M/S CONSOLIDATED COFFEE LTD. ETC. versus THE AGRICULTURAL INCOME TAX OFFICER, MADIKERI AND ORS.

Citation: [2000] SUPP. 4 S.C.R. 608 · Decided: 14-11-2000 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

B 
c 
M/S CONSOLIDATED COFFEE LTD. ETC. 
v. 
··THE AGRICULTURAL INCOME TAX OFFICER, 
MADIKERI AND ORS. 
NOVEMBER 14, 2000 
[S.P. BHARUCHA AND D.P. MOHAPATRA, JJ.] 
Agricultural Income Tax: 
Karnataka Agricultural Income Tax Act, 1957-Sections 41 and 42-
levy of penalty during period of stay of recovery of tax-Whether assessee 
in default during the period and thus liable to penalty-Held, no. 
Appellant-assessee filed appeals together with applications for stay of 
recovery of tax before Assistant Commissioner against assessments made by 
D Agricultural Income Tax Officer under the provisions of Karnataka 
Agricultural Income Tax Act, 1957. Commissioner stayed the recovery of the 
tax subject to the condition of payment of a stated amount and furnishing of a 
bank guarantee. The conditions of the stay orders were duly complied with by 
the assessee. The appeals were finally dismissed by the Commissioner. 
E Invoking the bank guarantee, the amount of tax was realised by the taxation 
authorities. The Agricultural Income Tax Officer issued a notice to the 
assessee under Section 42(1) of the Act proposing to levy penalty for not 
making the payment of tax during the period of stay. The assessee filed a 
Writ Petition in High Court for quashing the Notice. Single Judge dismissed 
the Writ Petition. On appeal, Division Bench also dismissed the appeal of the 
F assessee. 
In appeal to this Court, the assessee contended that no penalty could be 
levied for the period during which the stay orders were in operation because 
for that period the assessee was not in default as per .the provisions of the 
Act. Revenue contended that the stay order only prevented them from effecting 
G a recovery of the tax due from the assessee and that the assessee's obligation 
to pay the tax remained unaffected by the stay order and therefore the assessee 
is in default under the Act and thus liable to pay penalty. 
Allowing the appeals, the Court 
H 
608 
,, 
CONSOLIDATED COFFEE LTD. r. AGRICULTURAL INCOME TAX OFFICER 
609 
HELD: t.t Section 42 of the Karnataka Agricultural Income Tax Act, A 
1957 requires payment of penalty by an assessee who has not paid tax in time 
and the quantum of the penalty increases with the delay. The Section speaks 
of an assessee in default. Sub-section (2) of the section empowers collection 
of tax from an assessee in default as If it were an arrear of land revenue and 
as if it were a fine imposed by a Magistrate under the Code of Criminal B 
Procedure .. The proviso says where an assessee or other person has appealed 
or applied for revision of any order made under the Act and has complied 
with an order made by the appellate or the revising authority in regard to the 
payment of tax, no proceedings for recovery under sub-section (2) may be 
continued until the disposal of the appeal or revision. Thus there is 
recognition that during the period of stay is in operation, recovery of the tax C 
cannot be effected. It cannot be effected because the order of stay has placed 
the demand for the tax in abeyance.1613-C-D, El 
1.2. An order of stay may be made in different ways but the effect thereof 
is the same, namely, that for the period during which an order of stay operates, 
the order that is stayed does not exist in the eye of the law.1613-Fl 
D 
Once the stay is vacated, the order is resuscitated and may then be 
executed. For the period of the stay the assessee cannot be said to be in default 
of the orders stayed and therefore, no penalty can be imposed. 1613-Fl 
Kanoria Chemicals and Industries ltd. v. UP. State Electricity Board, E 
119971 5 sec 772, relied on. 
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 98-102 of 
2000. 
From the Judgment and Order dated 19.8.99 of the Karnataka High Court F 
in W.A. Nos. 4610-4614of1997. 
WITH 
Civil Appeal No. 3051 of2000. 
G. Sarangan, Sanjay Kunur, R.N. Keshwani and N.N. Keshwani for the 
Appellant. 
Sanjay R. Hegde and Satya Mitra for the Respondents. 
The Judgment of the Court was delivered by 
G 
H 
610 
SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R. 
A 
BHARUCHA, J. 
B 
CA. Nos. 98-102 of 2000 
The judgment and order under appeal was passed by a Division Bench 
of the High Court of Karnataka on writ appeals. 
Briefly stated, these are the facts: These appeals relate to the 
Assessment Years 1981-82 to 1985-86. After the Agricultural Income-Tax Officer 
had completed its assessments for these years under the provisions of the 
Kamataka Agricultural Income-Tax A

Excerpt shown. Read the full judgment & AI analysis in Lexace.