows that even when the difference in the tax exceeds 25 per cent., the authority has the power to levy or not to levy penalty. But that power like all such powers has to be exercised judicially with due regard to all the facts and circumstances of each case and cannot be exercised mechanically, casually or as a matter of course. We are of the view that the Agricultural Income-tax Officers in this and other cases have imposed penalty as if that was compulsive and in any event as a matter of course or mechanically, which was plainly illegal. Oil this ground, the order impugned by the petitioners is liable to be quashed. As noticed by us earlier, the Agricultural Income-tax Officer had very rightly issued show-cause notice to the petitioner before levying penalty which was not availed of by him. In this view, the petitioner cannot complain of violation of one of the basic components of natural justice, viz., audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . At this stage, Sri Mallya seeks for a reasonable time to file objections before the Agricultural Income-tax Officer and urge for dropping the proceedings. We are of the view that this request of Sri Mallya should be granted though the petitioner did not avail of the opportunity afforded to him by the Agricultural Income-tax Officer earlier. We also consider it proper to direct the petitioner to appear before the Agricultural Income-tax Officer on October 28, 1985, and take further orders from him for the further progress of the case. In the light of our above discussion, we make the following orders and directions- (i) We dismiss this writ petition in so far as it challenges the validity of section 18(2A)(b) of the Act. (ii) We quash the order impugned in this writ petition and direct the Agricultural Income-tax Officer, Hassan, respondent No. 1, to restore the proceedings to its original file and redetermine the same on receiving the objections, if any, to be filed by the petitioner within 30 days from this day, consider the cause, if any, shown by him, afford him an opportunity of hearing on October 28, 1985, if he appears on that day or on such other day to which date the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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