IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.N.RAVINDRAN THURSDAY, THE 8TH JANUARY 2009 / 18TH POUSHA 1930 OP.No. 35453 of 2000(U) --------------------------------- PETITIONER(S): ------------------------ P.A.PORINCHU, PADIKKALA HOUSE, LURDPURAM, THRISSUR. BY ADV. SRI.K.M.V.PANDALAI RESPONDENT(S): ------------------------- 1. AGRICULTURAL INCOME TAX AND SALES TAX OFFICER, CIVIL LINES, THRISSUR. 2. THE DISTRICT COLLECTOR, THRISSUR. 3. THE TAHSILDAR, THRISSUR. 4. THE VILLAGE OFFICER, CHEMBUKAVU. GOVERNMENT PLEADER SRI.K.P.PRADEEP (TAX) FOR R1 TO 4 THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 15/07/2008, THE COURT ON 08/01/2009 DELIVERED THE FOLLOWING: ORDER ON CMP. NO.60676/2000 IN OP. NO.35453/2000 DISMISSED 08.01.2009 SD/- P.N.RAVINDRAN, JUDGE APPENDIX PETITIONERS EXHIBITS P1:- COPY OF THE ASSESSMENT ORDER DT. 27.3.84 PASSED BY THE IST RESPONDENT. P2:- COPY OF THE APPELLATE ORDER DT. 2.11.85 PASSED BY THE ADDL. APPELLATE ASST.COMMISSIONER. P3:- COPY OF THE STAY ORDER DT. 24.1.86 BY THE TRIBUNAL. P4:- COPY OF THE DEMAND DRAFT DT. 17.2.86. P5:- COPY OF THE APPELLATE ORDER DT. 29.1.2000 BY THE TRIBUNAL. P6:- COPY OF THE RECEIPT ISSUED BY THE 4TH RESPONDENT DT. 24.10.2000. P7:- COPY OF THE ASSESSMENT ORDER DT. 17.10.2000 PASSED BY THE IST RESPONDENT. /TRUE COPY/ P.S. TO JUDGE tss P.N.Ravindran, J. ================ O.P.No.35453 of 2000 ================= Dated this the 8th day of January, 2008. JUDGMENT The petitioner is an assessee on the files of the first respondent. By Ext.P1 order passed on 27.3.1985, the first respondent assessed the petitioner to pay the sum of Rs.11,961.50, Rs.25,324.20 and Rs.32,712.90 as agricultural income tax for the assessment years 1978- 79, 1979-80, and 1980-81 respectively. Ext.P1 order of assessment was passed under Section 18(3) of the Kerala Agricultural Income Tax Act, 1950, hereinafter referred to as the “1950 Act” for short. The petitioner challenged Ext.P1 order of assessment in three separate appeals filed before the Additional Appellate Assistant Commissioner. By Ext.P2 order passed on 2.11.1985, the appellate authority granted cultivation expenses for the assessment years 1979-80 and 1980-81 and directed the assessing officer to modify Ext.P1 order of assessment accordingly. The petitioner thereupon filed Second Appeals before the Agricultural Income Tax Appellate Tribunal, Palakkad and sought stay of collection of the tax. By Ext.P3 order passed on 24.1.1986 the Appellate Tribunal OP 35453/00 -: 2 :- granted stay of collection of the tax on the petitioner paying the sum of Rs.2,000/- each towards the tax demanded for the assessment years 1978-79 1979-80 and 1980-81. As directed in Ext.P3, the petitioner remitted the sum of Rs.6,000/- on 17.2.1986 by way of demand draft drawn in favour of the first respondent. The appeals filed by the petitioner before the Appellate Tribunal were thereafter heard and disposed of by Ext.P5 order passed on 29.1.2000. 2. Pursuant to Exts.P2 and P5 orders, the assessing authority issued Ext.P7 order dated 17.10.2000 giving effect to the direction issued by the first appellate authority and the Appellate Tribunal. By the time Ext.P5 order was passed by the Appellate Tribunal, the 1950 Act was repealed and replaced by the Kerala Agricultural Income Tax Act, 1991, hereinafter referred to as the “1991 Act” for short. The 1991 Act came into force on 1st April, 1991. In Ext.P7, the assessing officer levied interest on the tax assessed in terms of Section 37(4) of the 1991 Act. The interest levied was Rs.930/- for the assessment year 1978-79, Rs.11,160/- for the assessment year 1979-80 and Rs.48,539/- for the assessment year 1980-81. In Ext.P7, the balance tax demanded for the assessment year 1978-79 was nil, for the assessment year 1979-80 was Rs.3,921/- and for the assessment year 1980-81 was Rs.19,645/-. On receipt of Ext.P7, the petitioner remitted the tax component amounting to Rs.23,566/- as can be seen from Ext.P6 receipt dated 24.10.2000. This Original Petition was thereafter filed on 18.12.2000 challenging OP 35453/00 -: 3 :- Ext.P7 to the extent it levies interest on the tax for the assessment years 1978-79, 1979-80 and 1980-81. The petitioner has in this Original Petition prayed for the following reliefs: (a) quash Exhibit-P7 order to the extent it relates to levy of penal interest for the year 1978-79, 1979-80 and 1980-81 by issue of a writ of certiorari; (b) issue a writ of mandamus forbearing the respondents from taking any further steps for the realisation of the penal interest levied as per Exhibit-P7 order for the years 1978-79, 1979-80 and 1980-81 till the disposal of this Original Petition; (c) declare that the petitioner is not liable to pay any penal interest for the years 1978-79, 1979-80 and 1980-81 in the circumstances of the case." 3. The petitioner contends that since the 1950 Act alone governs the assessment years in question no interest can be levied in the absence of a stipulation in the 1950 Act that where tax or penalty due is not paid in time, it will attract interest. The petitioner further contends that he had complied with the condition imposed in Ext.P3 interim order passed by the Appellate Tribunal and that as no notice of demand had been issued under the provisions of the 1991 Act, as stipulated in Section 45 (1) thereof, he cannot be deemed to be a person in default as stipulated in Section 62 thereof and therefore, the assessing officer was not justified in levying interest. 4. The first respondent has filed a counter affidavit contending OP 35453/00 -: 4 :- inter alia that in view of sub-section (3) of Section 99 of the 1991 Act, the respondents are entitled to complete the proceedings pending under the 1950 Act, regarding the assessment, levy, collection and recovery of the tax chargeable under the 1950 Act. Relying on sub-section (4) of Section 99 of the 1991 Act, the respondents contend that the Appellate Tribunal was entitled to continue and decide the proceedings pending before it under the provisions of the 1950 Act. Relying on sub-section (5) of Section 99 of the 1991 Act, the respondents contend that any arrears of tax or other amount pending can be collected and any recovery proceedings initiated or continued under the 1950 Act can be continued as if the levy, collection and recovery are made or is continuing under the provisions of the 1991 Act. The respondents also rely on Section 46(b) of the 1991 Act to contend that it is not necessary to serve a fresh notice of demand where the demand is reduced in appeal. The respondents therefore contend that though the demand made by the assessing officer was reduced by the Appellate Tribunal, it was not necessary to issue a notice of demand and as the amount demanded was paid only partly, the petitioner is liable to pay interest on the unpaid tax from the date of demand till the date of actual payment. As regards Section 62(2) of the 1991 Act, the respondents contend that 1991 Act is not applicable and that the only effect of the proviso to sub-section (2) of Section 62 of the 1991 Act is to keep the coercive proceedings in abeyance. 5. I have considered the submissions made at the Bar by the OP 35453/00 -: 5 :- learned counsel appearing on either side. It is common ground that the 1991 Act does not apply to the assessment years 1978-79, 1979-80 and 1981-81. It is also not in dispute that under the provisions of the 1950 Act, interest was not leviable on the tax assessed by the assessing officer. Sub-sections (3) and (4) of Section 99 of the 1991 Act empowered the Appellate Tribunal to continue with and dispose of the appeal. Section 99 (5) of the 1991 Act also empowers the respondents to levy and collect or recover the arrears of tax or other amount pending as on the date of the commencement of the 1991 Act. In the instant case, the assessment order and the first appellate order were passed while the 1950 Act was in force. The petitioner filed the Second Appeal in January, 1986 while 1950 Act was in force. By Ext.P3 interim order passed on 24.1.1986, the Appellate Tribunal stayed the collection of the disputed tax on condition that the petitioner shall remit Rs.2,000/- each for the three assessment years within four weeks from the date of the order. The petitioner admittedly complied with the said condition. The Second Appeal filed by the petitioner was disposed of only on 29.1.2000 long after the 1991 Act came into force. In my considered opinion, the stand taken by the respondents is not tenable. Though sub-sections (3) and (4) of Section 99 of the 1991 Act empower the Appellate Tribunal to dispose of the appeals, the Appellate Tribunal was bound to decide the appeals under the provisions of the 1950 Act. This is clear from sub-section (4) of Section 99 of the 1991 Act. Therefore, the petitioner's liability has to OP 35453/00 -: 6 :- be decided with reference to the provisions of the 1950 Act. In my opinion, though sub-section (5) of Section 99 of the 1991 Act enables initiation and continuance of proceedings to recover the arrears of tax or other amount due under the 1950 Act, such recovery can only be of a liability under the 1950 Act. The respondents admit that the 1991 Act does not apply to the assessment years in question. The respondents also do not dispute that under the 1950 Act, there was no provision to levy interest on the tax assessed, where there is delay in remittance of the tax assessed. Sub-section (4) of Section 37 of the 1991 Act regarding levy of interest does not admittedly apply to the assessment years in question. The petitioner was therefore not liable to pay tax in accordance with the provisions of the 1991 Act for the assessment years concerned. Under sub-section (4) of Section 37 of the 1991 Act, interest is payable only if the assessee fails to pay the tax in accordance with Section 37 of the 1991 Act in pursuance to a demand issued under Section 45 of the 1991 Act. The respondents admits that no notice of demand under the 1991 Act was issued and served on the petitioner. As a matter of fact, they contend relying on Section 46(1)(b) of the 1991 Act that no demand is necessary where the demand is reduced in appeal. I am therefore persuaded to agree with the petitioner that the levy of interest on the balance tax payable for the assessment years concerned was without the sanction or authority of law. In the result, the Original Petition is allowed and Ext.P7 to the OP 35453/00 -: 7 :- extent it levies interest for the assessment years 1978-79, 1979-80 and 1980-81 is quashed. No costs. P.N.Ravindran, Judge. ess 26/7