Pending cancellation application bars penalty, while best judgment assessment stands when hearing opportunities were ignored.

Penalty for default in payment of agricultural income-tax was held unsustainable where the assessee's application for cancellation of assessment remained pending, because imposing penalty during that subsisting statutory remedy was not a proper exercise of discretion and the order was quashed. The best judgment assessment under section 19(4) of the Mysore Agricultural Income-tax Act, 1957 was upheld, as the assessee failed to file a return, did not object to the proposition notice, and stayed absent despite repeated opportunities; the record showed no inaccuracy in the material relied on and no denial of reasonable opportunity of hearing.

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Issues: (i) Whether the levy of penalty for default in payment of agricultural income-tax was sustainable while the assessee's application for cancellation of assessment remained pending; and (ii) whether the best judgment assessment under section 19(4) of the Mysore Agricultural Income-tax Act, 1957 was arbitrary or made without reasonable opportunity of being heard.

Issue (i): Whether the levy of penalty for default in payment of agricultural income-tax was sustainable while the assessee's application for cancellation of assessment remained pending.

Analysis: The assessee had moved an application for cancellation of the assessment under the Act, and that application continued to remain undecided when the penalty was imposed. Penalty under the Act is discretionary and is attracted where there is default in payment of tax. When the statute itself provides a remedy for cancellation of the assessment and such remedy is pending consideration, imposition of penalty during that period is not a proper exercise of discretion.

Conclusion: The penalty was not sustainable and was liable to be quashed.

Issue (ii): Whether the best judgment assessment under section 19(4) of the Mysore Agricultural Income-tax Act, 1957 was arbitrary or made without reasonable opportunity of being heard.

Analysis: The assessee did not file a return despite notice, did not object to the proposition notice, and remained absent on the dates fixed for hearing. The particulars in the proposition notice included acreage, yield and rates, and the record did not show any inaccuracy in those particulars. The assessment was made on the basis of material available to the authority after repeated non-appearance by the assessee, and no denial of a reasonable opportunity was established.

Conclusion: The assessment order was upheld.

Final Conclusion: The penalty order failed, but the assessment challenge did not succeed; the writ petition was allowed only to the extent of quashing the penalty and directing refund if already paid.

Ratio Decidendi: Where a statutory application for cancellation of assessment is pending, it is not a proper exercise of discretion to impose penalty for default in payment of tax during that pendency; a best judgment assessment based on material supplied after non-appearance is not invalid absent denial of reasonable opportunity.

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