Cheque tender in time relates back on honour; trivial bank delay does not justify discretionary trade tax penalty.

Penalty under section 15A(1)(a) of the U.P. Trade Tax Act was treated as discretionary, not automatic, where tax was tendered by cheque or bank draft within time under Rule 48 and the instrument was later honoured. The court applied the relation-back principle, under which payment is regarded as made on the date of tender or presentation of the cheque. A short delay caused by bank processing and intervening holidays was held to be a trivial default that did not justify mechanical penal action, and the penalty orders were set aside.

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Issues: Whether penalty could be sustained under section 15A(1)(a) of the U.P. Trade Tax Act, 1948 for the alleged delayed deposit of tax when the assessee had tendered cheque or bank draft within time in the prescribed bank, and whether a short delay caused by encashment could justify penal action.

Analysis: Rule 48 of the U.P. Trade Tax Rules, 1948 recognises payment by cheque or bank draft. The Court applied the settled principle that, when a cheque is duly tendered and subsequently honoured, payment relates back to the date of delivery or presentation of the cheque. On the admitted facts, the assessee had deposited the instrument within time and any delay was only of two to three days caused by bank processing and intervening holidays. The Court held that penalty under section 15A(1)(a) is not mandatory and that the power to levy penalty is discretionary, to be exercised reasonably. In a matter of such trifling delay, mechanical imposition of penalty was unjustified.

Conclusion: The penalty could not be sustained and the issue was answered in favour of the assessee.

Final Conclusion: The revisions were allowed and the penalty orders were set aside on the ground that the alleged delay was not a penal default in law.

Ratio Decidendi: Where tax is tendered by cheque or bank draft in the manner permitted by the rules and the instrument is honoured, the date of payment relates back to the date of tender, and a trivial delay caused by bank encashment does not warrant discretionary penalty.

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