Agricultural income-tax penalty cannot be levied for the period when recovery stayed and no default arose.

A stay of recovery of agricultural income-tax keeps the demand in abeyance for the period it operates, so the assessee cannot be treated as in default during that time. Section 41 deems non-payment within the prescribed time to be default, but section 42 permits penalty only where default actually exists. The statutory scheme did not allow the penalty to be treated as a late-payment surcharge, and penalty under section 42 could not be levied for the period covered by the stay.

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Issues: Whether, during the period when recovery of agricultural income-tax stood stayed by the appellate or writ court, the assessee could be treated as being in default so as to attract penalty under section 42 of the Karnataka Agricultural Income-tax Act, 1957.

Analysis: Section 41 fixes the time for payment and deems non-payment within that time to be default, while section 42 imposes penalty only where an assessee is in default. The stay of recovery placed the tax demand in abeyance for the period it operated, so recovery could not be effected and the assessee could not, for that period, be treated as in default. The provision for penalty is distinct from the compensatory concept of interest, and the statutory scheme did not justify treating the penalty under section 42 as though it were a late-payment surcharge.

Conclusion: The assessee was not in default during the period of stay, and penalty under section 42 could not be levied for that period.

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