Penalty for delayed tax deposit requires absence of reasonable cause and prior demand steps before enforcement.

Penalty for delayed deposit of admitted tax under the U.P. Trade Tax Act is not automatic: the Revenue must establish absence of reasonable cause, and where the dealer pays the tax with interest and shows a plausible explanation for delay, penalty is unwarranted. Penalty proceedings were also held unsustainable where no provisional assessment, demand, or order had first been made under the applicable rules before invoking section 15A(1)(a). The operative effect is that statutory preconditions for penalty must be satisfied before penal action can validly proceed.

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Issues: (i) Whether penalty under section 15A(1)(a) of the U.P. Trade Tax Act, 1948 could be initiated for non-deposit of admitted tax without first resorting to provisional assessment and demand proceedings; (ii) Whether penalty was leviable when the admitted tax was ultimately paid with interest and the dealer showed reasonable cause for the delay.

Issue (i): Whether penalty under section 15A(1)(a) of the U.P. Trade Tax Act, 1948 could be initiated for non-deposit of admitted tax without first resorting to provisional assessment and demand proceedings.

Analysis: The liability to penalty under section 15A(1)(a) arises only where the dealer fails to deposit the tax due without reasonable cause. Where the return is found to be incorrect or the admitted tax is not deposited in time, the assessing authority was required to proceed under rule 41(6) of the U.P. Trade Tax Rules and raise a demand by way of provisional assessment before invoking penalty. In the present case, no provisional assessment proceeding was initiated, no provisional assessment order was passed, and no demand was raised.

Conclusion: Penalty proceedings under section 15A(1)(a) could not validly be initiated, and this issue is decided in favour of the assessee.

Issue (ii): Whether penalty was leviable when the admitted tax was ultimately paid with interest and the dealer showed reasonable cause for the delay.

Analysis: The dealer deposited the admitted tax along with interest and explained the delay by pleading financial arising from cane dues. The Revenue did not disprove this explanation or place material to show deliberate default or absence of reasonable cause. The governing principle applied was that penalty is not automatic merely because it is lawful to impose it, and the burden to establish absence of reasonable cause lies on the Revenue. On the facts found, the delay was supported by sufficient cause and there was no wilful non-deposit.

Conclusion: Penalty was not justified, and this issue is decided in favour of the assessee.

Final Conclusion: The penalty orders could not stand in law because the statutory preconditions for invoking penalty were not satisfied and reasonable cause for the delay was established.

Ratio Decidendi: Penalty for delayed deposit of admitted tax is not leviable unless the Revenue establishes absence of reasonable cause, and where the tax is paid with interest without a prior provisional assessment and demand, initiation of penalty proceedings is unsustainable.

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