IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE B.P.RAY MONDAY, THE 28TH FEBRUARY 2011 / 9TH PHALGUNA 1932 WA.No. 104 of 2011() -------------------- AGAINST THE JUDGEMENT/ORDER IN WPC.38078/2010 DATED 23/12/2010 .................... APPELLANT(S): PETITIONER ------------------------ MGOCSM OF INDIA (CHAIROS CENTRE), MGOCSM STUDENT CENTRE), CMS COLLEGE ROAD, KOTTAYAM-686001 REPRESENTED BY ITS GENERAL SECRETARY FR.VARGHESE VARGHESE. BY ADV. SRI.S.ANIL KUMAR (TRIVANDRUM) SRI.K.S.HARIHARAN NAIR RESPONDENT(S): RESPONDENTS -------------------------- 1. THE INTELLIGENCE OFFICER (IB), COMMERCIAL TAXES, KOTTAYAM-686001. 2. THE COMMERCIAL TAX OFFICER (W.C.), O/O.THE DY.COMMISSIONER, COMMERCIAL TAXES, KOTTAYAM-686001. 3. THE DEPUTY COMMISSIONER (APPEALS), COMMERCIAL TAXES, KOLLAM-691009. MR.SHAMSUDEEN, GOVERNMENT PLEADER THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 28/02/2011, ALONG WITH WPC NO. 38078 OF 2010 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & BHABANI PRASAD RAY, JJ. ---------------------------------- W.A.No.104 of 2011 & WP(C) No.38078 of 2010 --------------------------------- Dated, this the 28th day of February, 2011 J U D G M E N T Ramachandran Nair, J. The Writ Appeal is filed against the interim order passed by the learned Single Judge granting stay against recovery on condition of payment of Rs.20,00,000/- (Rupees twenty lakhs only) out of the total demand of above Rs.1,10,00,000/- (Rupees one crore ten lakhs only). The appellant's case is that challenge in the appeal is only against penalty order and the total penalty amount is only Rs.69,13,664/- (Rupees sixty nine lakhs thirteen thousand six hundred and sixty four only). The learned Single Judge directed payment of Rs.20 lakhs only because tax is also demanded in the demand notice issued demanding penalty levied under the order impugned in appeal. Learned Government Pleader pointed out that the appellant's claim for payment of tax at compounded rate is not tenable because no application was filed. 2. We do not think we should consider this question W.A.No.104/2011 & WP(C) No.38078/2010 -2- because assessment is yet to be taken up, and it is for the appellant to raise all the issues in the course of assessment. So far as the challenge against the payment ordered by the learned Single Judge is concerned, since the penalty levied is around Rs.69 lakhs, we do not find any justification to interfere with the direction to remit Rs.20,00,000/- (Rupees twenty lakhs only) as a condition for stay. In view of the above, time for payment is extended till 30/3/2011. At the time of hearing the Writ Appeal, we called for the WP(C), where the challenge is against demand of tax along with penalty demanded based on penalty order. What we feel is that demanding tax as a separate proceedings by way of assessment is required, which the learned Government Pleader submitted will be made in the course of time. So much so, the demand of tax made along with the demand of penalty notice should be treated as only a determination of tax for the purpose of levy of penalty. Therefore, there will be a direction to the respondents not to treat the tax shown as demanded in the notice of demand as tax recoverable from the appellant/petitioner. The Writ Appeal is disposed of granting extension of time for payment as above, and the Writ W.A.No.104/2011 & WP(C) No.38078/2010 -3- Petition is disposed of directing the Assessing Officer to complete the assessment without any delay and recover the tax based on orders of assessment. While considering the appeal against penalty, the appellant authority is free to consider whether the tax determination is correct because penalty is based on the tax evaded or sought to be evaded. In other words, in the course of deciding the appeal, the appellate authority will have to necessarily consider the correctness or otherwise of the tax determined based on which penalty is levied. (C.N.RAMACHANDRAN NAIR, JUDGE) (BHABANI PRASAD RAY, JUDGE) jg