Penalty under tax default provisions is discretionary, not automatic, where the statute requires hearing and judicial judgment.

Penalty under section 17A(3) of the Kerala Agricultural Income-tax Act is not automatic on mere failure to pay admitted tax. The use of "may" and the requirement of a reasonable opportunity of being heard show that the power is quasi-judicial and must be exercised with sound discretion, after considering whether the default was deliberate, contumacious, dishonest, or otherwise explained by bona fide reasons such as financial stringency. The provision was treated as analogous to section 140A(3) of the Income-tax Act, where penalty is likewise not imposed mechanically. On that basis, the penalty orders were unsustainable and were set aside, with fresh consideration directed in accordance with law.

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Issues: Whether levy of penalty under section 17A(3) of the Kerala Agricultural Income-tax Act, 1950 is automatic or discretionary, and whether the penalty orders were sustainable.

Analysis: Section 17A(3) authorises levy of penalty only where there is failure to pay the admitted tax, but the use of the word "may" and the proviso requiring a reasonable opportunity of being heard show that the power is not mechanical. Penalty proceedings of this nature are quasi-judicial and must be exercised on sound judicial discretion, considering all relevant circumstances, including whether the default was deliberate, contumacious, dishonest, or otherwise explained by bona fide reasons such as financial stringency. The provision was treated as analogous to section 140A(3) of the Income-tax Act, 1961, under which penalty is also not automatic.

Conclusion: Levy of penalty under section 17A(3) is discretionary and not automatic. The penalty orders were unsustainable and were set aside, with the matter remitted for fresh consideration in accordance with law.

Ratio Decidendi: Where a penal provision authorising recovery of tax default uses discretionary language and provides for hearing, the authority must exercise judicial discretion and cannot impose penalty as a matter of course.

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