CHINNAPPA REDDY J. - The respondent-assessee, a firm, failed to file its returns for the years 1965-66 to 1969-70, within the time stipulated by the Act. The firm submitted an explanation that the returns could not be filed in time because the person who was in-charge of the accounts of the firm was unable to attend to its affairs for some time owing to some personal reasons. The Income Tax Officer did not accept the explanation. He levied penalties. The assessee preferred revision petitions before the Commissioner of Income Tax. Before the Commissioner it was represented that the delay was due to family troubles. The Commissioner did not accept the explanation. He rejected the revision petitions. The assessee filed write petitions in the High Court, Obul Reddy J. (as he then was) quashed the orders of the Commissioner on the ground that penalties could only be imposed if it was found that the assessee acted deliberately in defiance of the law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of his obligations and not otherwise. He directed the Commissioner to reconsider the matters. The Commissioner has preferred these write appeals.
We find it extremely difficult to agree with the view expressed by Obul Reddy J. But that view approved by a Division Bench of this court consisting of Obul Reddy C.J. and Punnayya J. in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, . In the circumstances, we think that the question should be resolved by a Full Bench.
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, . In the circumstances, we think that the question should be resolved by a Full Bench.
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
. In the circumstances, we think that the question should be resolved by a Full Bench.
. In the circumstances, we think that the question should be resolved by a Full Bench.
We would, however, like to express our view in the matter. Section 271(1)(a) of the Income Tax Act provides that if the Income Tax Officer is satisfied that any person "has without reasonable cause" failed to furnish the returns of total income, etc., he may levy a penalty on such person. All that the Income Tax Officer to be satisfied about is that the failure of the assessee to submit return is "without reasonable cause" neither more nor less. Parliament has thus prescribed an objective test to determine the mental state of the person proposed to be proceeded against. There is no reason for importing the doctrine of mens rea into a situation where the requisite mental state is already defined. More about it later. Nor is there any reason for qualifying the failure to furnish a return with expressions like "contumacions", "dishonest", "in deliberate defiance of law", etc., To do so is to rewrite section 271(1)(a).
The doctrine of mens rea, in origin and in practice, is a rule of construction. In England, in 18th and 19th centuries, with the growth of statute law, a conflict arose between the common law and the statute law. The common law judges and lawyers evolved a rule of construction to avoid the conflict. They said :
"It is a sound rule to construe a statute in conformity with the common law rather than against it, except where and so far the statute is plainly intended to alter the course of the common law."
Now, it was one of the principles of English common law that mens rea was an essential ingredient of an Offence. An application of the rule of construction to this principle meant that there was no presumption that mens rea was excluded form statutory offences. This led to the development of presumption stated thus by Wright J :
"There is a presumption that mens rea, an evil intention or a knowledge of the wrongfulness of the act, is an essential ingredient in every offence, but that presumption is liable to be displaced either by the words of the statute creating the offence or by the subject-matter with which it deals, and both must be considered. " [Sherras v. De Rutzen [1895] 1 QB 918.
This presumption or rule of construction is a sound rule to apply where traditional crime is given statutory form or where a new crime is added to the general criminal law. But it has no application or it is of very weak application to offences created by modern, social, industrial, fiscal and economic legislation. Some judges have altogether denied the existence of any such presumption in the case of modern statutory offences while other judges have "manifested a marked tendency to readily displace or minimise the application of the presumption". Vide Stephen J. in Cundy v. Le Cocq [1884] 13 QBD 207 Kennedy L.J. in Hobbs v. Winchester Corporation [1910] 2 KB 417 and Donovan J. in Regina v. St Margarets Trust Ltd. [1958] 1 WLR 522. We may refer here to Bruhn (Jacob) v. The King [1909] Ac 317 where dealing with a case arising out of a contravention of revenue laws, Lord Atkinson said :
"In many cases connected with the revenue certain things are prohibited unless done by certain persons, or under certain conditions. Unless the person who does one of these things can establish that he is one of the privileged class, or that the prescribed conditions have been fulfilled, he will be adjudged guilty of the offence, though in fact he knew nothing of the prohibition."
In Lim Chin Aik v. The Queen [1963] AC 160 the Privy Council recognised that where "public welfare offences" (which most modern statutory offences are) were concerned there was a presumption of strict liability and the presumption of mens rea was displaced. In Indo-China Steam Navigation Co. Ltd. Vs. Jasjit Singh, Additional Collector of Customs and Others, the Supreme Court attached great importance to the social purpose of the legislation rather than to the so called presumption relating to mens rea. In State of Maharashtra Vs. Hans George, the Supreme Court expressed the view that the rule of construction laid down by the Court of Criminal Appeal of England in Regina v. St. Margarets Trust Ltd. [1958] 1 WLR 522 was nearer to the point having regard to the objects and purposes of the legislation with which they were dealing. In Nathulal Vs. State of Madhya Pradesh, Subba Rao J. held that mens rea was an essential ingredient of a criminal offence but, all the same, accepted the position that the rule relating to mens rea was a rule of constitution. He observed :
Indo-China Steam Navigation Co. Ltd. Vs. Jasjit Singh, Additional Collector of Customs and Others, the Supreme Court attached great importance to the social purpose of the legislation rather than to the so called presumption relating to mens rea. In State of Maharashtra Vs. Hans George, the Supreme Court expressed the view that the rule of construction laid down by the Court of Criminal Appeal of England in Regina v. St. Margarets Trust Ltd. [1958] 1 WLR 522 was nearer to the point having regard to the objects and purposes of the legislation with which they were dealing. In Nathulal Vs. State of Madhya Pradesh, Subba Rao J. held that mens rea was an essential ingredient of a criminal offence but, all the same, accepted the position that the rule relating to mens rea was a rule of constitution. He observed :
Indo-China Steam Navigation Co. Ltd. Vs. Jasjit Singh, Additional Collector of Customs and Others,
the Supreme Court attached great importance to the social purpose of the legislation rather than to the so called presumption relating to mens rea. In State of Maharashtra Vs. Hans George, the Supreme Court expressed the view that the rule of construction laid down by the Court of Criminal Appeal of England in Regina v. St. Margarets Trust Ltd. [1958] 1 WLR 522 was nearer to the point having regard to the objects and purposes of the legislation with which they were dealing. In Nathulal Vs. State of Madhya Pradesh, Subba Rao J. held that mens rea was an essential ingredient of a criminal offence but, all the same, accepted the position that the rule relating to mens rea was a rule of constitution. He observed :
the Supreme Court attached great importance to the social purpose of the legislation rather than to the so called presumption relating to mens rea. In State of Maharashtra Vs. Hans George, the Supreme Court expressed the view that the rule of construction laid down by the Court of Criminal Appeal of England in Regina v. St. Margarets Trust Ltd. [1958] 1 WLR 522 was nearer to the point having regard to the objects and purposes of the legislation with which they were dealing. In Nathulal Vs. State of Madhya Pradesh, Subba Rao J. held that mens rea was an essential ingredient of a criminal offence but, all the same, accepted the position that the rule relating to mens rea was a rule of constitution. He observed :
State of Maharashtra Vs. Hans George, the Supreme Court expressed the view that the rule of construction laid down by the Court of Criminal Appeal of England in Regina v. St. Margarets Trust Ltd. [1958] 1 WLR 522 was nearer to the point having regard to the objects and purposes of the legislation with which they were dealing. In Nathulal Vs. State of Madhya Pradesh, Subba Rao J. held that mens rea was an essential ingredient of a criminal offence but, all the same, accepted the position that the rule relating to mens rea was a rule of constitution. He observed :
State of Maharashtra Vs. Hans George,
the Supreme Court expressed the view that the rule of construction laid down by the Court of Criminal Appeal of England in Regina v. St. Margarets Trust Ltd. [1958] 1 WLR 522 was nearer to the point having regard to the objects and purposes of the legislation with which they were dealing. In Nathulal Vs. State of Madhya Pradesh, Subba Rao J. held that mens rea was an essential ingredient of a criminal offence but, all the same, accepted the position that the rule relating to mens rea was a rule of constitution. He observed :
the Supreme Court expressed the view that the rule of construction laid down by the Court of Criminal Appeal of England in Regina v. St. Margarets Trust Ltd. [1958] 1 WLR 522 was nearer to the point having regard to the objects and purposes of the legislation with which they were dealing. In Nathulal Vs. State of Madhya Pradesh, Subba Rao J. held that mens rea was an essential ingredient of a criminal offence but, all the same, accepted the position that the rule relating to mens rea was a rule of constitution. He observed :
Nathulal Vs. State of Madhya Pradesh, Subba Rao J. held that mens rea was an essential ingredient of a criminal offence but, all the same, accepted the position that the rule relating to mens rea was a rule of constitution. He observed :
Nathulal Vs. State of Madhya Pradesh,
Subba Rao J. held that mens rea was an essential ingredient of a criminal offence but, all the same, accepted the position that the rule relating to mens rea was a rule of constitution. He observed :
Subba Rao J. held that mens rea was an essential ingredient of a criminal offence but, all the same, accepted the position that the rule relating to mens rea was a rule of constitution. He observed :
"It is, however, a sound rule of construction which is adopted in England and also accepted in India, to construe a provision which creates an offence in conformity with the common law rather then against it except where the statute expressly or by necessary implication excludes mens rea."
If the true position is that the principles of mens rea is a rule of construction raising a presumption that criminal intent is not to be considered as excluded unless so excluded expressly or by necessary implication, it must follow that where the requisite mental state is defined by the statute itself (as, for instance, in the present case) there is no scope for the application of the doctrine of mens rea. In India, the requisite mental state is almost always defined by the statute itself, and generally, there is no scope for application of the doctrine of mens rea. The question of the application of the doctrine of mens rea arises only in cases where the requisite mental state is not defined by statute. In such cases, it is necessary first to consider the words in their true and natural sense; to consider the object of the statute; if necessary, to consider further the attendant circumstances such as the nature of the duty imposed and on whom, whether a particular construction will render the Act effective or ineffective to achieve its object, whether it will permit the observance of the statute. If the evidence afforded by these considerations is insufficient to conclude whether mens rea is included or excluded as an ingredient of the offence then only recourse should be had to the presumption. As we said earlier, in the present case, Parliament has provided an objective test to determine the mental element. There is, therefore, no occasion to invoke the doctrine of mens rea.
We would further like to point out that it is wrong to classify proceedings for levy of penalty under taxation statutes as offences of a criminal nature. In Corpus Juris Secundum. Vol. 85, p. 580, it is said.
"A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws."
In P. Ummali Umma Vs. Inspg. Asstt. Commr. of Income Tax and Others, Mathew J. said :
P. Ummali Umma Vs. Inspg. Asstt. Commr. of Income Tax and Others, Mathew J. said :
P. Ummali Umma Vs. Inspg. Asstt. Commr. of Income Tax and Others,
Mathew J. said :
Mathew J. said :
"I cannot say that the penalty imposed u/s 28 of the repealed Act or u/s 271 of the Act was or is imposed on the basis that it was or is an offence. For the offence punishment was or is prescribed such as imprisonment, fine or both. The imposition of penalty on the basis of an act or omission by an assessee is not because the act or omission constitutes and offence, but because that act or omission would constitute an attempt at evasion. Therefore, penalty is exacted not because an act or omission is an offence but because it is an attempt at evasion of tax on the part of the assessee."
In R.C. No. 64/1970 [ Commissioner of Income Tax Vs. Maduri Rajeswar, ] a Division Bench of this court of which one of us was a member observed :
Commissioner of Income Tax Vs. Maduri Rajeswar, ] a Division Bench of this court of which one of us was a member observed :
Commissioner of Income Tax Vs. Maduri Rajeswar,
] a Division Bench of this court of which one of us was a member observed :
] a Division Bench of this court of which one of us was a member observed :
"The object of the two provisions appeal to be different : the one entailing the prosecution and punishment is to vindicate public justice by punishing the offender, whereas the object of penalty proceedings is to render evasion unprofitable and to secure to the State the compensation for damages or attempted evasions."
In W. Ps. Nos. 7974 and 7839/1973 [ Kashiram Vs. Income Tax Officer, E-Ward, ] the question of the constitutional validity of section 140A(3) was raised before us. In that case, we had occasion to point out that the provision of levy of penalty for failure to pay the tax on self-assessment was no more than a mere provisions ensuring compliance with sub-section (1), making such non-compliance unprofitable. We also observed as follows :
Kashiram Vs. Income Tax Officer, E-Ward, ] the question of the constitutional validity of section 140A(3) was raised before us. In that case, we had occasion to point out that the provision of levy of penalty for failure to pay the tax on self-assessment was no more than a mere provisions ensuring compliance with sub-section (1), making such non-compliance unprofitable. We also observed as follows :
Kashiram Vs. Income Tax Officer, E-Ward,
] the question of the constitutional validity of section 140A(3) was raised before us. In that case, we had occasion to point out that the provision of levy of penalty for failure to pay the tax on self-assessment was no more than a mere provisions ensuring compliance with sub-section (1), making such non-compliance unprofitable. We also observed as follows :
] the question of the constitutional validity of section 140A(3) was raised before us. In that case, we had occasion to point out that the provision of levy of penalty for failure to pay the tax on self-assessment was no more than a mere provisions ensuring compliance with sub-section (1), making such non-compliance unprofitable. We also observed as follows :
"Now, there are provisions in the Income Tax Act providing for levy of penalties for non-compliance with the provisions relating to filing of return, non-furnishing of accounts or particulars, failure to pay advance tax, concealment or evasion of Income Tax, etc., Criminal prosecution is also provided for by Chapter 22 of the Act in certain cases which, inter alia, include failure to file a return of income, failure to produce accounts and documents, making of false statements and declaration, failure to deduct and pay tax when required to do so. These provisions relating to levy of penalties and criminal prosecutions are twin sanctions provided by law for ensuring compliance with law on the part of the assessees."
We may mention that in C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, the Supreme Court held that the character of penalty was that of an additional tax. In The Collector of Malabar, Kozhikode and Another Vs. Erimmal Ebrahim Hajee, the Supreme Court held that even the provision for arrest for non-payment of taxes was only a measure to compel payment of taxes and not a measure of punishment.
C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, the Supreme Court held that the character of penalty was that of an additional tax. In The Collector of Malabar, Kozhikode and Another Vs. Erimmal Ebrahim Hajee, the Supreme Court held that even the provision for arrest for non-payment of taxes was only a measure to compel payment of taxes and not a measure of punishment.
C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another,
the Supreme Court held that the character of penalty was that of an additional tax. In The Collector of Malabar, Kozhikode and Another Vs. Erimmal Ebrahim Hajee, the Supreme Court held that even the provision for arrest for non-payment of taxes was only a measure to compel payment of taxes and not a measure of punishment.
the Supreme Court held that the character of penalty was that of an additional tax. In The Collector of Malabar, Kozhikode and Another Vs. Erimmal Ebrahim Hajee, the Supreme Court held that even the provision for arrest for non-payment of taxes was only a measure to compel payment of taxes and not a measure of punishment.
The Collector of Malabar, Kozhikode and Another Vs. Erimmal Ebrahim Hajee, the Supreme Court held that even the provision for arrest for non-payment of taxes was only a measure to compel payment of taxes and not a measure of punishment.
The Collector of Malabar, Kozhikode and Another Vs. Erimmal Ebrahim Hajee,
the Supreme Court held that even the provision for arrest for non-payment of taxes was only a measure to compel payment of taxes and not a measure of punishment.
the Supreme Court held that even the provision for arrest for non-payment of taxes was only a measure to compel payment of taxes and not a measure of punishment.
Obul Reddi C.J. referred to the observations of the Supreme Court in Hindustan Steel Ltd. Vs. State of Orissa, where, dealing with the provision for levy of penalty under the Orissa Sales Tax Act, the Supreme Court observed :
Hindustan Steel Ltd. Vs. State of Orissa, where, dealing with the provision for levy of penalty under the Orissa Sales Tax Act, the Supreme Court observed :
Hindustan Steel Ltd. Vs. State of Orissa,
where, dealing with the provision for levy of penalty under the Orissa Sales Tax Act, the Supreme Court observed :
where, dealing with the provision for levy of penalty under the Orissa Sales Tax Act, the Supreme Court observed :
"Under the Act penalty may be imposed for failure to register as a dealer : section 9(1), read with section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law of was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the company in failing to register the company as a dealer acted in the honest and genuine belief that the company was not a dealer. Granting that they erred, no case for imposing penalty was made out."
We think that the Supreme Court was merely trying to explain the possible manner in which discretion may be exercised for imposing a penalty. They were emphasising that mere failure to register as a dealer ought not to attract a penalty. In each case the discretion to levy penalty had to be exercised, not mechanically, but, judicially after taking into account all the facts and circumstances of the case relevant for the exercise of discretion. It is no authority for the proposition that u/s 271(1)(a) of the Act the Income Tax Officer must find some extra mental element in addition to finding that the assessee had failed to furnish a return "without reasonable cause".
The views expressed by us are shared by a Full Bench of the Kerala High Court in Commissioner of Income Tax Vs. Gujarat Travancore Agency, and a Full Bench of the Orissa High Court in Commissioner of Income Tax Vs. Gangaram Chapolia, .
Commissioner of Income Tax Vs. Gujarat Travancore Agency, and a Full Bench of the Orissa High Court in Commissioner of Income Tax Vs. Gangaram Chapolia, .
Commissioner of Income Tax Vs. Gujarat Travancore Agency,
and a Full Bench of the Orissa High Court in Commissioner of Income Tax Vs. Gangaram Chapolia, .
and a Full Bench of the Orissa High Court in Commissioner of Income Tax Vs. Gangaram Chapolia, .
Commissioner of Income Tax Vs. Gangaram Chapolia, .
Commissioner of Income Tax Vs. Gangaram Chapolia,
.
.
In the light of this discussion we are unable to agree with the view expressed by Obul Reddy C.J. and Punnayya J. in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, . We, therefore, direct that the papers may be placed before the Honorable the Chief Justice for the constitution of Full Bench.
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, . We, therefore, direct that the papers may be placed before the Honorable the Chief Justice for the constitution of Full Bench.
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
. We, therefore, direct that the papers may be placed before the Honorable the Chief Justice for the constitution of Full Bench.
. We, therefore, direct that the papers may be placed before the Honorable the Chief Justice for the constitution of Full Bench.
JUDGMENT OF THE FULL BENCH
The judgment of the Full Bench was delivered by
SAMBASIVA RAO J. - Is there an occasion to introduce the doctrine of mens rea into section 271(1)(a) read with sub-clause (i) of that section of the Income Tax Act, 1961 Seeking an answer to this question, these four writ appeals have been directed by Chinnappa Reddy and Jeevan Reddy JJ. to be placed before a Full Bench.
It is not necessary for answering the question and also for the adjudication of the four appeals before us to go into the facts in minute detail. Broadly stated, the material facts are : The respondents are assessee which are firms. They failed to file their returns for the years 1965-66 to 1969-70 within the time prescribed under the Income Tax Act, 1961 (hereinafter referred to as the Act). An explanation was tendered for this delay saying that the person who was in charge of the accounts of the firms was unable to look after the affairs of the firms for some time owing to some personal reasons. The Income Tax Officer was not inclined to accept this explanation and levied penalties for late submission of the returns. The respondents preferred revision petitions before the Commissioner of Income Tax. Before him, the reason for the delay was stated as family troubles. He rejected the revision petitions as he did not accept the explanation. Thereupon, writ petitions were filed in this court by the respondents. Obul Reddy J, as he then was, quashed the order of the Commissioner, holding that the penalties could be imposed only when it was found that the assessee acted deliberately in defiance of the law, or was guilty of contumacious or dishonest conduct, or acted in conscious disregard of his obligations and not otherwise. The learned judge sent back the matters to the Commissioner for reconsidering them in the light of the observations he made and the observations of the Supreme Court in Hindustan Steel Ltd. Vs. State of Orissa, . The department preferred these writ appeals challenging the learned judges order.
Hindustan Steel Ltd. Vs. State of Orissa, . The department preferred these writ appeals challenging the learned judges order.
Hindustan Steel Ltd. Vs. State of Orissa,
. The department preferred these writ appeals challenging the learned judges order.
. The department preferred these writ appeals challenging the learned judges order.
The view expressed by Obul Reddy J., sitting single in these writ petitions, was later reiterated and approved by a Division Bench consisting of Obul Reddy C.J. and Punnayya J. in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, .
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, .
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
.
.
It was after rendering of the above Bench decision, these four writ appeals came before Chinnappa Reddy and Jeevan Reddy JJ. The learned judges observed that it was extremely difficult to agree with the view taken by Obul Reddy J., sitting single, which was reiterated in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, .
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, .
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
.
.
While stating this, the learned judges gave their reasons for their disagreement. According to them, penalty could be imposed for the delayed filing of the return u/s 271(1)(a) of the Act, when the Income Tax Officer is satisfied that the assessee has "without reasonable cause" failed to file it within the prescribed time. While imposing such a penalty, what all the Income Tax Officer is to be satisfied about is that the delay occurred "without reasonable cause". The provision of law requires nothing more or nothing less. Parliament itself has thus provided an objective test to determine the mental state of the person proposed to be proceeded against. There is no reason for importing the doctrine of mens rea into a situation where the requisite mental state is already defined. There is no justification for qualifying the failure to file a return with the expressions, "contumacious", "dishonest", "in deliberate defiance of law", etc., Then the learned judges proceeded to give the reasons in daetail for the conclusions earlier Division Bench in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, they decided that the conflict should be resolved by a Full Bench. While commending the appeals and the view propounded by Chinnappa Reddy and Jeevan Reddy JJ., in their order referring the appeals to a Full Bench, Sri Polavarapu Rama Rao pressed his brief in the following manner : The doctrine of mens rea is a rule of construction. It is a sound rule to construe the statute in conformity with the common law in so far as it is possible. However, where the statute plainly intends to alter the course of the common law, the statutory provisions should prevail. Mens rea is an essential ingredient of an offence. However, the general presumption that mens rea is an essential ingredient of an offence can be displaced either by the words of the statute creating the offence or by the subject matter with which it deals, in which case both must be considered. It may be that mens rea is a necessary ingredient in every traditional crime which is given statutory form. But it has very limited application, and in some cases, it has no application at all to offences created by modern, social, industrial, fiscal and economic legislation. The Indian Income Tax Act is one such modern fiscal legislation. As a piece of modern fiscal and economic legislation, the Act provides for deterrents in many shapes and forms for not acting in accordance with its provisions. It may rest content with collection interest for delayed submission of returns. In some other cases, it goes a step further and provides for levy of penalty, and in still some other cases, it treated the deleted filing of the returns an offence making the offender liable to punishment. May be, that one of the three modes of deterrents laid down by the Act for preventing delayed filing of the returns is imposing of a penalty u/s 271(1)(a). Penal proceedings are quasi-criminal in their nature. But section 271(1)(a) itself providing for imposition of penalty, clearly lays down the test and the basis for its imposition and that is the satisfaction of the Income Tax Officer that the delay has occurred "without reasonable cause". There is no warrant or justification for inducting into this provision the concept of mens rea, when the provisions itself is abundantly clear, laying down the objective tests for imposition of penalty. On the other hand, the third mode of preventive action is provided u/s 276C. Section 276C considers delayed filing of a return as an offence, which is punishable with rigorous imprisonment for a terms which may extend to one year or with a fine, when the assessee has willfully failed to furnish in due time the return of his income. In such cases alone the concept of mens rea could be introduced, and it will have to be established by the revenue that the assessees conduct in filing the return after due date was wilful; in other words, he deliberately acted in defiance of law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of his obligations. But that is not require in a case under which action is taken u/s 271(1)(a) and penalty is imposed. In order to do so, it would meet the requirement of law if the Income Tax Officer or the Appellate Assistant Commissioner is satisfied that the assessee has "without reasonable cause" failed to furnish the return of his income within the time allowed. So, the learned course for the revenue argued that the existence of mens rea, i.e., contumacious conduct is not a necessary ingredient for a proceeding u/s 271(1)(a). Only the satisfaction of the concerned officer that the delay has occurred "without reasonable cause" is sufficient.
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, they decided that the conflict should be resolved by a Full Bench. While commending the appeals and the view propounded by Chinnappa Reddy and Jeevan Reddy JJ., in their order referring the appeals to a Full Bench, Sri Polavarapu Rama Rao pressed his brief in the following manner : The doctrine of mens rea is a rule of construction. It is a sound rule to construe the statute in conformity with the common law in so far as it is possible. However, where the statute plainly intends to alter the course of the common law, the statutory provisions should prevail. Mens rea is an essential ingredient of an offence. However, the general presumption that mens rea is an essential ingredient of an offence can be displaced either by the words of the statute creating the offence or by the subject matter with which it deals, in which case both must be considered. It may be that mens rea is a necessary ingredient in every traditional crime which is given statutory form. But it has very limited application, and in some cases, it has no application at all to offences created by modern, social, industrial, fiscal and economic legislation. The Indian Income Tax Act is one such modern fiscal legislation. As a piece of modern fiscal and economic legislation, the Act provides for deterrents in many shapes and forms for not acting in accordance with its provisions. It may rest content with collection interest for delayed submission of returns. In some other cases, it goes a step further and provides for levy of penalty, and in still some other cases, it treated the deleted filing of the returns an offence making the offender liable to punishment. May be, that one of the three modes of deterrents laid down by the Act for preventing delayed filing of the returns is imposing of a penalty u/s 271(1)(a). Penal proceedings are quasi-criminal in their nature. But section 271(1)(a) itself providing for imposition of penalty, clearly lays down the test and the basis for its imposition and that is the satisfaction of the Income Tax Officer that the delay has occurred "without reasonable cause". There is no warrant or justification for inducting into this provision the concept of mens rea, when the provisions itself is abundantly clear, laying down the objective tests for imposition of penalty. On the other hand, the third mode of preventive action is provided u/s 276C. Section 276C considers delayed filing of a return as an offence, which is punishable with rigorous imprisonment for a terms which may extend to one year or with a fine, when the assessee has willfully failed to furnish in due time the return of his income. In such cases alone the concept of mens rea could be introduced, and it will have to be established by the revenue that the assessees conduct in filing the return after due date was wilful; in other words, he deliberately acted in defiance of law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of his obligations. But that is not require in a case under which action is taken u/s 271(1)(a) and penalty is imposed. In order to do so, it would meet the requirement of law if the Income Tax Officer or the Appellate Assistant Commissioner is satisfied that the assessee has "without reasonable cause" failed to furnish the return of his income within the time allowed. So, the learned course for the revenue argued that the existence of mens rea, i.e., contumacious conduct is not a necessary ingredient for a proceeding u/s 271(1)(a). Only the satisfaction of the concerned officer that the delay has occurred "without reasonable cause" is sufficient.
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
they decided that the conflict should be resolved by a Full Bench. While commending the appeals and the view propounded by Chinnappa Reddy and Jeevan Reddy JJ., in their order referring the appeals to a Full Bench, Sri Polavarapu Rama Rao pressed his brief in the following manner : The doctrine of mens rea is a rule of construction. It is a sound rule to construe the statute in conformity with the common law in so far as it is possible. However, where the statute plainly intends to alter the course of the common law, the statutory provisions should prevail. Mens rea is an essential ingredient of an offence. However, the general presumption that mens rea is an essential ingredient of an offence can be displaced either by the words of the statute creating the offence or by the subject matter with which it deals, in which case both must be considered. It may be that mens rea is a necessary ingredient in every traditional crime which is given statutory form. But it has very limited application, and in some cases, it has no application at all to offences created by modern, social, industrial, fiscal and economic legislation. The Indian Income Tax Act is one such modern fiscal legislation. As a piece of modern fiscal and economic legislation, the Act provides for deterrents in many shapes and forms for not acting in accordance with its provisions. It may rest content with collection interest for delayed submission of returns. In some other cases, it goes a step further and provides for levy of penalty, and in still some other cases, it treated the deleted filing of the returns an offence making the offender liable to punishment. May be, that one of the three modes of deterrents laid down by the Act for preventing delayed filing of the returns is imposing of a penalty u/s 271(1)(a). Penal proceedings are quasi-criminal in their nature. But section 271(1)(a) itself providing for imposition of penalty, clearly lays down the test and the basis for its imposition and that is the satisfaction of the Income Tax Officer that the delay has occurred "without reasonable cause". There is no warrant or justification for inducting into this provision the concept of mens rea, when the provisions itself is abundantly clear, laying down the objective tests for imposition of penalty. On the other hand, the third mode of preventive action is provided u/s 276C. Section 276C considers delayed filing of a return as an offence, which is punishable with rigorous imprisonment for a terms which may extend to one year or with a fine, when the assessee has willfully failed to furnish in due time the return of his income. In such cases alone the concept of mens rea could be introduced, and it will have to be established by the revenue that the assessees conduct in filing the return after due date was wilful; in other words, he deliberately acted in defiance of law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of his obligations. But that is not require in a case under which action is taken u/s 271(1)(a) and penalty is imposed. In order to do so, it would meet the requirement of law if the Income Tax Officer or the Appellate Assistant Commissioner is satisfied that the assessee has "without reasonable cause" failed to furnish the return of his income within the time allowed. So, the learned course for the revenue argued that the existence of mens rea, i.e., contumacious conduct is not a necessary ingredient for a proceeding u/s 271(1)(a). Only the satisfaction of the concerned officer that the delay has occurred "without reasonable cause" is sufficient.
they decided that the conflict should be resolved by a Full Bench. While commending the appeals and the view propounded by Chinnappa Reddy and Jeevan Reddy JJ., in their order referring the appeals to a Full Bench, Sri Polavarapu Rama Rao pressed his brief in the following manner : The doctrine of mens rea is a rule of construction. It is a sound rule to construe the statute in conformity with the common law in so far as it is possible. However, where the statute plainly intends to alter the course of the common law, the statutory provisions should prevail. Mens rea is an essential ingredient of an offence. However, the general presumption that mens rea is an essential ingredient of an offence can be displaced either by the words of the statute creating the offence or by the subject matter with which it deals, in which case both must be considered. It may be that mens rea is a necessary ingredient in every traditional crime which is given statutory form. But it has very limited application, and in some cases, it has no application at all to offences created by modern, social, industrial, fiscal and economic legislation. The Indian Income Tax Act is one such modern fiscal legislation. As a piece of modern fiscal and economic legislation, the Act provides for deterrents in many shapes and forms for not acting in accordance with its provisions. It may rest content with collection interest for delayed submission of returns. In some other cases, it goes a step further and provides for levy of penalty, and in still some other cases, it treated the deleted filing of the returns an offence making the offender liable to punishment. May be, that one of the three modes of deterrents laid down by the Act for preventing delayed filing of the returns is imposing of a penalty u/s 271(1)(a). Penal proceedings are quasi-criminal in their nature. But section 271(1)(a) itself providing for imposition of penalty, clearly lays down the test and the basis for its imposition and that is the satisfaction of the Income Tax Officer that the delay has occurred "without reasonable cause". There is no warrant or justification for inducting into this provision the concept of mens rea, when the provisions itself is abundantly clear, laying down the objective tests for imposition of penalty. On the other hand, the third mode of preventive action is provided u/s 276C. Section 276C considers delayed filing of a return as an offence, which is punishable with rigorous imprisonment for a terms which may extend to one year or with a fine, when the assessee has willfully failed to furnish in due time the return of his income. In such cases alone the concept of mens rea could be introduced, and it will have to be established by the revenue that the assessees conduct in filing the return after due date was wilful; in other words, he deliberately acted in defiance of law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of his obligations. But that is not require in a case under which action is taken u/s 271(1)(a) and penalty is imposed. In order to do so, it would meet the requirement of law if the Income Tax Officer or the Appellate Assistant Commissioner is satisfied that the assessee has "without reasonable cause" failed to furnish the return of his income within the time allowed. So, the learned course for the revenue argued that the existence of mens rea, i.e., contumacious conduct is not a necessary ingredient for a proceeding u/s 271(1)(a). Only the satisfaction of the concerned officer that the delay has occurred "without reasonable cause" is sufficient.
On the other hand, Sri Dasaratharama Reddy, for the assessees-respondents maintained that section 271 occurs in Chapter XXI which has the title "Penalties imposable". Penalty is a penal imposition. That means the proceeding is in the nature of a criminal proceeding. Mens rea is always a necessary ingredient of a criminal proceeding. That apart, the section itself is sufficiently indicative of the intention of Parliament that mens rea has been made a necessary part of a proceeding u/s 271. He relies on the Explanation to sub-clause (iii) of section 271(1), which requires a person whose return of his total income is less than eighty per cent. of the total income as assessed u/s 143 or 144 or 147 to prove that his failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. In the absence of such proof emanating from him, the Explanation deems him to have concealed the particulars of his income or to have furnished inaccurate particulars of his income. The Explanation thus introduces into section 271 the need to prove existence or absence of fraud or any gross or wilful neglect. If the returned total income in less than 80 per cent. of the total income as finally assessed, it would be for the assessee to prove absence of fraud or gross or wilful neglect. From this, it must logically follows that if the returned income is not less than 80 per cent. of the finally assessed income, the burden would lie on the revenue to show that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income on account of fraud or gross or wilful neglect. Such being the position in regard to the cases arising under clause (c) of section 271(1) there is no reason whatever to exclude the ideas of fraud or gross or wilful neglect from the other two clauses of the self-same section, namely, (a) and (b). In the submission of the learned counsel, this idea must be extended even to delayed filed of the returns. He further relied on sub-section (4A) of section 271, which he claimed as another indication of the existence of mens rea in the entirety of section 271. It was argued that under sub-section (4A), the Commissioner may reduce or waive the amount of minimum penalty imposable on a person for delayed filing of the return "without reasonable cause", if it is seen that the assessee has, prior to the issue of the notice to him under sub-section (1) of section 139, voluntarily and in good faith made full disclosure of his income. The use of the phrases "voluntarily" and "in good faith" clearly points to the proof of existence of the mental attitude on the part of the assessee which smacks of mens rea, before he is visited with penalty by the appropriate authority. Thus, either going by the general principles that apply to penalty proceedings or going by the language of the statute, so, learned counsel submitted, it is sufficiently clear that mens rea is an ingredient of a penalty proceeding u/s 271(1)(a). Therefore, without showing that the assessee acted deliberately in define of law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of his obligations while filing the return after time, the appropriate taxing authority cannot impose penalty u/s 271.
Let us first notice section 271, excluding the irrelevant portions thereof as a first step in the process of finding out whether mens rea has been made an ingredient for imposing penalty for filing returns after due dates. It occurs in Chapter XXI under the caption "Penalties imposable". The heading given to section 271 is "Failure to furnish returns, comply with notices, concealment of income, etc.," The heading itself classifies the subject with which it deals into (1) failure to furnish returns, (2), failure to company with notice, and (3) concealment of income. Since incidental matters are also included in the section, the word "etc., " is added at the end.
Then section 271 says :
"271. (1) If the Income Tax Officer of the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person -
(a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 139 or by such notice, as the case may be, or
(b) has without reasonable cause failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143, or
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income,
he may direct that such person shall pay by way of penalty, - (i) in the cases referred to in clause (a), in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the assessed tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the assessed tax.
Explanation. - In the this clause "assessed tax" mens tax as reduced by the sum, if any, deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C;
(ii) in the cases referred to in clues (b), in addition to any tax payable by him, a sum which shall not be less than ten per cent. but which shall not exceed fifty per cent. of the amount of the tax, if any, which would have been avoided if the income returned by such person had been accepted as the correct income;
(iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished.
Explanation. - Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) as assessed u/s 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income nut which has been disallowed as deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section......
(4A) Notwithstanding anything contained in clause (i) or clause (iii) of sub-section (1), the Commissioner may, in his discretion -
(i) reduce or waive the amount of minimum penalty imposable on a person under clause (i) of sub-section (1) for failure, without reasonable cause, to furnish the return of total income which such person was required to furnish under sub-section (1) of section 139, or
(ii) reduce or waive the amount of minimum penalty imposable on a person under clause (iii) of sub-section (1), if he is satisfied that such person -
(a) in the case referred to in clause (i) of this sub-section has, prior to the issue of notice to him under sub-section (2) of section 139, voluntarily and in good faith, made full disclosure of his income; and in the case referred to in clause (ii) of this sub-section has, prior to the detection by the Income Tax Officer of the concealment of particulars of income in respect of which the penalty is imposable or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith, made full and true disclosure of such particulars;
(b) has co-operated in any enquiry relating to the assessment of such income; and
(c) has either paid or made satisfactory arrangements for payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year :
Provided that -
(i) if in a case the minimum penalty imposable under clause (i) of sub-section (1) for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate of the minimum penalty imposable under the said clause for those years, exceeds a sum of fifty thousand rupees, or
(ii) if in a case falling under clause (c) of sub-section (1), the amount of income in respect of which penalty is imposable for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate amount of such income for those years, exceeds a sum of five hundred thousand rupees,
no order reduction or waiving the penalty shall be made by the Commissioner unless the previous approval of the Board has been obtained.
(4B) An order under sub-section (4B) shall be final and shall not be called in question before any court of law or any other authority."
Clause (iii) of sub-section (1) and Explanation to sub-section (1) of section 271 were amended by way of substitution and insertion by the Amendment Act, 1973.
In these writ appeals, we are called upon to deal only with the nature of penalty that is imposable on the assessee for filing his returns after due dates and we are not concerned with either failure to comply with notices or with concealment of income which are also matters dealt with by section 271. Therefore, we shall confine our consideration of the matter only to the failure to furnish returns within the time allowed. We do not propose to deal with other matter included in the section, as failure to comply with notice and concealment of income, excepting to the extent that they will be necessary to arrive at the actual intent and content of clause (a) of section 271(1) read with sub-section (i), on a comparative appraisal of the different provisions of the section.
Does section 271(1)(a) take in its amplitude the requirement that the appropriate taxation authority should be satisfied before imposing penalties on an assessee for his filled returns late not only that he had reasonable cause but also that he acted deliberately in defiance of law or was guilty of contumacious of dishonest conduct or acted in conscious disregard of his obligation In other words, is it necessary for the appropriate authority to arrive at the conclusion that the conduct of the assessee in filing the delayed return has been vitiated by mens rea. What all clause (a) expressly requires is that the officer or the Appellate Assistant Commissioner has to be satisfied that the assessee has, without reasonable cause, failed to furnish the return within the time allowed. Mens rea is evil intention or knowledge of the wrongfulness of the act that a person commits. That is, the person has a guilty mind in committing the act. It is only when such mental attitude is present in an act, the person who commits it is said to have acted deliberately in defiance of law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of his obligation.
Mens rea is an essential ingredient of an offence. However, it is a rule of construction. If there is a conflict between the common law and the statute law, it has always been held that it is a sound rule to construe a statute in conformity with the common law. But it cannot be postulated that a statute cannot alter the course of the common law. Parliament in exercise of its constitution powers makes statutes and in exercise of that power it can affirm, alter or take away the common law altogether. Therefore, if it is plain from the statute that it intends to alter the course of the common law, then the plain meaning should be accepted. The existence of mens rea as an essential ingredient of an offence has to be made out by the construction of the statute. This is what Wright J. said in Sherras v. De Rutzen [1995] 1 QB 918, 921 on the subject :
"There is a presumption that mens rea, an evil intention, or a knowledge of the wrongfulness of the act, is an essential ingredient in every offence; but that presumption is liable to be displaced either by the words of the statute creating the offence or by the subject-matter with which it deals, and both must be considered."
Absolute liability for an offence in order to presume mens rea should be established. In order to find out whether means rea, i.e., a guilty mind is an ingredient or nor, reference has to be made to the language of the enactment, the object and subject-matter of the statute and the nature and character of the act sought to be punished. It should also be borne in mind, while considering the question of mens rea, that even in cases where there ia an absolute prohibition, absolute liability is not to be presumed but has to be clearly established. Adopting the view of Wright J. in Sherras v. De Rutzen [1895] 1 QB 918 and the view expressed in Brend v. Wood 110 JP 317 : [1946] 62 TLR 462. Lord Due Parcq observed in Srinivas Mall v. Emperor ILR 26 Pat 460 : AIR 1947 PC 135 .
It is...... Of the utmost importance for the protection of the liberty of the subject that a court should always bear in mind that, unless the statute, either clearly or by necessary implication rules out mens rea as a constituent part of a crime a defendant should not be found guilty of an offence against the criminal law unless he has got a guilty mind."
It Ravula Hariprasada Rao Vs. The State, this rule regarding presumption of mens rea and construction of the statute was approved by the Supreme Court of State of Maharashtra Vs. Hans George, .
Ravula Hariprasada Rao Vs. The State, this rule regarding presumption of mens rea and construction of the statute was approved by the Supreme Court of State of Maharashtra Vs. Hans George, .
Ravula Hariprasada Rao Vs. The State,
this rule regarding presumption of mens rea and construction of the statute was approved by the Supreme Court of State of Maharashtra Vs. Hans George, .
this rule regarding presumption of mens rea and construction of the statute was approved by the Supreme Court of State of Maharashtra Vs. Hans George, .
State of Maharashtra Vs. Hans George, .
State of Maharashtra Vs. Hans George,
.
.
Subba Rao J. (as he then was) expressed the view in Nathulal Vs. State of Madhya Pradesh, that the rule of construction was adopted in England and accepted in India to construe a statutory provision which creates as offence, in conformity with the common law rather than against it. At the same time, the learned judge pointed out an exception, and that is where the statute expressly or by necessary implication excludes mens rea. In the light of these authoritative opinion expressed in the judicial pronouncements of the Supreme Court, it can be unhesitatingly concluded that mens rea of criminal intent is a necessary ingredient in a criminal offence. A presumption exists that criminal intent is not excluded unless the statute excludes it either expressly or by necessary implication.
Nathulal Vs. State of Madhya Pradesh, that the rule of construction was adopted in England and accepted in India to construe a statutory provision which creates as offence, in conformity with the common law rather than against it. At the same time, the learned judge pointed out an exception, and that is where the statute expressly or by necessary implication excludes mens rea. In the light of these authoritative opinion expressed in the judicial pronouncements of the Supreme Court, it can be unhesitatingly concluded that mens rea of criminal intent is a necessary ingredient in a criminal offence. A presumption exists that criminal intent is not excluded unless the statute excludes it either expressly or by necessary implication.
Nathulal Vs. State of Madhya Pradesh,
that the rule of construction was adopted in England and accepted in India to construe a statutory provision which creates as offence, in conformity with the common law rather than against it. At the same time, the learned judge pointed out an exception, and that is where the statute expressly or by necessary implication excludes mens rea. In the light of these authoritative opinion expressed in the judicial pronouncements of the Supreme Court, it can be unhesitatingly concluded that mens rea of criminal intent is a necessary ingredient in a criminal offence. A presumption exists that criminal intent is not excluded unless the statute excludes it either expressly or by necessary implication.
that the rule of construction was adopted in England and accepted in India to construe a statutory provision which creates as offence, in conformity with the common law rather than against it. At the same time, the learned judge pointed out an exception, and that is where the statute expressly or by necessary implication excludes mens rea. In the light of these authoritative opinion expressed in the judicial pronouncements of the Supreme Court, it can be unhesitatingly concluded that mens rea of criminal intent is a necessary ingredient in a criminal offence. A presumption exists that criminal intent is not excluded unless the statute excludes it either expressly or by necessary implication.
Then it has to be considered what precisely is the nature of penalty proceeding. It is possible to say that simply because the word "penalty" is used in a statute, it has classified that proceeding as a proceeding of a criminal nature When a statute provides for imposition of penalty, it will have to be found out from the scheme of the Act and the particular provision under which penalty is imposable, whether imposition of penalty is provided as a punishment for an offence. Simply because something more than the usual payment of tax that is payable by an individual is imposed on him, could it be said that a punishment is inflicted on him for an offence he has committed Once again, it will have to be kept in mind that as human values have been changing and changing at a fast pace, a spate of social legislation has been taken up by all countries, particularly developing countries like India. Taxation statutes have two purposes. They are intended not only to collect revenues for the State, but also for bringing about social justice and to enable the State to implement social welfare schemes undertaken by it. Consequently, several taxation statutes, if not all, have taken great care in making provisions for collection of taxes imposed, as speedily as possible. If there is a delay on the part of the tax-payer to pay his taxes, taxation statutes have provided for not only remedial and coercive proceedings, but also punishments treating certain tax delinquencies as offences. These several measures should not be confused with each other. The position has been explained thus in Corpus Juris Secundum, Volume 85, at page 580 :
"A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws."
In the same page, it proceeds to state :
"In some jurisdictions it is held that the penalty becomes, by operation of the statute imposing it, a part and parcel of the taxes due, and in other jurisdiction penalties are a type of tax. In still other jurisdictions, however, it is held that the penalty is not a part of the tax, and that will not be regarded as a legal incident to a tax. It is merely a method of enforcing payment of the tax."
It is held by the Supreme Court of the United States dealing with the nature of penalties in Guy T. Helvering v. Charles E. Mitchell 303 US 391 :
"Where civil procedure is prescribed for the enforcement of remedial sanction, the accepted rule and constitutional guarantees governing the trial of criminal prosecutions do not apply."
Once again, the Supreme Court of the United States, dealing with penalties imposed for evasion or avoidance of payment of Income Tax, observed in Murray R. Spies v. United States 317 US 492 495 :
"The penalties imposed by Congress to enforce the tax law embrace both civil and criminal sanctions. The former consist of additions to the tax upon determinations of fact made by an administrative agency and with no burden on the Government to prove its case beyond a reasonable doubt. The latter consist of penal offences enforced by the criminal process in the familiar manner. Invocation of one does not exclude resort to the other... The failure in a duty to make a timely return, unless it is shown that such failure is due to reasonable cause and not due to wilful neglect, is punishable by an addition to the tax of 5 of 25 per cent. therefore depending on the duration of the default... The offence may be more grievous than a case for civil penalty. Hence, the wilful failure to make a return, keep records, or supply information when required, is made a misdemeanor, with regard to existence of a tax liability."
The Supreme Court, while considering the nature of penalty levied u/s 28(1)(c) of the Income Tax Act, observed in C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, that penalty is only an additional tax. Mathew J., sitting single in Kerala High Court, in P. Ummali Umma Vs. Inspg. Asstt. Commr. of Income Tax and Others, after referring to the two decisions of the Supreme Court of the United States, observed at pages 675 and 676 :
C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, that penalty is only an additional tax. Mathew J., sitting single in Kerala High Court, in P. Ummali Umma Vs. Inspg. Asstt. Commr. of Income Tax and Others, after referring to the two decisions of the Supreme Court of the United States, observed at pages 675 and 676 :
C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another,
that penalty is only an additional tax. Mathew J., sitting single in Kerala High Court, in P. Ummali Umma Vs. Inspg. Asstt. Commr. of Income Tax and Others, after referring to the two decisions of the Supreme Court of the United States, observed at pages 675 and 676 :
that penalty is only an additional tax. Mathew J., sitting single in Kerala High Court, in P. Ummali Umma Vs. Inspg. Asstt. Commr. of Income Tax and Others, after referring to the two decisions of the Supreme Court of the United States, observed at pages 675 and 676 :
P. Ummali Umma Vs. Inspg. Asstt. Commr. of Income Tax and Others, after referring to the two decisions of the Supreme Court of the United States, observed at pages 675 and 676 :
P. Ummali Umma Vs. Inspg. Asstt. Commr. of Income Tax and Others,
after referring to the two decisions of the Supreme Court of the United States, observed at pages 675 and 676 :
after referring to the two decisions of the Supreme Court of the United States, observed at pages 675 and 676 :
"No. conviction for any offence is involved in the imposition of an penalty. Article 20(1) of the Constitution will have application only when a person is subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. This would indicate that commission of an offence and a conviction thereof are necessary in order that the provisions of the article may be attracted... A penalty, therefore, would come within the purview of article 20(1) only if the earlier part of the clause is attracted, i.e., there must have been a conviction for an offence. Unless there is a conviction, no question of the latter part of the article applying will arise... The imposition of penalty on the basis of an act or omission by an assessee is not because the act or omission constitutes an offence, but because that act or omission would constitute an attempt at evasion. Therefore, penalty is exacted not because an act or omission is an offence but because it is an attempt at evasion of tax on the part of the assessee. Article 20(1) of the Constitution can have no application to a case where a penalty is imposed not as punishment for an offence but for some other collateral purpose."
Chinnappa Reddy and A. D. Reddy JJ. expressed, in their judgment in R. C. No. 64 of 1970 ( Commissioner of Income Tax Vs. Maduri Rajeswar, dated of November 24, 1971, the view that the proceedings entailing penalty under the Income Tax Act are to be equated to prosecutions attracting punishment cannot be accepted, as no conviction for any offence is involved in the imposing of a penalty. They found that article 20(1) of the Constitution was not applicable to the proceedings imposing penalty under the Income Tax Act. While coming to this conclusion, they followed the decision in Spies v. United States 317 US 492.
Commissioner of Income Tax Vs. Maduri Rajeswar, dated of November 24, 1971, the view that the proceedings entailing penalty under the Income Tax Act are to be equated to prosecutions attracting punishment cannot be accepted, as no conviction for any offence is involved in the imposing of a penalty. They found that article 20(1) of the Constitution was not applicable to the proceedings imposing penalty under the Income Tax Act. While coming to this conclusion, they followed the decision in Spies v. United States 317 US 492.
Commissioner of Income Tax Vs. Maduri Rajeswar,
dated of November 24, 1971, the view that the proceedings entailing penalty under the Income Tax Act are to be equated to prosecutions attracting punishment cannot be accepted, as no conviction for any offence is involved in the imposing of a penalty. They found that article 20(1) of the Constitution was not applicable to the proceedings imposing penalty under the Income Tax Act. While coming to this conclusion, they followed the decision in Spies v. United States 317 US 492.
dated of November 24, 1971, the view that the proceedings entailing penalty under the Income Tax Act are to be equated to prosecutions attracting punishment cannot be accepted, as no conviction for any offence is involved in the imposing of a penalty. They found that article 20(1) of the Constitution was not applicable to the proceedings imposing penalty under the Income Tax Act. While coming to this conclusion, they followed the decision in Spies v. United States 317 US 492.
The above considerations would demonstrate that imposition of penalty for tax delinquency cannot be equated to imposition of punishment for an offence.
Sri. Dasaratharama Reddy, however, pointed out that penalty proceedings are quasi-criminal in nature and are not of civil character. He endeavored to point out that taxation laws do not maintain such distinction between offences and penalties and generally they make penalties leviable for offence. An offence necessarily must have, as one of its essential ingredients, guilty mind or mens rea. He referred to section 30 of the Andhra Pradesh General Sales Tax Act, 1957, which deal with "offences and penalties". That section provides for imposition of penalties, including imprisonment and fine, on conviction for tax delinquencies. Taxation laws, therefore, do not keep up any marked distinction between penalty and punishment for an offence, so the learned course submitted. Likewise, he invited our attention to section 10 of the Central Sales Tax Act, 1956, which provides for imposition of penalties like simple imprisonment and fine for tax offences. Our attention was also invited to section 9 of the Andhra Pradesh Cinemas (Regulation) Act, 1970, under which penalties are leviable for certain offences.
Relying on these provisions, it was argued that at least in so far as taxation enactments are concerned, there is not much of a distinction between penalty for taxation delinquency and punishment for taxation offence. It is in this view, Sri Dasaratharama Reddy submitted, the observations of Shah. Act. C.J., in Hindustan Steel Ltd. Vs. State of Orissa, should be understood. There the learned Acting Chief Justice was considering, as one of the questions, whether imposition of penalties for failure to get registered as a dealer was justified under the Orissa Sales Tax Act of 1947. The learned Chief Justice observed at page 29 :
Hindustan Steel Ltd. Vs. State of Orissa, should be understood. There the learned Acting Chief Justice was considering, as one of the questions, whether imposition of penalties for failure to get registered as a dealer was justified under the Orissa Sales Tax Act of 1947. The learned Chief Justice observed at page 29 :
Hindustan Steel Ltd. Vs. State of Orissa,
should be understood. There the learned Acting Chief Justice was considering, as one of the questions, whether imposition of penalties for failure to get registered as a dealer was justified under the Orissa Sales Tax Act of 1947. The learned Chief Justice observed at page 29 :
should be understood. There the learned Acting Chief Justice was considering, as one of the questions, whether imposition of penalties for failure to get registered as a dealer was justified under the Orissa Sales Tax Act of 1947. The learned Chief Justice observed at page 29 :
"Under the Act penalty may be imposed for failure to register as a dealer : section 9(1), read with section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligations."
Resting on these observations of the Supreme Court, the argument was advanced that imposition of penalty is the result of a quasi-criminal proceeding and such being the nature, it shall not be imposed unless the assessee either acted deliberately in defiance of law, or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of his obligation. Indeed, this is the observation which is the fountain sources from which the concept of mens rea or guilty mind being an ingredient of a penalty proceeding under the Income Tax Act sprang up. These observations have set the ball rolling and injected into penalty proceedings the idea of mens rea or guilty conduct.
In the light of what we have said above, we will now proceed to consider whether this argument of Sri Dasaratharami Reddy is tenable. As we have pointed out, we are limited the consideration only to cases which fall u/s 271(1)(a) of the Income Tax Act, i.e., cases of levy of penalty for the filing of Income Tax returns. We will consider the question on the assumption that imposition of penalty is in the nature of a quasi-criminal proceeding. Even so, is it necessary or does it inevitable follow that quality mind should be an ingredient that should be established before imposing penalty for filing Income Tax return late We have already recorded our conclusion that mens rea, though an essential ingredient of an offence, is a rule of construction. The presumption that evil intention of mens rea is an essential ingredient in every offence is liable to be displaced by the words of the statute creating the offence. A statutory provisions which creates an offence will have to be considered in conformity with the common law presumption that guilty mind is an ingredient of an offence. However, where the statute which provides for penalty or quasi-judicial proceedings, as it may be, expressly or by necessary implication, lays down its own objective tests for levying penalty and excludes mens rea, then the statute should prevail. We may go even a step further. Even supposing that mens rea is treated by the state as a necessary ingredient of a penalty proceeding, then it will have to be examined, whether the relevant statutory provisions or provisions provide for any objective criteria for adjudication upon the liability of an individual for the imposition of penalty. In other words, it is the statutory provision which deals with imposition of penalty, in the light of the general scheme of the Act, that should be looked into to find out whether guilty mind is necessary for imposition of penalty. If that is not done, and if penalty proceedings is conducted on general common law principles alone, it would result in ignoring and even contravening the provisions of the statute itself, under which penalty is imposed.
We will now examine how the Income Tax Act, 1961, had dealt with late filing of the returns. Practically all taxing statutes lay down their own procedure and machinery for enforcing implementation of their provisions. It must be remembered that all these taxation laws are intended to fetch revenue for the State to enable it to run its administration and to implement welfare programmes. There shall be neither evasion of tax, nor delay in the procedure relating to assessment and collection of taxes. In order to see that payment of tax is not evaded, that there is no delay is assessment or in the collection of tax imposed, every taxation statute lays down a clear cut procedure. While doing so, the statutes may treat minor delinquencies lightly, some other delinquencies which are not simple in nature slightly harshly and delinquencies of grave nature very severely. The Indian Income Tax Act adopts the same policy. If the Act is analysed, it could be seen that it has dealt with returns of income and the delays relating thereto in three different ways. Section 139 which occurs in Chapter XIV relating to "Procedure for assessment" deals with "Return of income". Sub-section (1) prescribes the time before which returns should be filed. Further sub-section also lay down the manner in which extension of time for filing returns may be sought and granted. Sub-section (8) makes the assessee liable to pay simple interest at twelve per cent. per annum on the amount of the tax payable on the total income as determined on regular assessment, if there was delay in filing the return. This is one way of enforcing compliance with the requirements of the law for filing the returns in time. Even here, the proviso to sub-section (8) confers power on the Income Tax Officer to reduce or waive the interest payable by the assessee, in such cases and under such circumstances as may be prescribed. Then Chapter XXI [deals with "Penalties imposable". Unlike the Sales Tax Act of Andhra Pradesh, the Indian Income Tax Act deals with "penalties imposable" separately and in a different chapter. Section 271(1)(a) which we have already extracted, makes penalty imposable if the Income Tax Officer of the Appellate Assistant Commissioner is satisfied, in the course of any proceeding under the Act, that any person has without reasonable cause failed to furnish the return of total income which he was required to furnish u/s 139(1) or in response to a notice given u/s 139(2). When the Income Tax Officer or the Appellate Assistant Commissioner is satisfied that a person has, without reasonable cause, failed to furnish returns in time, he may direct that such person shall pay by way of penalty, as provided in sub-clause (i), in addition to the amount of the tax, a sum equal to two per cent, of the assessed tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the assessed tax.
It is important to note the difference between the imposition of interest u/s 139(1) and the imposition of penalty u/s 271(1)(a). If there is delay in filing the return, interest is chargeable u/s 139(1) and in appropriate cases the Income Tax Officer is given power to remit the whole or part of it. Section 271(1)(a) goes a step further and deals with somewhat graver situations. A penalty as provided in clause (i) may be imposed only when the Income Tax Officer or the Appellate Assistant Commissioner is satisfied that the delay has occurred without reasonable cause. Every cause cannot explain away the delay in filing the return. If a cause, which is reasonable, in other words, a cause while appeals to or satisfied any reasonable mind, does not exist, then alone penalty can be imposed. The quantum of penalty is heavier than the interest that is collectable u/s 139(8). But, as sub-clause (i) to sub-section (1) of section 271 now stands, it may be anything between two per cent. of the assessed tax for every month during which the default continued, and fifty per cent. of the aggregate thereof. It is very much noteworthy that for failure to comply with a notice u/s 142(1) or 143(2) without reasonable cause, section 271(1)(b) read with sub-clause(ii) provides for the higher rate of penalty starting from ten per cent. of the tax. When it comes to concealment of particulars of income or furnishing of inaccurate particulars of income, the penalty u/s 271(1)(c) is still more serve. We are pointed out this to highlight the distinction kept by the statute between various degrees of seriousness of failure and concealments. It is also significant to note that clause (i) says that what is imposed thereunder is"in addition" to the amount of the tax."
Section 274, occurring in the same Chapter XXI, says :
"No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard."
Therefore, before penalty is imposed a reasonable opportunity should be given to the assessee to make a representation. If he then succeeds in satisfying the appropriate assessing authority that he was prevented by reasonable cause from filing the return in time, no penalty may be imposed on him. It is manifest that the statute has intended that a safeguard by a reasonable opportunity should be afforded to the assessee before any penalty is imposed. That is the second mode postulated by the Act for enforcing compliance with its provisions.
The third mode is contained in Chapter XXII which bears the caption "Offences and prosecutions". It makes several contraventions, offences, like failure to make payments or deliver returns or statements, or so allow inspection (as made in section 276), failure to comply with the provisions of section 178(1) and (3) (as made in section 276A) and also failure to deduct and pay tax (as shown in section 276B), failure to furnish returns of income (made punishable u/s 276C). Section 276C reads as follows :
"If a person wilful fails to furnish in due time the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148, he shall be punishable with rigorous imprisonment for a terms which may extend to one year or with fine equal to a sum calculated at a rate which shall not be less than four rupees or more than ten rupees for every day during which the default continues, or with both."
We are not here concerned with the proviso to the section. It can be immediately noticed that this section treats only wilful failures to furnish returns in due time as punishable offence. This is clearly and patently distinct form failure to furnish returns in time" without reasonable cause". Certainly, the expression "without reasonable cause" and the expression "wilful failure" cannot be equated. It is important to note that the word "wilful" was introduced with effect from April 1, 1971, by Act 42 of 1970. Until then, the words which appeared were "without reasonable cause". For the change, the reason, as could be seen from taxation, Volume 30, at page 101, is that the Joint Select Commissioner felt that "in accordance with the accepted canons of criminal jurisprudence failure to furnish returns or produce documents, etc., should be made punishable only when such failure is wilful". It is thus manifest that the word "wilful" has been deliberately introduced to incorporate into the provision and to clearly specify the idea of mens rea. That is absent in section 271(1)(a). Thus, it is seen that the Act postulates three modes of enforcement of the statutory requirement of filing the Income Tax return in time, (1) by levying interest, (2) by imposing penalty if the delay has been occasioned without reasonable cause, and (3) by punishing the assessee treating failure to file the returns as on offence if it was proved that it was caused by wilful failure. These are the three varying degrees of non-filing of returns within time and the statute clearly keeps up the distinction between the three modes. While it rests content by imposing only penalty on reaching satisfaction as to the absence of reasonable cause, it insists upon the presence of wilful failure to furnish returns in due time to make it an offence punishable with imprisonment or fine. There is another equally significant distinction between the word "penalty" as contemplated by section 271(1)(a) and the punishment posited by section 276C. The penalty leviable u/s 271(1)(a) is a payment" in addition to the tax" and is calculated in relation to the amount of the assessed tax. It means that the penalty imposed under that provision is in that way related to tax. What is imposed u/s 276C is altogether different in nature. It is a punishment wholly unrelated to the tax amount. The offender can be visited with rigorous imprisonment for a term which may extend to one year or with fine equal to a sum calculated at a rate which shall not be less than four rupees or more than ten rupees for every day during which the default continues, or with both. The fine that is imposable has to be reckoned on the basis of the duration of the default and not on the basis of the tax. All this clearly demonstrates the different which the statute maintains between the penalty imposable u/s 271(1)(a) and the punishment that is leviable u/s 276C. While for imposing a penalty, absence of reasonable cause has to be shown, for imposing punishment u/s 276C, wilful failure has to be demonstrated."Wilful failure" certainly brings in the element of guilty mind, while absence of "reasonable cause" does not. Thus, the statute has kept up the dichotomy between a penalty proceeding and a prosecution proceeding for failure to furnish returns in due time. This is clear enunciation by the statute itself of the three different modes of enforcing its provisions. It contains clear indication of the growing gravity of the three situations dealt with, not only through the severity of the additional amounts or the punishments that are imposable, but also through the language employed in section 139(1), section 271(1)(a) and section 276C. Thus, it is clear that the element of guilty mind is made an ingredient for an action u/s 276C and not for penalty proceeding u/s 271(1)(a).
Sri Dasaratharama Reddy, pointed out the difference in the language between rule 117A(v) of the Income Tax Rules, 1962, and section 146 of the Income Tax Act on one side and section 271(1)(a) on the other. In the first set of provisions, the phrase "sufficient cause" is used, while in section 271(1)(a), the expression "reasonable cause" is used. Section 146 relates to "reopening of assessment at the instance of the assessee", and enables the assessee to seek cancellation of the assessment on the ground that he was prevented by "sufficient cause" from making the return required under sub-section (2) of section 139. His attempt was that the expression "sufficient cause" used in section 146 is analogous to the same language used in section 5 of the Limitation Act or Order 9, rule 9, or Order 9, rule 13, of the CPC and that it is different from the expression "reasonable cause" used in section 271(1)(a). The cause being sufficient or otherwise does not indicate the guilty element but the expression "without reasonable cause" would suggest its presence. He amplified the argument by saying that by the words "without reasonable cause" it is meant that cause should not be unreasonable. In other words, if a cause is unreasonable, then it indicates a certain element of guilty mental attitude on the part of the assessee. It was, therefore, argued that the words "without reasonable cause" would bring in the element of guilty mind. For this, reliance was placed on the decision of the Madras High Court in V. RAMANATHAN Vs. COMMISSIONER OF Income Tax, MADRAS., . There, the Division Bench said :
V. RAMANATHAN Vs. COMMISSIONER OF Income Tax, MADRAS., . There, the Division Bench said :
V. RAMANATHAN Vs. COMMISSIONER OF Income Tax, MADRAS.,
. There, the Division Bench said :
. There, the Division Bench said :
"There is some difference in the language employed in section 27 and section 28(of 1922 Act). While in the case u/s 27 the requirement is only a sufficient cause to enable the cancellation of the assessment, to justify the imposition of the penalty u/s 28 the absence of reasonable cause has to be established. Again, in an application u/s 27 of the Act, the onus is upon the assessee to establish sufficient cause, while u/s 28, before a penalty could be imposed, it is for the department to show that the assessee who failed to submit the return did so without reasonable cause."
We are unable to agree with this. We do not think that there is any material difference between the expressions "sufficient cause" and "reasonable cause". What is sufficient cause is always a reasonable cause. As stated in Strouds Judicial Dictionary, "the word reasonable has in law the prima facie meaning of reasonable in regard to those circumstances of which the actor, called on to act reasonably, knows or ought to know". If a cause is reasonable having regard to the circumstances in which it has occurred and with reference to the person who has conducted himself in the course of the act which is under examination and if that act or cause is found to be reasonable in the light of the circumstances by a reasonable mind, it is accepted as sufficient cause. We cannot, therefore, agree that there is any substantial different between "reasonable cause" and "sufficient cause". We derive support for this view from a decision of the Division Bench of this court in REPAKA SEETHARAMASWAMY AND ANOTHER Vs. COMMISSIONER OF Income Tax, HYDERABAD., . It cannot, therefore, be accepted that the occurrence of the words "without reasonable cause" in section 271(1)(a) would indicate the requirement of a guilty mind.
REPAKA SEETHARAMASWAMY AND ANOTHER Vs. COMMISSIONER OF Income Tax, HYDERABAD., . It cannot, therefore, be accepted that the occurrence of the words "without reasonable cause" in section 271(1)(a) would indicate the requirement of a guilty mind.
REPAKA SEETHARAMASWAMY AND ANOTHER Vs. COMMISSIONER OF Income Tax, HYDERABAD.,
. It cannot, therefore, be accepted that the occurrence of the words "without reasonable cause" in section 271(1)(a) would indicate the requirement of a guilty mind.
. It cannot, therefore, be accepted that the occurrence of the words "without reasonable cause" in section 271(1)(a) would indicate the requirement of a guilty mind.
At the same time, we must take notice of the use of the expression "without reasonable cause or excuse" in some of the offences for which prosecutions can be levied under the Act. As we have said, Chapter XXII relates to "offences and prosecutions". Section 276, 276A and 276B make offences of failure to make payments or deliver returns or statements or allow inspection, failure to deduct and pay tax "without reasonable cause or excuse", and they are punishable with either fine or imprisonment. These sections, using the above said expression, occur in the Chapter relating to "Offences and prosecutions" and expressly declare that, if these acts are done without reasonable cause or excuse, they would be punishable offences. It is noteworthy that immediately following these sections and occurring in the same Chapter section 276C, which deals that such failure becomes as offence when it is wilful. There cannot be a more eloquent testimony to the intention of Parliament to maintain the distinction between the offences covered by section 276, 276A and 276B on the one hand, and the one u/s 276C on the other. While, in the former, absence of reasonable cause and excuse has to be established, in the latter to make an offence of failure to file returns of income in due time wilful failure has to be proved.
Even so, Sri Dasaratharama Reddy urged that the very section 271, when understood in a broad perspective of all its provisions, indicates that guilty mind has to be established even in regard to late filing of returns of income. In the first place, he relies on the Explanation to clause (iii) to contend that the element of fraud, gross negligence or wilful neglect on the part of the assessee is clearly made an ingredient of an action to be taken u/s 271 for imposition of penalty. The said Explanation is in these terms :
"Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) as assessed u/s 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, he deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section."
In the submission of the learned counsel, though fraud or gross or wilful neglect on the part of the assessee is made an element of the penalty proceedings under clause (c) of section 271(1), it should be understood that this ingredient of fraud, etc., runs through all the other clauses. When three eventualities, for which penalties could be levied under the section, are mentioned one after another and proof of fraud or gross or wilful neglect is made an essential ingredient of one of them, there is no reason, so maintained the learned counsel, to suppose that the said ingredient is confined or limited only to clause (c). If the total income returned by the person is less than eight per cent. of the total income as assessed finally, the Explanation places the burden of proof on him, in order to escape from penalty, of establishing that his failure to return to correct income does not arise out of gross or wilful neglect on his part. If he does not make any attempt to do so, a presumption is raised by the explanation that he has concealed the particulars of his income or furnished inaccurate particulars of such income. By parity of reasoning, the learned counsel argued, when the total income returned is not less than eighty per cent. of the total income as finally assessed, then the burden would be on the department to prove that the failure to return the correct income was due to fraud or gross or wilful neglect on the part of the assessee. Likewise, clauses (a) and (b), which deal with failure to furnish returns in due time and failure to comply with reasonable notices, should also be construed as placing the burden on the department to prove fraud or wilful neglect on the part of the assessee in committing the two acts mentioned in the two clauses. Our attention was invited to a decision of the Patna High Court in Commissioner of Income Tax Vs. Patna Timber Works, . That is a case relating to penalty levied for concealment. It was found there that there was a difference of more than 20 per cent. in the income returned and the total income as assessed, and, therefore, clause (c) came into operation by the rule of presumption. It was observed that by the rule of evidence engrafted in the Explanation, it is for the assessee to prove that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. This gives the key to the interpretation of the main provisions contained in clause (c) after its amendment. If a case is not covered by the Explanation, then charge of furnishing inaccurate particulars of income can be founded by recording a finding that the assessee had furnished such particulars due to his fraud. That means the department has to show that such furnishing was a result of gross or wilful neglect on his part. Unless such ingredient is proved and found, penalty cannot be levied on the mere finding that there was a difference in the particulars given and the figure of the income assessed. This is the substance of the Patna decision.
Commissioner of Income Tax Vs. Patna Timber Works, . That is a case relating to penalty levied for concealment. It was found there that there was a difference of more than 20 per cent. in the income returned and the total income as assessed, and, therefore, clause (c) came into operation by the rule of presumption. It was observed that by the rule of evidence engrafted in the Explanation, it is for the assessee to prove that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. This gives the key to the interpretation of the main provisions contained in clause (c) after its amendment. If a case is not covered by the Explanation, then charge of furnishing inaccurate particulars of income can be founded by recording a finding that the assessee had furnished such particulars due to his fraud. That means the department has to show that such furnishing was a result of gross or wilful neglect on his part. Unless such ingredient is proved and found, penalty cannot be levied on the mere finding that there was a difference in the particulars given and the figure of the income assessed. This is the substance of the Patna decision.
Commissioner of Income Tax Vs. Patna Timber Works,
. That is a case relating to penalty levied for concealment. It was found there that there was a difference of more than 20 per cent. in the income returned and the total income as assessed, and, therefore, clause (c) came into operation by the rule of presumption. It was observed that by the rule of evidence engrafted in the Explanation, it is for the assessee to prove that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. This gives the key to the interpretation of the main provisions contained in clause (c) after its amendment. If a case is not covered by the Explanation, then charge of furnishing inaccurate particulars of income can be founded by recording a finding that the assessee had furnished such particulars due to his fraud. That means the department has to show that such furnishing was a result of gross or wilful neglect on his part. Unless such ingredient is proved and found, penalty cannot be levied on the mere finding that there was a difference in the particulars given and the figure of the income assessed. This is the substance of the Patna decision.
. That is a case relating to penalty levied for concealment. It was found there that there was a difference of more than 20 per cent. in the income returned and the total income as assessed, and, therefore, clause (c) came into operation by the rule of presumption. It was observed that by the rule of evidence engrafted in the Explanation, it is for the assessee to prove that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. This gives the key to the interpretation of the main provisions contained in clause (c) after its amendment. If a case is not covered by the Explanation, then charge of furnishing inaccurate particulars of income can be founded by recording a finding that the assessee had furnished such particulars due to his fraud. That means the department has to show that such furnishing was a result of gross or wilful neglect on his part. Unless such ingredient is proved and found, penalty cannot be levied on the mere finding that there was a difference in the particulars given and the figure of the income assessed. This is the substance of the Patna decision.
Our attention was also invited to the decision of the High Court of Punjab and Haryana in Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran, . The learned judges explained the purposes of the Explanation as being to differentiate the two types of assessee-those who have reported correct income up to eighty per cent. of the assessed income and those who have not. In the case of the first type the onus lies on the department to prove fraud or gross or wilful neglect in not returning the correct income, and in the case of the second type the onus is on the assessee to establish that the failure to return the correct income was not on account of any fraud or gross or wilful neglect on his part. The learned judges referred to Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, and then observed that the principles enunciated by the Supreme Court in that case that section 271 is penal in character is still applicable. In the same strain and to the same effect practically, are the decisions of the Kerala High Court in Commissioner of Income Tax Vs. Sankarsons and Company, that of the Allahabad High Court in Saeed Ahmad Vs. Inspecting Assistant Commissioner of Income Tax, Range II, that of the Gujarat High Court in Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt, the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran, . The learned judges explained the purposes of the Explanation as being to differentiate the two types of assessee-those who have reported correct income up to eighty per cent. of the assessed income and those who have not. In the case of the first type the onus lies on the department to prove fraud or gross or wilful neglect in not returning the correct income, and in the case of the second type the onus is on the assessee to establish that the failure to return the correct income was not on account of any fraud or gross or wilful neglect on his part. The learned judges referred to Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, and then observed that the principles enunciated by the Supreme Court in that case that section 271 is penal in character is still applicable. In the same strain and to the same effect practically, are the decisions of the Kerala High Court in Commissioner of Income Tax Vs. Sankarsons and Company, that of the Allahabad High Court in Saeed Ahmad Vs. Inspecting Assistant Commissioner of Income Tax, Range II, that of the Gujarat High Court in Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt, the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran,
. The learned judges explained the purposes of the Explanation as being to differentiate the two types of assessee-those who have reported correct income up to eighty per cent. of the assessed income and those who have not. In the case of the first type the onus lies on the department to prove fraud or gross or wilful neglect in not returning the correct income, and in the case of the second type the onus is on the assessee to establish that the failure to return the correct income was not on account of any fraud or gross or wilful neglect on his part. The learned judges referred to Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, and then observed that the principles enunciated by the Supreme Court in that case that section 271 is penal in character is still applicable. In the same strain and to the same effect practically, are the decisions of the Kerala High Court in Commissioner of Income Tax Vs. Sankarsons and Company, that of the Allahabad High Court in Saeed Ahmad Vs. Inspecting Assistant Commissioner of Income Tax, Range II, that of the Gujarat High Court in Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt, the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
. The learned judges explained the purposes of the Explanation as being to differentiate the two types of assessee-those who have reported correct income up to eighty per cent. of the assessed income and those who have not. In the case of the first type the onus lies on the department to prove fraud or gross or wilful neglect in not returning the correct income, and in the case of the second type the onus is on the assessee to establish that the failure to return the correct income was not on account of any fraud or gross or wilful neglect on his part. The learned judges referred to Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, and then observed that the principles enunciated by the Supreme Court in that case that section 271 is penal in character is still applicable. In the same strain and to the same effect practically, are the decisions of the Kerala High Court in Commissioner of Income Tax Vs. Sankarsons and Company, that of the Allahabad High Court in Saeed Ahmad Vs. Inspecting Assistant Commissioner of Income Tax, Range II, that of the Gujarat High Court in Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt, the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, and then observed that the principles enunciated by the Supreme Court in that case that section 271 is penal in character is still applicable. In the same strain and to the same effect practically, are the decisions of the Kerala High Court in Commissioner of Income Tax Vs. Sankarsons and Company, that of the Allahabad High Court in Saeed Ahmad Vs. Inspecting Assistant Commissioner of Income Tax, Range II, that of the Gujarat High Court in Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt, the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali,
and then observed that the principles enunciated by the Supreme Court in that case that section 271 is penal in character is still applicable. In the same strain and to the same effect practically, are the decisions of the Kerala High Court in Commissioner of Income Tax Vs. Sankarsons and Company, that of the Allahabad High Court in Saeed Ahmad Vs. Inspecting Assistant Commissioner of Income Tax, Range II, that of the Gujarat High Court in Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt, the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
and then observed that the principles enunciated by the Supreme Court in that case that section 271 is penal in character is still applicable. In the same strain and to the same effect practically, are the decisions of the Kerala High Court in Commissioner of Income Tax Vs. Sankarsons and Company, that of the Allahabad High Court in Saeed Ahmad Vs. Inspecting Assistant Commissioner of Income Tax, Range II, that of the Gujarat High Court in Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt, the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
Commissioner of Income Tax Vs. Sankarsons and Company, that of the Allahabad High Court in Saeed Ahmad Vs. Inspecting Assistant Commissioner of Income Tax, Range II, that of the Gujarat High Court in Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt, the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
Commissioner of Income Tax Vs. Sankarsons and Company,
that of the Allahabad High Court in Saeed Ahmad Vs. Inspecting Assistant Commissioner of Income Tax, Range II, that of the Gujarat High Court in Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt, the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
that of the Allahabad High Court in Saeed Ahmad Vs. Inspecting Assistant Commissioner of Income Tax, Range II, that of the Gujarat High Court in Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt, the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
Saeed Ahmad Vs. Inspecting Assistant Commissioner of Income Tax, Range II, that of the Gujarat High Court in Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt, the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
Saeed Ahmad Vs. Inspecting Assistant Commissioner of Income Tax, Range II,
that of the Gujarat High Court in Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt, the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
that of the Gujarat High Court in Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt, the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt, the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
Commissioner of Income Tax, Gujarat I Vs. S.P. Bhatt,
the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
the one of Gauhati High Court in Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others,
and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
and the decision of the Orissa High Court in Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
Commissioner of Income Tax Vs. K.C. Behera and Others, which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
Commissioner of Income Tax Vs. K.C. Behera and Others,
which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
which were brought to our notice by Sri Dasaratharama Reddy. All these decisions of the various High Courts examined the scope of the Explanation to sub-clause (iii) and its impacts on the main provision contained in clause (c) of section 271(1). It must be noted that none of them relates to the other clauses of section 271(1). The decisions pointed out that the object behind the enactment of the Explanation was to check more effectively the evasion of Income Tax. Obviously, the main purpose of the Explanation is to place the burden of establishing want of fraud or gross or wilful neglect in the matter of Income Tax return filed by the assessee on him, where the difference revealed between the returned income and assessed income is more than twenty per cent. But is case the difference is less than twenty per cent. then the assumption postulated by the Explanation would not arise, and it shall be for the department to establish that the assessee had concealed the particulars of his income of furnished inaccurate particulars of such income. This is the burden of all the aforesaid decisions.
In our opinion, these decisions throw light on the question of burden of proof in so far as clause (c) and sub-clause (iii) read with its Explanation are concerned. None of the decisions goes further and says that the element of fraud, or gross or wilful neglect is engrafted into clauses (a) and (b) as well. These decisions do not, therefore, help Sri Dasaratharama Reddy in sustaining his contention that the principle of the Explanation to sub-clause (iii) should be read into clauses (a) (b) of section 271(1).
In his endeavour to show that the existence or absence of reasonable cause is made an ingredient of clauses (a) and (b), the learned counsel relied on the decision of the Gujarat High Court in Morvi Cotton Merchants Industrial Corporation Ltd. Vs. The State of Gujarat, A Division Bench of the Gujarat High Court was considering the scope of the phrase "without reasonable excuse", in section 10(d) of the Central Sales Tax Act, 1956. The court held :
Morvi Cotton Merchants Industrial Corporation Ltd. Vs. The State of Gujarat, A Division Bench of the Gujarat High Court was considering the scope of the phrase "without reasonable excuse", in section 10(d) of the Central Sales Tax Act, 1956. The court held :
Morvi Cotton Merchants Industrial Corporation Ltd. Vs. The State of Gujarat,
A Division Bench of the Gujarat High Court was considering the scope of the phrase "without reasonable excuse", in section 10(d) of the Central Sales Tax Act, 1956. The court held :
A Division Bench of the Gujarat High Court was considering the scope of the phrase "without reasonable excuse", in section 10(d) of the Central Sales Tax Act, 1956. The court held :
"The expression...... is a necessary ingredient of the offence mentioned therein and that ingredient has to be alleged and proved by the department and on which the authority imposing the penalty has to give a finding. It is only when that ingredient is pleaded and proved by the department, by way of presumptive proof, that the onus shifts on to the dealer to rebut that presumption."
It was further held :
"In the absence of a finding by the department about the absence of reasonable excuse, no penalty u/s 10(d) read with section 10A can be imposed."
This decisions is again of no avail to the learned counsel. It was section 10A which provides for offences under clause (b) or clause (c) or clause (d) of section 10 of the Central Sales Tax Act. Thus, section 10(d) is clearly incorporated in section 10A. Further section 10(d) itself makes using of the goods purchased for the purposes specified in section 8(3)(b) without reasonable excuse, an offence punishable with imprisonment or fine or with both. Thus, it is more in the nature of sections 276, 276A and 276B of the Income Tax Act, which treat certain things done without reasonable cause or excuse as offences. When the statute itself expressly treats them as offences, there cannot be any ambiguity about it. But section 271 is only a provision under which penalties could be imposed in some eventualities. It is true, penalty, as the very name suggests, implies penal proceeding. It was so held in Hindustan Steel Ltd. Vs. State of Orissa, and the character of a penal proceeding was also made clear by a Division Bench of this High Court in T. Venkata Krishnaiah and Co. Vs. Commissioner of Income Tax, . The learned judges were dealing with the distinction between charging of interest and imposition of penalty and observed that interest was civil in nature while penalty was penal and so both could be levied.
Hindustan Steel Ltd. Vs. State of Orissa, and the character of a penal proceeding was also made clear by a Division Bench of this High Court in T. Venkata Krishnaiah and Co. Vs. Commissioner of Income Tax, . The learned judges were dealing with the distinction between charging of interest and imposition of penalty and observed that interest was civil in nature while penalty was penal and so both could be levied.
Hindustan Steel Ltd. Vs. State of Orissa,
and the character of a penal proceeding was also made clear by a Division Bench of this High Court in T. Venkata Krishnaiah and Co. Vs. Commissioner of Income Tax, . The learned judges were dealing with the distinction between charging of interest and imposition of penalty and observed that interest was civil in nature while penalty was penal and so both could be levied.
and the character of a penal proceeding was also made clear by a Division Bench of this High Court in T. Venkata Krishnaiah and Co. Vs. Commissioner of Income Tax, . The learned judges were dealing with the distinction between charging of interest and imposition of penalty and observed that interest was civil in nature while penalty was penal and so both could be levied.
T. Venkata Krishnaiah and Co. Vs. Commissioner of Income Tax, . The learned judges were dealing with the distinction between charging of interest and imposition of penalty and observed that interest was civil in nature while penalty was penal and so both could be levied.
T. Venkata Krishnaiah and Co. Vs. Commissioner of Income Tax,
. The learned judges were dealing with the distinction between charging of interest and imposition of penalty and observed that interest was civil in nature while penalty was penal and so both could be levied.
. The learned judges were dealing with the distinction between charging of interest and imposition of penalty and observed that interest was civil in nature while penalty was penal and so both could be levied.
Sri Dasaratharama Reddy further endeavoured to reinforce the above argument by referring to the circumstances that by the Finance Act of 1964, the word "deliberately" was deleted from clause (c) which was there earlier before the words "furnished inaccurate particulars of such income". How he developed the argument is, when once the word "deliberately" was deleted, the very act of furnishing of inaccurate particulars of income is treated as a ground for imposition of penalty. When mere furnishing inaccurate particulars of income is treated as a case for imposing penalty, the learned counsel argued, there is no reason to suppose that failure to furnish returns of income before due date without reasonable cause is not placed on the same footing as the former act. If fraud or any gross or wilful neglect is made an ingredient of furnishing inaccurate particulars for which penalty can be imposed, in the submission of the learned counsel, the same ingredient should be applicable to failure to furnish the return in due time without reasonable cause.
Besides these submissions, the learned counsel also relied on sub-section (4A) of section 271. We have extracted the sub-section even at the threshold of our judgment. Under this provision, the Commissioner is given power, notwithstanding anything contained in clause (i) or clause (iii) of sub-section (1), to reduce or waive the amount of minimum penalty in regard to cases referred to in clause (i) of section 271(1)(a), if he is satisfied that, prior to the issue of notice to him under sub-section (2) of section 139, the assessee had voluntarily and in good faith made disclosures of his income. The use of the words "voluntarily and in good faith" with reference to imposition of penalty under sub-clause (i) was very much emphasized by the learned counsel. From this, an attempt was made to spell out that the failure to furnish the return of income in due time without reasonable cause would mean that the failure to file the return is vitiated by lack of good faith. According to the learned counsel, sub-section (4A) imports into clause (a) of sub-section (1), the element of bad intention or presence or absence of good faith.
On a careful examination of the argument and the provision of section 271, we are unable to uphold this understanding of section 271 and the further contention that the element of fraud or gross or wilful neglect contained in the Explanation could be engrafted into clause (a) also. The Explanation to sub-section (iii), in telling phrases, makes it clear that the principle in regard to proof for gross or wilful neglect is in regard to concealment of particulars of income or furnishing inaccurate particulars of income. What is more, the Explanation further declares that it is "for the purpose of clause (c) of this sub-section" (i.e., sub-section (1)). When the language of the Explanation is so express and explicit, there is no possibility for any doubt that its operation is limited only to cases which come under clause (c). Otherwise, the application of fraud and gross or wilful neglect to cases of concealment of particulars of income and the words "for the purposes of clause (c) of the sub-section" would be meaningless. If it was intended by the Explanation that its principle should govern all the three clauses of sub-section (1), Parliament could have said so. Instead of saying it, it specifically restricted and limited its application only to cases falling under clause (c). Therefore, there is no warrant whatever for extending the principle of the Explanation to clause (a).
Further, though all the three varieties of cases mentioned in sub-section (1) in clauses (a),(b) and (c) are grouped together, the section treats each one of them separately and distinctly. While the words "without reasonable cause" occur in clauses (a) and (b), they do not appear in clause (c). Furthermore, all the three categories of delinquencies are separately dealt with. Had the intention been to impose a similar penalty for all those delinquencies, there was no need for Parliament to provide three varying degrees of penalties. Sub-clause (i) which refers to delinquencies mentioned in clause (a) provides for the least burdensome penalties; sub-clause (ii) which refers to those in clause (b) imposes a little heavier penalties, while sub-clause (iii) which refers to cases in clause (c) provides highest penalties. Obviously and patently, Parliament intended to treat the concealment of the particulars of income and furnishing inaccurate particulars of income as grave matters and that was manifestly why heaviest of the three penalties was imposable in such cases, and the burden of proof where the returned total income is less than eighty per cent. of the assessed income, is also placed on the assessee himself to show that the concealment, etc., did not arise from any fraud or any gross or wilful neglect.
Equally important is the circumstances that sub-clause (i) has its own Explanation giving the meaning of "assessed tax" used therein. Obviously, that Explanation applies only to cases which come under clause (a). It cannot be postulated that its application can be extended to other clauses. By parity of reasoning and also for the reasons which we have stated above, the Explanation to sub-clause (iii) should be limited in its scope to cases which come under clause (c) alone.
Coming to sub-section (4A), it confers powers on the Commissioner to reduce or waive the amount of minimum penalty. Sub-clause (a) of sub-section (4A) lays down the guidelines for the exercise of that power by the Commissioner. There is no duty cast on him to necessarily reduce or waive the amount of minimum penalty. The discretion is conferred on him and clause (a) lays down the manner in which that discretion has to be exercised in so far as cases referred to in clause (i) are concerned. In cases relating to failure to furnish the return of total income in due time, the Commissioner may reduce or waive the amount of penalty if he is satisfied that the assessee has voluntarily and in good faith made full disclosure of his income. The words "voluntarily and in good faith" apply to the full disclosure of the income prior to the notice u/s 139(2), and do not in any way refer to the furnishing of the return of income in due time. Indeed, the expression "without reasonable cause" is repeated and reiterated in clause (i) of sub-section (4A) while referring to failure to furnish the return of total income. Whatever the meaning that expression has, when used in clause (a) of sub-section (1), the same meaning should be attributed when it occurs in clause (i) of sub-section (4A). The reasonable understanding of sub-section (4A) would be that the Commissioner should see in cases of failure to furnish the return of income without reasonable cause, before he reduces or waives the amount of minimum penalty, whether the assessee had acted voluntarily and in good faith and made full disclosure of his income prior to the issue of notice to him u/s 139(2). The presence or absence of good faith cannot be extended to the late filing of returns of income. Otherwise, the sub-section would have said so clearly. Apart from that, sub-section (4A) deals only with reduction or waive of the amount of minimum penalty imposable which can be granted by the Commissioner while clause (a) refers to a situation which arises in the course of any proceedings under the Act dealt with by the Income Tax Officer or the Appellate Assistant Commissioner.
For these reasons, we are unable to agree with Sri Dasaratharama Reddi in his submission that section 271 itself gives a definite clue to import the element of mens rea into clause (a).
Now, having reached this conclusion. let us have a general conspectus of the provisions of the Act dealing with delay in filing the return. Section 139(8) provides for charging of interest for delay. Section 271(1)(a) read with sub-clause (i) provides for imposition of penalty if the delay has occurred without reasonable cause. Section 276C considers failure to furnish the return of income in due time as an offence if the failure is wilful. Why does the statute keep this distinction In the first case the very occurrence of delay is sufficient to enable the officer to charge interest. In the second case, the requirement is that he should be satisfied that the assessee has failed to furnish the return in time without reasonable cause. In the third case, wilful failure has to be established. The statute has clearly kept up this difference between the three proceeding and has indicated the growing gravity of the failure on the the part of the assessee in the three cases. If contumacious conduct, which must necessarily be wilful failure, is the requirement of section 271(1)(a) also, then what is the difference between it and section 276C On the other hand, to keep the distinction between imposition of penalty and imposition of punishment, the statute has used different languages and different words. The words "wilful default" or contumacious conduct are conspicuous by their absence in section 271(1)(a) while "wilful failure" is expressly stated in section 276C. By a comparative understanding of these three provisions relating to the delayed returns of income, it must necessarily follow that section 271(1)(a) does not take in contumacious conduct, or to put it in other words, mens rea.
We derive support to this view from the decision of the Supreme Court in Indo-China Steam Navigation Co. Ltd. Vs. Jasjit Singh, Additional Collector of Customs and Others, Dealing with the provisions of the Sea Customs Act, the court said that "section 52A read with section 167(12A) makes it clear that the legislature intends, by necessary implication, the exclusion of mens rea in dealing with the contravention of section 52A". That was on the ground that "in column (1), section 167(12A) reproduces the material words of section 52A and does not add the words "knowingly or wilfully."
Indo-China Steam Navigation Co. Ltd. Vs. Jasjit Singh, Additional Collector of Customs and Others, Dealing with the provisions of the Sea Customs Act, the court said that "section 52A read with section 167(12A) makes it clear that the legislature intends, by necessary implication, the exclusion of mens rea in dealing with the contravention of section 52A". That was on the ground that "in column (1), section 167(12A) reproduces the material words of section 52A and does not add the words "knowingly or wilfully."
Indo-China Steam Navigation Co. Ltd. Vs. Jasjit Singh, Additional Collector of Customs and Others,
Dealing with the provisions of the Sea Customs Act, the court said that "section 52A read with section 167(12A) makes it clear that the legislature intends, by necessary implication, the exclusion of mens rea in dealing with the contravention of section 52A". That was on the ground that "in column (1), section 167(12A) reproduces the material words of section 52A and does not add the words "knowingly or wilfully."
Dealing with the provisions of the Sea Customs Act, the court said that "section 52A read with section 167(12A) makes it clear that the legislature intends, by necessary implication, the exclusion of mens rea in dealing with the contravention of section 52A". That was on the ground that "in column (1), section 167(12A) reproduces the material words of section 52A and does not add the words "knowingly or wilfully."
In State of Maharashtra Vs. Hans George, the majority held that :
State of Maharashtra Vs. Hans George, the majority held that :
State of Maharashtra Vs. Hans George,
the majority held that :
the majority held that :
"Unless the statute, either clearly or by necessary implication rules out mens rea as a constituent part of a crime an accused should not be found guilty of an offence against the criminal law unless he has got a guilty mind. Absolute liability is not to be lightly presumed but has to be clearly established."
The court can only interpret the law as it finds it. Parliaments mind has to be gathered from the provisions it has incorporated in a statute. When all the relevant provisions in the Income Tax Act relating to failure to file the return of income before due date are considered, it cannot be held that contumacious conduct is made an ingredient of a proceeding u/s 271(1)(a). We go even a step further. By making wilful failure to file a return an offence u/s 276C and by the very language in section 271(1)(a), it can safely be concluded that mens rea is not an ingredient of a proceeding under sub-clause (a) of section 271(1).
So far, we have not gone into any of the decided cases directly dealing with this aspect of the matter. That is because the true meaning of a provision will have to be found out first by reading that provision in the context of the scheme of the Act and the other relevant provisions. It is the statute that must be primarily looked into for deciding the nature of the proceeding; the judicial precedents unless they are binding, come only later, that too only as a supplemental or reinforcing factor. Having endeavoured to find out the true import of section 271(1)(a) and the real character of the proceeding thereunder and the ingredients of the proceeding, we will proceed to have a brief review of the cases on the point.
The catena of the case law relating to penalty started with the decisions of the Supreme Court dated August 4, 1969, in Hindustan Steel Ltd. Vs. State of Orissa, . One of the question posed and answered by the court in the case was, whether the imposition of penalty for failure to register as a dealer was justified, under the Orissa Sales Tax Act. Shah, Actg. C.J., made the following general observations at page 29 in regard to the penalty u/s 9(1) read with section 25(1) (a) of the Act. It appears, there was another section which dealt with the imposition of penalty in that Act, but that was not referred to. The omission to refer to that particular provision is not of much consequence, in our view. The observations are as hereunder (page 29) :
Hindustan Steel Ltd. Vs. State of Orissa, . One of the question posed and answered by the court in the case was, whether the imposition of penalty for failure to register as a dealer was justified, under the Orissa Sales Tax Act. Shah, Actg. C.J., made the following general observations at page 29 in regard to the penalty u/s 9(1) read with section 25(1) (a) of the Act. It appears, there was another section which dealt with the imposition of penalty in that Act, but that was not referred to. The omission to refer to that particular provision is not of much consequence, in our view. The observations are as hereunder (page 29) :
Hindustan Steel Ltd. Vs. State of Orissa,
. One of the question posed and answered by the court in the case was, whether the imposition of penalty for failure to register as a dealer was justified, under the Orissa Sales Tax Act. Shah, Actg. C.J., made the following general observations at page 29 in regard to the penalty u/s 9(1) read with section 25(1) (a) of the Act. It appears, there was another section which dealt with the imposition of penalty in that Act, but that was not referred to. The omission to refer to that particular provision is not of much consequence, in our view. The observations are as hereunder (page 29) :
. One of the question posed and answered by the court in the case was, whether the imposition of penalty for failure to register as a dealer was justified, under the Orissa Sales Tax Act. Shah, Actg. C.J., made the following general observations at page 29 in regard to the penalty u/s 9(1) read with section 25(1) (a) of the Act. It appears, there was another section which dealt with the imposition of penalty in that Act, but that was not referred to. The omission to refer to that particular provision is not of much consequence, in our view. The observations are as hereunder (page 29) :
"Under the Act penalty may be imposed for failure to register as a dealer : section 9(1), read with section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacions or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose penalty will be justified in refusing to impose penalty when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the company in failing to register the company as a dealer acted in the honest and genuine belief that the company was not a dealer. Granting that they erred, no case for imposing penalty was made out."
It can be immediately seen that these observations are of a general nature. May be, certain penalties can be imposed only if the party either acted deliberately in defiances of law, or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. For imposition of penalties in some other cases, contumacious conduct may not be necessary. Simply because it is called penalty, contumacious conduct cannot be automatically imported into its proceeding. As we have time and again observed about, relaying on the Supreme Court decisions, it depends upon the statutory provisions. It may be that u/s 9(1) read with section 25(1) (a) of the Orissa Sales Tax Act, contumacious conduct was necessary before a penalty would be imposed. But section 271(1)(a) of the Income Tax Act clearly says, as distinct from section 276C, that what should be established is absence of reasonable cause. So, the observations made in the Hindustan Steel Ltd. Vs. State of Orissa, will have to be understood in the light of the provisions of the law and the facts with which the court was dealing and it would be untenable to give a universal application to the observations to all penalty cases.
Hindustan Steel Ltd. Vs. State of Orissa, will have to be understood in the light of the provisions of the law and the facts with which the court was dealing and it would be untenable to give a universal application to the observations to all penalty cases.
Hindustan Steel Ltd. Vs. State of Orissa,
will have to be understood in the light of the provisions of the law and the facts with which the court was dealing and it would be untenable to give a universal application to the observations to all penalty cases.
will have to be understood in the light of the provisions of the law and the facts with which the court was dealing and it would be untenable to give a universal application to the observations to all penalty cases.
Next is the decision of the Supreme Court dated April 29, 1970, in Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, . Though this is a case decided later than the Hindustan Steel Ltd. Vs. State of Orissa, it was reported in the Income Tax Reports earlier. In this case, the principal question which arose in the proceedings u/s 28(1)(c) of the Indian Income Tax Act, 1922, which provision corresponds to the present section 271(1)(c), was burden of proof in regard to concealment of income. The first point which fell for determination by the court was the nature of the penal provision. The court held that the observations in C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, that the true nature of penalty was additional tax, that those observations were made in a different context and with a different purpose. Then the learned judges referred to Hindustan Steel Ltd. Vs. State of Orissa, and then observed that it was a settled law by then in the sales tax law, that an order imposing penalty was the result of a quasi-criminal proceeding. So, the learned judges observed that proceedings u/s 28 were penal in character. Proceeding to consider the burden of proof, the learned the judges held that u/s 28(1)(c) the department must establish that the assessee had concealed the particulars of his income.
Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, . Though this is a case decided later than the Hindustan Steel Ltd. Vs. State of Orissa, it was reported in the Income Tax Reports earlier. In this case, the principal question which arose in the proceedings u/s 28(1)(c) of the Indian Income Tax Act, 1922, which provision corresponds to the present section 271(1)(c), was burden of proof in regard to concealment of income. The first point which fell for determination by the court was the nature of the penal provision. The court held that the observations in C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, that the true nature of penalty was additional tax, that those observations were made in a different context and with a different purpose. Then the learned judges referred to Hindustan Steel Ltd. Vs. State of Orissa, and then observed that it was a settled law by then in the sales tax law, that an order imposing penalty was the result of a quasi-criminal proceeding. So, the learned judges observed that proceedings u/s 28 were penal in character. Proceeding to consider the burden of proof, the learned the judges held that u/s 28(1)(c) the department must establish that the assessee had concealed the particulars of his income.
Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali,
. Though this is a case decided later than the Hindustan Steel Ltd. Vs. State of Orissa, it was reported in the Income Tax Reports earlier. In this case, the principal question which arose in the proceedings u/s 28(1)(c) of the Indian Income Tax Act, 1922, which provision corresponds to the present section 271(1)(c), was burden of proof in regard to concealment of income. The first point which fell for determination by the court was the nature of the penal provision. The court held that the observations in C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, that the true nature of penalty was additional tax, that those observations were made in a different context and with a different purpose. Then the learned judges referred to Hindustan Steel Ltd. Vs. State of Orissa, and then observed that it was a settled law by then in the sales tax law, that an order imposing penalty was the result of a quasi-criminal proceeding. So, the learned judges observed that proceedings u/s 28 were penal in character. Proceeding to consider the burden of proof, the learned the judges held that u/s 28(1)(c) the department must establish that the assessee had concealed the particulars of his income.
. Though this is a case decided later than the Hindustan Steel Ltd. Vs. State of Orissa, it was reported in the Income Tax Reports earlier. In this case, the principal question which arose in the proceedings u/s 28(1)(c) of the Indian Income Tax Act, 1922, which provision corresponds to the present section 271(1)(c), was burden of proof in regard to concealment of income. The first point which fell for determination by the court was the nature of the penal provision. The court held that the observations in C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, that the true nature of penalty was additional tax, that those observations were made in a different context and with a different purpose. Then the learned judges referred to Hindustan Steel Ltd. Vs. State of Orissa, and then observed that it was a settled law by then in the sales tax law, that an order imposing penalty was the result of a quasi-criminal proceeding. So, the learned judges observed that proceedings u/s 28 were penal in character. Proceeding to consider the burden of proof, the learned the judges held that u/s 28(1)(c) the department must establish that the assessee had concealed the particulars of his income.
Hindustan Steel Ltd. Vs. State of Orissa, it was reported in the Income Tax Reports earlier. In this case, the principal question which arose in the proceedings u/s 28(1)(c) of the Indian Income Tax Act, 1922, which provision corresponds to the present section 271(1)(c), was burden of proof in regard to concealment of income. The first point which fell for determination by the court was the nature of the penal provision. The court held that the observations in C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, that the true nature of penalty was additional tax, that those observations were made in a different context and with a different purpose. Then the learned judges referred to Hindustan Steel Ltd. Vs. State of Orissa, and then observed that it was a settled law by then in the sales tax law, that an order imposing penalty was the result of a quasi-criminal proceeding. So, the learned judges observed that proceedings u/s 28 were penal in character. Proceeding to consider the burden of proof, the learned the judges held that u/s 28(1)(c) the department must establish that the assessee had concealed the particulars of his income.
Hindustan Steel Ltd. Vs. State of Orissa,
it was reported in the Income Tax Reports earlier. In this case, the principal question which arose in the proceedings u/s 28(1)(c) of the Indian Income Tax Act, 1922, which provision corresponds to the present section 271(1)(c), was burden of proof in regard to concealment of income. The first point which fell for determination by the court was the nature of the penal provision. The court held that the observations in C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, that the true nature of penalty was additional tax, that those observations were made in a different context and with a different purpose. Then the learned judges referred to Hindustan Steel Ltd. Vs. State of Orissa, and then observed that it was a settled law by then in the sales tax law, that an order imposing penalty was the result of a quasi-criminal proceeding. So, the learned judges observed that proceedings u/s 28 were penal in character. Proceeding to consider the burden of proof, the learned the judges held that u/s 28(1)(c) the department must establish that the assessee had concealed the particulars of his income.
it was reported in the Income Tax Reports earlier. In this case, the principal question which arose in the proceedings u/s 28(1)(c) of the Indian Income Tax Act, 1922, which provision corresponds to the present section 271(1)(c), was burden of proof in regard to concealment of income. The first point which fell for determination by the court was the nature of the penal provision. The court held that the observations in C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, that the true nature of penalty was additional tax, that those observations were made in a different context and with a different purpose. Then the learned judges referred to Hindustan Steel Ltd. Vs. State of Orissa, and then observed that it was a settled law by then in the sales tax law, that an order imposing penalty was the result of a quasi-criminal proceeding. So, the learned judges observed that proceedings u/s 28 were penal in character. Proceeding to consider the burden of proof, the learned the judges held that u/s 28(1)(c) the department must establish that the assessee had concealed the particulars of his income.
C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, that the true nature of penalty was additional tax, that those observations were made in a different context and with a different purpose. Then the learned judges referred to Hindustan Steel Ltd. Vs. State of Orissa, and then observed that it was a settled law by then in the sales tax law, that an order imposing penalty was the result of a quasi-criminal proceeding. So, the learned judges observed that proceedings u/s 28 were penal in character. Proceeding to consider the burden of proof, the learned the judges held that u/s 28(1)(c) the department must establish that the assessee had concealed the particulars of his income.
C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another,
that the true nature of penalty was additional tax, that those observations were made in a different context and with a different purpose. Then the learned judges referred to Hindustan Steel Ltd. Vs. State of Orissa, and then observed that it was a settled law by then in the sales tax law, that an order imposing penalty was the result of a quasi-criminal proceeding. So, the learned judges observed that proceedings u/s 28 were penal in character. Proceeding to consider the burden of proof, the learned the judges held that u/s 28(1)(c) the department must establish that the assessee had concealed the particulars of his income.
that the true nature of penalty was additional tax, that those observations were made in a different context and with a different purpose. Then the learned judges referred to Hindustan Steel Ltd. Vs. State of Orissa, and then observed that it was a settled law by then in the sales tax law, that an order imposing penalty was the result of a quasi-criminal proceeding. So, the learned judges observed that proceedings u/s 28 were penal in character. Proceeding to consider the burden of proof, the learned the judges held that u/s 28(1)(c) the department must establish that the assessee had concealed the particulars of his income.
Hindustan Steel Ltd. Vs. State of Orissa, and then observed that it was a settled law by then in the sales tax law, that an order imposing penalty was the result of a quasi-criminal proceeding. So, the learned judges observed that proceedings u/s 28 were penal in character. Proceeding to consider the burden of proof, the learned the judges held that u/s 28(1)(c) the department must establish that the assessee had concealed the particulars of his income.
Hindustan Steel Ltd. Vs. State of Orissa,
and then observed that it was a settled law by then in the sales tax law, that an order imposing penalty was the result of a quasi-criminal proceeding. So, the learned judges observed that proceedings u/s 28 were penal in character. Proceeding to consider the burden of proof, the learned the judges held that u/s 28(1)(c) the department must establish that the assessee had concealed the particulars of his income.
and then observed that it was a settled law by then in the sales tax law, that an order imposing penalty was the result of a quasi-criminal proceeding. So, the learned judges observed that proceedings u/s 28 were penal in character. Proceeding to consider the burden of proof, the learned the judges held that u/s 28(1)(c) the department must establish that the assessee had concealed the particulars of his income.
As we have already pointed out, the fact that penalty proceedings are penal and quasi-criminal in nature would not necessarily make mens rea as essential ingredient of the proceeding. It will have to be decided on the basis of the relevant provision in the statute. The general observation made by Shah, Acting C.J., in Hindustan Steel Ltd. Vs. State of Orissa, led several High Courts to apply them to all penalty proceedings u/s 271(1)(a) also. They are Michael Fernandes Vs. Commissioner of Wealth Tax, Mysore and Another, ; All India Sewing Machine Co. Vs. Commissioner of Income Tax, ; Commissioner of Income Tax Vs. Alimohamad and Co., and Dawn and Co. Vs. Commissioner of Income Tax, .
Hindustan Steel Ltd. Vs. State of Orissa, led several High Courts to apply them to all penalty proceedings u/s 271(1)(a) also. They are Michael Fernandes Vs. Commissioner of Wealth Tax, Mysore and Another, ; All India Sewing Machine Co. Vs. Commissioner of Income Tax, ; Commissioner of Income Tax Vs. Alimohamad and Co., and Dawn and Co. Vs. Commissioner of Income Tax, .
Hindustan Steel Ltd. Vs. State of Orissa,
led several High Courts to apply them to all penalty proceedings u/s 271(1)(a) also. They are Michael Fernandes Vs. Commissioner of Wealth Tax, Mysore and Another, ; All India Sewing Machine Co. Vs. Commissioner of Income Tax, ; Commissioner of Income Tax Vs. Alimohamad and Co., and Dawn and Co. Vs. Commissioner of Income Tax, .
led several High Courts to apply them to all penalty proceedings u/s 271(1)(a) also. They are Michael Fernandes Vs. Commissioner of Wealth Tax, Mysore and Another, ; All India Sewing Machine Co. Vs. Commissioner of Income Tax, ; Commissioner of Income Tax Vs. Alimohamad and Co., and Dawn and Co. Vs. Commissioner of Income Tax, .
Michael Fernandes Vs. Commissioner of Wealth Tax, Mysore and Another, ; All India Sewing Machine Co. Vs. Commissioner of Income Tax, ; Commissioner of Income Tax Vs. Alimohamad and Co., and Dawn and Co. Vs. Commissioner of Income Tax, .
Michael Fernandes Vs. Commissioner of Wealth Tax, Mysore and Another,
; All India Sewing Machine Co. Vs. Commissioner of Income Tax, ; Commissioner of Income Tax Vs. Alimohamad and Co., and Dawn and Co. Vs. Commissioner of Income Tax, .
; All India Sewing Machine Co. Vs. Commissioner of Income Tax, ; Commissioner of Income Tax Vs. Alimohamad and Co., and Dawn and Co. Vs. Commissioner of Income Tax, .
All India Sewing Machine Co. Vs. Commissioner of Income Tax, ; Commissioner of Income Tax Vs. Alimohamad and Co., and Dawn and Co. Vs. Commissioner of Income Tax, .
All India Sewing Machine Co. Vs. Commissioner of Income Tax,
; Commissioner of Income Tax Vs. Alimohamad and Co., and Dawn and Co. Vs. Commissioner of Income Tax, .
; Commissioner of Income Tax Vs. Alimohamad and Co., and Dawn and Co. Vs. Commissioner of Income Tax, .
Commissioner of Income Tax Vs. Alimohamad and Co., and Dawn and Co. Vs. Commissioner of Income Tax, .
Commissioner of Income Tax Vs. Alimohamad and Co.,
and Dawn and Co. Vs. Commissioner of Income Tax, .
and Dawn and Co. Vs. Commissioner of Income Tax, .
Dawn and Co. Vs. Commissioner of Income Tax, .
Dawn and Co. Vs. Commissioner of Income Tax,
.
.
Obul Reddi C.J. and Punnayya J., in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, had to consider a PETITIONERition filed u/s 256(2) of the Income Tax Act. One of the questions posed was, whether the penal provisions of section 271(1)(a) were not attracted to the facts of the case. The Tribunal expressed the view that they did not find material let in by the revenue to show that the assessee wilfully defaulted, more especially, when it had been seen that the return was filed voluntarily without issue of notice u/s 139(2). Consequently, Tribunal set aside the orders of the authorities below imposing penalty upon the assessee. After considering the case, in the course of the judgment, the learned Chief Justice referred to the majority view of the Supreme Court spoken by Subba Rao J., in Nathulal Vs. State of Madhya Pradesh, that mens rea is an essential ingredient of a criminal offence and only where it is absolutely clear that the implementation of the object of the statute would otherwise be defeated that mens rea may, be necessary implication, be excluded from a statute. Subba Rao J. also pointed out that the nature of mens rea implied in a statute creating an offence depends on the object of the Act and the provisions thereof. Then Obul Reddi C.J. observed Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, had to consider a PETITIONERition filed u/s 256(2) of the Income Tax Act. One of the questions posed was, whether the penal provisions of section 271(1)(a) were not attracted to the facts of the case. The Tribunal expressed the view that they did not find material let in by the revenue to show that the assessee wilfully defaulted, more especially, when it had been seen that the return was filed voluntarily without issue of notice u/s 139(2). Consequently, Tribunal set aside the orders of the authorities below imposing penalty upon the assessee. After considering the case, in the course of the judgment, the learned Chief Justice referred to the majority view of the Supreme Court spoken by Subba Rao J., in Nathulal Vs. State of Madhya Pradesh, that mens rea is an essential ingredient of a criminal offence and only where it is absolutely clear that the implementation of the object of the statute would otherwise be defeated that mens rea may, be necessary implication, be excluded from a statute. Subba Rao J. also pointed out that the nature of mens rea implied in a statute creating an offence depends on the object of the Act and the provisions thereof. Then Obul Reddi C.J. observed Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
had to consider a PETITIONERition filed u/s 256(2) of the Income Tax Act. One of the questions posed was, whether the penal provisions of section 271(1)(a) were not attracted to the facts of the case. The Tribunal expressed the view that they did not find material let in by the revenue to show that the assessee wilfully defaulted, more especially, when it had been seen that the return was filed voluntarily without issue of notice u/s 139(2). Consequently, Tribunal set aside the orders of the authorities below imposing penalty upon the assessee. After considering the case, in the course of the judgment, the learned Chief Justice referred to the majority view of the Supreme Court spoken by Subba Rao J., in Nathulal Vs. State of Madhya Pradesh, that mens rea is an essential ingredient of a criminal offence and only where it is absolutely clear that the implementation of the object of the statute would otherwise be defeated that mens rea may, be necessary implication, be excluded from a statute. Subba Rao J. also pointed out that the nature of mens rea implied in a statute creating an offence depends on the object of the Act and the provisions thereof. Then Obul Reddi C.J. observed Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
had to consider a PETITIONERition filed u/s 256(2) of the Income Tax Act. One of the questions posed was, whether the penal provisions of section 271(1)(a) were not attracted to the facts of the case. The Tribunal expressed the view that they did not find material let in by the revenue to show that the assessee wilfully defaulted, more especially, when it had been seen that the return was filed voluntarily without issue of notice u/s 139(2). Consequently, Tribunal set aside the orders of the authorities below imposing penalty upon the assessee. After considering the case, in the course of the judgment, the learned Chief Justice referred to the majority view of the Supreme Court spoken by Subba Rao J., in Nathulal Vs. State of Madhya Pradesh, that mens rea is an essential ingredient of a criminal offence and only where it is absolutely clear that the implementation of the object of the statute would otherwise be defeated that mens rea may, be necessary implication, be excluded from a statute. Subba Rao J. also pointed out that the nature of mens rea implied in a statute creating an offence depends on the object of the Act and the provisions thereof. Then Obul Reddi C.J. observed Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
Nathulal Vs. State of Madhya Pradesh, that mens rea is an essential ingredient of a criminal offence and only where it is absolutely clear that the implementation of the object of the statute would otherwise be defeated that mens rea may, be necessary implication, be excluded from a statute. Subba Rao J. also pointed out that the nature of mens rea implied in a statute creating an offence depends on the object of the Act and the provisions thereof. Then Obul Reddi C.J. observed Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
Nathulal Vs. State of Madhya Pradesh,
that mens rea is an essential ingredient of a criminal offence and only where it is absolutely clear that the implementation of the object of the statute would otherwise be defeated that mens rea may, be necessary implication, be excluded from a statute. Subba Rao J. also pointed out that the nature of mens rea implied in a statute creating an offence depends on the object of the Act and the provisions thereof. Then Obul Reddi C.J. observed Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
that mens rea is an essential ingredient of a criminal offence and only where it is absolutely clear that the implementation of the object of the statute would otherwise be defeated that mens rea may, be necessary implication, be excluded from a statute. Subba Rao J. also pointed out that the nature of mens rea implied in a statute creating an offence depends on the object of the Act and the provisions thereof. Then Obul Reddi C.J. observed Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
"We are not inclined to agree that section 271(1) excludes mens rea by necessary implication. Once it is held by us that mens rea is an essential ingredient for imposing penalty it follows that the onus is upon the department to show the element of guilty mind in the assessee."
Then reference was made to the observations of Shah, Acting C.J., in Hindustan Steel Ltd. Vs. State of Orissa, and then of Grover J. in Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, . The learned Chief Justice proceeded to refer to the decisions of the High Courts of Mysore, Karnataka, Orissa and Kerala and finally observed Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
Hindustan Steel Ltd. Vs. State of Orissa, and then of Grover J. in Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, . The learned Chief Justice proceeded to refer to the decisions of the High Courts of Mysore, Karnataka, Orissa and Kerala and finally observed Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
Hindustan Steel Ltd. Vs. State of Orissa,
and then of Grover J. in Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, . The learned Chief Justice proceeded to refer to the decisions of the High Courts of Mysore, Karnataka, Orissa and Kerala and finally observed Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
and then of Grover J. in Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, . The learned Chief Justice proceeded to refer to the decisions of the High Courts of Mysore, Karnataka, Orissa and Kerala and finally observed Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, . The learned Chief Justice proceeded to refer to the decisions of the High Courts of Mysore, Karnataka, Orissa and Kerala and finally observed Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali,
. The learned Chief Justice proceeded to refer to the decisions of the High Courts of Mysore, Karnataka, Orissa and Kerala and finally observed Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
. The learned Chief Justice proceeded to refer to the decisions of the High Courts of Mysore, Karnataka, Orissa and Kerala and finally observed Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
"It is unnecessary to multiply decisions of this point. In view of what the Supreme Court has laid down in Hindustan Steel Ltd. Vs. State of Orissa, and in Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, the statutory obligation is upon the department to show that the assessee had acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest, or acted in conscious disregard of its obligation."
Hindustan Steel Ltd. Vs. State of Orissa, and in Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, the statutory obligation is upon the department to show that the assessee had acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest, or acted in conscious disregard of its obligation."
Hindustan Steel Ltd. Vs. State of Orissa,
and in Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, the statutory obligation is upon the department to show that the assessee had acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest, or acted in conscious disregard of its obligation."
and in Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, the statutory obligation is upon the department to show that the assessee had acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest, or acted in conscious disregard of its obligation."
Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, the statutory obligation is upon the department to show that the assessee had acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest, or acted in conscious disregard of its obligation."
Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali,
the statutory obligation is upon the department to show that the assessee had acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest, or acted in conscious disregard of its obligation."
the statutory obligation is upon the department to show that the assessee had acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest, or acted in conscious disregard of its obligation."
In the light of the opinion we have expressed, the observations in the Hindustan Steel Ltd. Vs. State of Orissa, and in Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, have no universal application to all penalty proceedings and certainly not to penalty proceedings u/s 271(1)(a). Therefore, we are unable to agree with the view expressed by Obul Reddi C.J. and Punnayya J. in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, .
Hindustan Steel Ltd. Vs. State of Orissa, and in Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, have no universal application to all penalty proceedings and certainly not to penalty proceedings u/s 271(1)(a). Therefore, we are unable to agree with the view expressed by Obul Reddi C.J. and Punnayya J. in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, .
Hindustan Steel Ltd. Vs. State of Orissa,
and in Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, have no universal application to all penalty proceedings and certainly not to penalty proceedings u/s 271(1)(a). Therefore, we are unable to agree with the view expressed by Obul Reddi C.J. and Punnayya J. in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, .
and in Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, have no universal application to all penalty proceedings and certainly not to penalty proceedings u/s 271(1)(a). Therefore, we are unable to agree with the view expressed by Obul Reddi C.J. and Punnayya J. in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, .
Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, have no universal application to all penalty proceedings and certainly not to penalty proceedings u/s 271(1)(a). Therefore, we are unable to agree with the view expressed by Obul Reddi C.J. and Punnayya J. in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, .
Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali,
have no universal application to all penalty proceedings and certainly not to penalty proceedings u/s 271(1)(a). Therefore, we are unable to agree with the view expressed by Obul Reddi C.J. and Punnayya J. in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, .
have no universal application to all penalty proceedings and certainly not to penalty proceedings u/s 271(1)(a). Therefore, we are unable to agree with the view expressed by Obul Reddi C.J. and Punnayya J. in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, .
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, .
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
.
.
We may incidentally refer to a decision of the Madras High Court in V. RAMANATHAN Vs. COMMISSIONER OF Income Tax, MADRAS., were a Division Bench held that it is for the department to show that the assessee who failed to submit the return did so without reasonable cause. The view expressed here in only on the question of burden of proof. Further, it said that what the department has to show is that the assessee had failed to submit the return with reasonable cause. It did not say further that contumacious conduct also should be established by the department.
V. RAMANATHAN Vs. COMMISSIONER OF Income Tax, MADRAS., were a Division Bench held that it is for the department to show that the assessee who failed to submit the return did so without reasonable cause. The view expressed here in only on the question of burden of proof. Further, it said that what the department has to show is that the assessee had failed to submit the return with reasonable cause. It did not say further that contumacious conduct also should be established by the department.
V. RAMANATHAN Vs. COMMISSIONER OF Income Tax, MADRAS.,
were a Division Bench held that it is for the department to show that the assessee who failed to submit the return did so without reasonable cause. The view expressed here in only on the question of burden of proof. Further, it said that what the department has to show is that the assessee had failed to submit the return with reasonable cause. It did not say further that contumacious conduct also should be established by the department.
were a Division Bench held that it is for the department to show that the assessee who failed to submit the return did so without reasonable cause. The view expressed here in only on the question of burden of proof. Further, it said that what the department has to show is that the assessee had failed to submit the return with reasonable cause. It did not say further that contumacious conduct also should be established by the department.
We must also refer to a decision of Vaidya and Sriramulu JJ. in Mullapudi Venkatarayudu Vs. Union of India (UOI), . It is also a case which arose u/s 271(1)(a). The learned judges held among other things :
Mullapudi Venkatarayudu Vs. Union of India (UOI), . It is also a case which arose u/s 271(1)(a). The learned judges held among other things :
Mullapudi Venkatarayudu Vs. Union of India (UOI),
. It is also a case which arose u/s 271(1)(a). The learned judges held among other things :
. It is also a case which arose u/s 271(1)(a). The learned judges held among other things :
"As there is no exclusion of mens rea either expressly or by necessary implication in section 271, it has to be determined whether there was any mens rea in the assessee acting against the provisions of section 139(1) was with a wrongful intention or culpable negligence. In order to determine whether there was culpable negligence it will have to be determined whethe the assessee did his best as a reasonable man to avoid the non-compliance. Where the Income Tax Officer came to be conclusion that the mere fact that the petitioner was under the impression that as in earlier years he would be served with a notice to file the return was not sufficient to held that he had taken reasonable care to comply with the provisions of the section."
For the reasons we have stated above, the position as stated by the Division Bench in this case case cannot be accepted.
Then came the Full Bench decision of the Kerala High Court in Commissioner of Income Tax Vs. Gujarat Travancore Agency, . That is a case which directly arose u/s 271(1)(a). Gopalan Nambiyar J. spoke for the Bench. After comparing section 18 of the Wealth-tax Act with section 271(1)(a) of the Income Tax Act the Full Bench held that the provisions for the imposition of penalty u/s 271(1)(a) are independent of the provisions of prosecution and punishment u/s 276C, in the sense that the proceedings under the one will not bar action under the other. It was observed :
Commissioner of Income Tax Vs. Gujarat Travancore Agency, . That is a case which directly arose u/s 271(1)(a). Gopalan Nambiyar J. spoke for the Bench. After comparing section 18 of the Wealth-tax Act with section 271(1)(a) of the Income Tax Act the Full Bench held that the provisions for the imposition of penalty u/s 271(1)(a) are independent of the provisions of prosecution and punishment u/s 276C, in the sense that the proceedings under the one will not bar action under the other. It was observed :
Commissioner of Income Tax Vs. Gujarat Travancore Agency,
. That is a case which directly arose u/s 271(1)(a). Gopalan Nambiyar J. spoke for the Bench. After comparing section 18 of the Wealth-tax Act with section 271(1)(a) of the Income Tax Act the Full Bench held that the provisions for the imposition of penalty u/s 271(1)(a) are independent of the provisions of prosecution and punishment u/s 276C, in the sense that the proceedings under the one will not bar action under the other. It was observed :
. That is a case which directly arose u/s 271(1)(a). Gopalan Nambiyar J. spoke for the Bench. After comparing section 18 of the Wealth-tax Act with section 271(1)(a) of the Income Tax Act the Full Bench held that the provisions for the imposition of penalty u/s 271(1)(a) are independent of the provisions of prosecution and punishment u/s 276C, in the sense that the proceedings under the one will not bar action under the other. It was observed :
"The mere use of the expression without reasonable cause cannot import a mental element or mens rea. There is no justification for reading into section 271, the requirements of any mens rea expressly provided for in section 276C".
Nambiyar J. pointed out that :
"It will not be correct to regard the ingredients of the misconduct under the two provisions, i.e., sections 271 and 276C as identical. The imposition of penalty u/s 271 on the basis on an act or omission by an assessee in not because the act or omission constitutes and offence, but because that act or omission would constitute an attempt at evasion. Hence, the penalty provisions under the Act are not provisions of a criminal nature which warrant the requirement of mens rea in the sense in which the same is required for an offence by the criminal law. Hence, mens rea need not be established before imposition of penalty u/s 271(1)(a)."
While coming to this conclusion. the Full Bench distinguished Hindustan Steel Ltd. Vs. State of Orissa, ) and overruled the earlier decisions of the Kerala High Court in P. Vs. Devassy V. Commissioner of Income Tax, and Dawn and Co. Vs. Commissioner of Income Tax, . The Full Bench also referred to the decision of the Punjab High Court in Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran, and it was dissented from.
Hindustan Steel Ltd. Vs. State of Orissa, ) and overruled the earlier decisions of the Kerala High Court in P. Vs. Devassy V. Commissioner of Income Tax, and Dawn and Co. Vs. Commissioner of Income Tax, . The Full Bench also referred to the decision of the Punjab High Court in Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran, and it was dissented from.
Hindustan Steel Ltd. Vs. State of Orissa,
) and overruled the earlier decisions of the Kerala High Court in P. Vs. Devassy V. Commissioner of Income Tax, and Dawn and Co. Vs. Commissioner of Income Tax, . The Full Bench also referred to the decision of the Punjab High Court in Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran, and it was dissented from.
) and overruled the earlier decisions of the Kerala High Court in P. Vs. Devassy V. Commissioner of Income Tax, and Dawn and Co. Vs. Commissioner of Income Tax, . The Full Bench also referred to the decision of the Punjab High Court in Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran, and it was dissented from.
P. Vs. Devassy V. Commissioner of Income Tax, and Dawn and Co. Vs. Commissioner of Income Tax, . The Full Bench also referred to the decision of the Punjab High Court in Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran, and it was dissented from.
P. Vs. Devassy V. Commissioner of Income Tax,
and Dawn and Co. Vs. Commissioner of Income Tax, . The Full Bench also referred to the decision of the Punjab High Court in Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran, and it was dissented from.
and Dawn and Co. Vs. Commissioner of Income Tax, . The Full Bench also referred to the decision of the Punjab High Court in Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran, and it was dissented from.
Dawn and Co. Vs. Commissioner of Income Tax, . The Full Bench also referred to the decision of the Punjab High Court in Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran, and it was dissented from.
Dawn and Co. Vs. Commissioner of Income Tax,
. The Full Bench also referred to the decision of the Punjab High Court in Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran, and it was dissented from.
. The Full Bench also referred to the decision of the Punjab High Court in Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran, and it was dissented from.
Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran, and it was dissented from.
Additional Commissioner of Income Tax Vs. Karnail Singh V. Kaleran,
and it was dissented from.
and it was dissented from.
The Full Bench of the Orissa High Court in Commissioner of Income Tax Vs. Gangaram Chapolia, considered the nature of the penalty proceedings u/s 271(1)(a). Considering the question when exactly an assessee can be visited with a penalty u/s 271(1)(a), the Full Bench opined that if the assessee does not furnish any explanation or furnishes a cause which is not accepted as reasonable, penalty is leviable for not furnishing the return within the time allowed. Then the learned judges compared section 271(1)(a) and section 276C and observed at page 619 :
Commissioner of Income Tax Vs. Gangaram Chapolia, considered the nature of the penalty proceedings u/s 271(1)(a). Considering the question when exactly an assessee can be visited with a penalty u/s 271(1)(a), the Full Bench opined that if the assessee does not furnish any explanation or furnishes a cause which is not accepted as reasonable, penalty is leviable for not furnishing the return within the time allowed. Then the learned judges compared section 271(1)(a) and section 276C and observed at page 619 :
Commissioner of Income Tax Vs. Gangaram Chapolia,
considered the nature of the penalty proceedings u/s 271(1)(a). Considering the question when exactly an assessee can be visited with a penalty u/s 271(1)(a), the Full Bench opined that if the assessee does not furnish any explanation or furnishes a cause which is not accepted as reasonable, penalty is leviable for not furnishing the return within the time allowed. Then the learned judges compared section 271(1)(a) and section 276C and observed at page 619 :
considered the nature of the penalty proceedings u/s 271(1)(a). Considering the question when exactly an assessee can be visited with a penalty u/s 271(1)(a), the Full Bench opined that if the assessee does not furnish any explanation or furnishes a cause which is not accepted as reasonable, penalty is leviable for not furnishing the return within the time allowed. Then the learned judges compared section 271(1)(a) and section 276C and observed at page 619 :
"Wilful failure to file the return in due time is the gravamen of the offence u/s 271(1)(c) (obviously, a mistake for 276(C). The burden of proof is on the revenue to establish beyond reasonable doubt that the failure to file the return in due time is wilful. There is a well-marked distinction between the meaning of the expression without reasonable cause and wilfully. The word wilfully in Chambers Twentieth Century Dictionary carried the following meanings : governed only by ones will, obstinate; done intentionally. When a person acts wilfully he acts without reasonable cause, but the converse is not true. Not to carelessly or negligently file the return within the time allowed is an act without reasonable cause, but it may not be wilful. The word wilful imports the concept of mens rea while it is absent in the expression without reasonable cause."
Then the learned judges referred to the observations in the Hindustan Steel Ltd. Vs. State of Orissa, was also referred to and it was observed that apart from the conclusion that penalty proceedings are quasi-criminal in nature, Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, does not throw any light or the point in issue in the case before the Full Bench.
Hindustan Steel Ltd. Vs. State of Orissa, was also referred to and it was observed that apart from the conclusion that penalty proceedings are quasi-criminal in nature, Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, does not throw any light or the point in issue in the case before the Full Bench.
Hindustan Steel Ltd. Vs. State of Orissa,
was also referred to and it was observed that apart from the conclusion that penalty proceedings are quasi-criminal in nature, Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, does not throw any light or the point in issue in the case before the Full Bench.
was also referred to and it was observed that apart from the conclusion that penalty proceedings are quasi-criminal in nature, Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, does not throw any light or the point in issue in the case before the Full Bench.
Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, does not throw any light or the point in issue in the case before the Full Bench.
Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali,
does not throw any light or the point in issue in the case before the Full Bench.
does not throw any light or the point in issue in the case before the Full Bench.
Sri Dasaratharama Reddi criticised these two Full Bench decisions pointing out that they did not notice the difference in the language used in section 139(8) and its proviso, section 146 and section 271(1)(a). We do not think that this criticism is valid. The omission to compare the language of the above provisions with section 271(1)(a) is immaterial. What is important is the comparison between section 271(1)(a) and section 276C. That was clearly pointed out by both the Full Benches.
Then, in the order of reference to a Full Bench in this case, Chinnappa Reddi and Jeevan Reddi JJ. expressed a similar view. The view expressed by the Full Benches of Kerala and Orissa High Courts and that of the Divisions Bench in the order of reference are in accord with the view which we have taken. As we have already held, the view expressed in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, is not correct.
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, is not correct.
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
is not correct.
is not correct.
If mens rea is not an ingredient of the proceeding u/s 271(1)(a), the further question would remain on whom the burden of proof lies in regard to showing the absence of reasonable cause. In our opinion, reading section 271(1)(a) and section 274 together, the position would be made clear. Penalty u/s 271(1)(a) can be imposed only when the Income Tax Officer or the Appellate Assistant Commissioner is satisfied in the course of any proceedings under the Income Tax Act, that any person has without reasonable cause failed to furnish the return of total income which he was required to furnish in accordance with law. In other words, unless the concerned officer is satisfied that the delay has occurred without reasonable cause, no penalty can be imposed. In the first place, he will have to be satisfied that there is no reasonable cause and then only he can impose penalty. The responsibility of reaching that satisfaction is thus cast on the appropriate authority. Section 274 requires that before imposing a penalty, the assessee should be heard or should have been given a reasonable opportunity of being heard. Therefore, the position that emerges from the reading of section 271(1)(a) and section 274 together is : When as assessee files the return after the due date, the Income Tax Officer gives him an opportunity to explain the delay. If after considering the explanation of the assessee the Income Tax Officer is satisfied that there is no reasonable cause for the delay, he levies the penalty. The burden is upon the Income Tax Officer to be satisfied that there is no reasonable cause. Even if the assessee, when given an opportunity, does not avail himself of that opportunity it is for the Income Tax Officer to go through the records and satisfy himself that there was no reasonable cause. It is the responsibility of the officer concerned to examine the reason advanced and find out where it is reasonable in the circumstances of the case. If he is satisfied that it is reasonable cause then he cannot impose a penalty. He can impose penalty only if he is satisfied that the delay has occurred without reasonable cause. Though the preliminary responsibility is that of the assessee to advance some cause, it is the task of the Income Tax Officer or the Appellate Assistant Commissioner to satisfy himself whether the cause advanced is reasonable or not. To put in other words, no penalty can be levied unless the satisfaction of the concerned officer is indicated that the delay was not due to any reasonable cause. If, for instance, the assessee does not give any cause at all, either by himself or when given an opportunity u/s 274, then it is the task of the Income Tax Officer or the Appellate Assistant Commissioner to satisfy himself whether the circumstances which emerge from the record indicate any reasonable cause or not. When no reason at all has been advanced by the assessee, the task of the officer concerned in reaching that satisfaction become very very light. In such cases, generally speaking, unless something concrete emerges from the record itself, the concerned officer may reach the satisfaction that the delay occurred without reasonable cause. When some reason has been advanced, it is his duty to examine it and find out where it is reasonable or not in the circumstances of the case and the situation of the assessee. Even in regard to the task of reaching his satisfaction, the assessee cannot escape the primary responsibility of advancing a cause and if he does not do it, he runs the risk of the officer coming to the conclusion that there was no reasonable cause for the delay. Take for instance, the case in John v. Humphreys [1955] 1 All ER 793 where a person was prosecuted for driving without licence. Certainly, the burden was on the prosecution to prove that the accused was driving without licence. They could only be expected to prove that when the accused was detected he was asked for his licence, he did not show it, he was given an opportunity to produce it, but he did not produce it. It would be unreasonable to put further burden on the prosecution to prove that the driver had at no time secured any licence or if he had secured one that had expired. Whether he had a subsisting licence or not is a matter is within the special knowledge of the accused and it is for him to show that. Likewise, in these matters of reaching satisfaction as to the existence or absence of reasonable cause, the matters which are within the special knowledge of the assessee should be disclosed by him. If he fails to disclose them, then what all the Income Tax Officer, or the Appellate Assistant Commissioner can do and is expected to do, to reach the satisfaction that is required u/s 271(1), is to examine the entire record relating to the proceeding and to find out whether the delay has been occasioned on account of any reasonable cause or without reasonable cause. This, in our view, is the scope of the burden or satisfaction that rests with the Income Tax Officer or the Appellate Assistant Commissioner.
It may also be emphasised that, having regard to the penal consequences, the expression "reasonable cause" has to be liberally construed in favour of the assessee. Construing section 5 of the Limitation Act there is a long line of cases beginning with Krishna v. Chathappan ILR [1889] Mad 269 which was approved by the Supreme Court in Ramlal, Motilal and Chhotelal Vs. Rewa Coalfields Ltd., that the word "sufficient cause" should receive liberal construction so as to advance substantial justice. This is particularly true with regard to a case where non-submission of return in time results in penal consequences.
Ramlal, Motilal and Chhotelal Vs. Rewa Coalfields Ltd., that the word "sufficient cause" should receive liberal construction so as to advance substantial justice. This is particularly true with regard to a case where non-submission of return in time results in penal consequences.
Ramlal, Motilal and Chhotelal Vs. Rewa Coalfields Ltd.,
that the word "sufficient cause" should receive liberal construction so as to advance substantial justice. This is particularly true with regard to a case where non-submission of return in time results in penal consequences.
that the word "sufficient cause" should receive liberal construction so as to advance substantial justice. This is particularly true with regard to a case where non-submission of return in time results in penal consequences.
Having expressed our opinion as to the nature of the proceeding u/s 271(1)(a) and the scope of the burden in reaching the satisfaction, we will now proceed to examine the merits of the case. The assessee, which are firms, failed to file their returns for the years 1965-66 to 1969-70 within the time prescribed under the Indian Income Tax Act. In the first place, the explanation given before the Income Tax Officer was that the person who was in charge of the accounts of the firms was unable to look after the affairs of the firms for some time on account of his personal grievance. In the revision petition before the Commissioner, the reason for the delay was stated as family troubles. The family troubles obviously must be taken to be those of the members of the firms. They did not care to state what the family troubles were, when they occurred, how long they persisted and when they ended. It is not as if they did not have opportunity to do so. They had ample opportunity when they preferred revision petitions before the Income Tax Commissioner. A mere vague and bald statement that "family troubles" prevented the filing of the returns in time did not naturally appeal to the Commissioner as a reasonable cause. So, he did not accept the explanation and rejected the revision petitioneritions. Since we have held that the view taken by Obul Reddi J. (as he then was) while quashing the orders of the Commissioner and remitting the matters back to him that the penalties could be imposed only when the assessee either acted deliberately in defiance of law, or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation and not otherwise, is not warranted by section 271(1)(a), the question remains, whether the decision of the Commissioner in holding that the explanation given by the assessee for filing the returns after due time, is right or not. We have already pointed out that though the burden is on the Commissioner to reach the satisfaction as to the existence or absence of reasonable cause for the delayed filing of returns, the assessee must place before the appropriate authority, matters which are within his exclusive knowledge. Here, the assessee rested content with merely saying that they were prevented by family troubles. The nature and duration of the troubles which stood in the way of filing of the returns in time were within the peculiar special knowledge of the assessees and were not disclosed. Neither the Income Tax Officer nor the Commissioner is expected to make a separate enquiry by himself as to what those family troubles were and how long they lasted and whether they really prevented the assessee from filing the returns in time, when obviously no further material was available from the record to show cause for the delayed filing of the returns. In these circumstances, we are satisfied that the Commissioner was right in refusing to accept these bald and unexplained family troubles as the reasonable cause for the delayed filing of the returns.
We, therefore, uphold the decisions of the Commissioner in rejecting the revision petitions of the assessees, set aside the order of Obul Reddy J. (as he then was) quashing the order of the Commissioner of Income Tax and allow these writ appeals. It is, however, open to the assessees to applicantroach the Commissioner u/s 271(1)(4A) for appropriate relief. We would also like to make it clear that what we have decided is only in respect of the proceedings u/s 271(1)(a) and not in regard to section 271(1)(c).
In view of the unsettled law on the subject so far, we direct the parties to bear their own costs throughout.
LAKSHMAIAH J. - I agree with the conclusion of my learned brother that these writ appeals should be allowed, but having regard to the general importance of the question raised which we are informed by the learned counsel appearing in this case, was not raised anywhere in this form, I propose to give my own reasons :
The question formulated by my learned brother for being answered is :
"Is there an occasion to introduce the doctrine of mens rea into section 271(1)(a) read with sub-clause (i) of that section of the Income Tax Act, 1961 "
Section 271(1)(a)(i), in so far as it is material, reads thus :
"271. Failure to furnish returns, comply with notices, concealment of income, etc.,-(1) If the Income Tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person -
(a) has without reasonable cause failed to furnish the returns of total income which he was required to furnish under sub-section (1) of section 139 or.........
he may direct that such person shall pay by way of penalty, -
(i) in the cases referred to in clause (a), in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty cent. of the tax."
Facts :
For failure to furnish within the stipulated time the return of total income which the respondent-assessee was required u/s 139(1), the Income Tax Officer in exercise of the powers conferred upon him by sub-section (1) of section 271 of the Act imposed penalty.
A Division Bench of this court consisting of the honourable the Chief Justice and Punnayya J. in Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, was of the view that penalties u/s 271(1)(a) could only be imposed, if it was found that the assessee acted deliberately in defiance of the law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of his obligations and not otherwise.
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan, was of the view that penalties u/s 271(1)(a) could only be imposed, if it was found that the assessee acted deliberately in defiance of the law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of his obligations and not otherwise.
Additional Commissioner of Income Tax Vs. Narayanadas Ramkishan,
was of the view that penalties u/s 271(1)(a) could only be imposed, if it was found that the assessee acted deliberately in defiance of the law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of his obligations and not otherwise.
was of the view that penalties u/s 271(1)(a) could only be imposed, if it was found that the assessee acted deliberately in defiance of the law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of his obligations and not otherwise.
Another Division Bench of this court, consisting of Chinnappa Reddi and Jeevan Reddi JJ. found it difficult to agree with that view of section 271. According to that Bench ADDL. COMMISSIONER OF Income Tax, A.P., AND ANOTHER Vs. DARGAPANDARINATH TULJAYYA and CO.,
ADDL. COMMISSIONER OF Income Tax, A.P., AND ANOTHER Vs. DARGAPANDARINATH TULJAYYA and CO.,
ADDL. COMMISSIONER OF Income Tax, A.P., AND ANOTHER Vs. DARGAPANDARINATH TULJAYYA and CO.,
"Parliament has prescribed an objective test to determine the mental state of the person proposed to be proceeded against. There is no reason for importing the doctrine of mens rea into a situation where the requisite mental state is already defined......... Nor is there any reason for qualifying the failure to furnish a return with expressions like contumacious, dishonest, in deliberate defiance of law, etc., To do so, is to rewrite section 271(1)(a)."
It is for the purpose of solving that conflict this Full Bench is constituted. The problem presented for solution is essentially one of interpretation or construction of statutes necessitating thus a consideration of -
(I) the nature, subject matter, object and policy of the Income Tax Act, 1961, and
(II) the common law tradition of judicial approach towards modern legislation.
(I) (a). The Income Tax Act : nature and subject-matter. -This Act was enacted by Parliament in exercise of the exclusive power conferred upon it under articles and 245246 of the Constitution of India to make law with respect to matters enumerated in the Union List, particularly in entry 82 dealing with "taxes on income other than agricultural income", in entry 93 dealing with "offences against laws with respect to any of the matters in this list", and in entry 95 dealing with "jurisdiction and powers of all court except the Supreme Court with respect to any of the matters in this List". That exclusive power extends to making any law with respect to any matter not enumerated in the Concurrent List or State List and such power includes the power of making any laws imposing a tax not mentioned in either of those Lists. (See article 248 and entry 97 in the Union List).
Parliament has concurrent power with the legislature of a State to make laws with respect to "criminal law" (entry I) and "criminal procedure" (entry II) of the Concurrent List.
The scope of criminal law is explicated by including within its ambit "all matters included in the Indian Penal Code at the commencement of this Constitution but excluding offences against laws with respect to any of the matters specified in List I or List II......" The expression "criminal procedure" in entry II comprehends within its ambit "all matters in the Code of Criminal Procedure at the commencement of this Constitution".
It is thus manifest that the framers of the Constitution intended that offences against laws contained in the Income Tax Act, 1961, should be excluded from out of the purview of "criminal law", whatever else that expression "criminal law" may comprehend.
Offence-Definition. - The expression "offence" is not defined in the Constitution but that expression is defined by section 3(38) of the General Clauses Act, 1897, which is rendered applicable through article 367 for the interpretation of the Constitution to mean "any act or omission made punishable by any law for the time being in force."
Indian Penal Code. - The word "offence" is defined by section 40 of the Indian Penal Code, among other things, to denote a thing made punishable by the Indian Penal Code. In the second paragraph of that section, we find the word "offence" being described to denote a thing punishable under the Code or under any special or local law as hereinafter defined. In the last paragraph of that section, we find the word being defined as having the same meaning when the thing punishable under the special or local law is punishable under such law with imprisonment for a term of six months or upwards, whether with or without fine.
Section 41 defines "special law" as law applicable to a particular subject and section 42 defines "local law" as law applicable only to a particular part of India.
Section 53 deals with punishments and provides thus :
"53. Punishments. - The punishments to which offenders are liable under the provisions of this Code are. -
Firstly, - Death;
Secondly, - Imprisonment for life;
Thirdly, - (Repealed by Act XVII of 1949);
Fourthly, - Imprisonment, which is of two descriptions, namely :-
(1) Rigorous, that is, with hard labour;
(2) Simple;
Fifthly, - Forfeiture of property;
Sixthly, - Fine."
Criminal Procedure Code. - Section 4(o) of the Code of Criminal Procedure, 1898, defines the expression "offence" to mens "any act or omission made punishable by any law for the time being in force;......"
Section 5 deals with "Trial of offences under Penal Code and against other laws" and reads thus :
"5. (1) All offences under the Indian Penal Code shall be investigated inquired into, tried and otherwise dealt with according to the provisions hereinafter contained.
(2) All offences under any other law shall be investigated, inquired into, tried and otherwise dealt with according to the same provisions, but subject to any enactment for the time being in force regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences."
Section 28 and 29 deal with powers of the Code with respect to offences both under the Penal Code as well as under the other laws, and they read as follows :
"28. Offences under Penal Code. - Subject to the other provisions of this Code any offence under the Indian Penal Code may be tried -
(a) by the High Court, or
(b) by the court of session, or
(c) by any other court by which such offence is shown in the eighth column of the Second Schedule to be triable.
29. Offences under other laws. - (1) Subject to the other provisions of the Code any offence under any other law shall, when any court is mentioned in this behalf in such law, be tried by such court.
(2) When no court is so mentioned it may be tried by the High Court or subject as aforesaid by any court constituted under this Code by which such offence is shown in the eighth column of the Second Schedule to be triable."
The distinction is thus maintained under the Code between offences under the Indian Penal Code and offences under other laws, as mentioned in the Second Schedule appended to the Code.
There are provisions in the Code of Criminal Procedure, 1973, corresponding to those that were mentioned above.
income tax Act : Offences. - So far as the Income Tax Act, 1961, is concerned, we find Chapter XXII being devoted to the subject-matter of "offences and prosecutions". Contraventions of provisions of the Act mentioned in the various sections under that Chapter were rendered punishable with rigorous imprisonment extending from six months to two years with a further liability to fine also. So far as failure to furnish return of income under sub-section (1) of section 139 is concerned, section 276C says that, if a person wilfully fails to furnish in due time the return of income which he is required to furnish under sub-section 139 ...... he shall be punishable with rigorous imprisonment for a terms which may extend to one year or with fine equal to a sum calculated at a rate which shall not be less than four rupees or more than ten rupees for every day during which the default continues, or with both. (The proviso is not relevant).
Section 279 deals with the subject-matter of prosecution to be at the instance of the Commissioner and provides that a person shall not be proceeded against for an offence among other things u/s 276C except at the instance of the Commissioner. Sub-section (2) provides for a compounding of any offence by the Commissioner either before or after the institution of the proceedings.
Section 292 of the Act deals with cognisance of offence and provides that no court inferior to that of a presidency magistrate or a magistrate of the first class shall try any offence under this Act.
income tax Act : Penalties :-
Chapter XXI of the Income Tax Act deals with penalties imposable wherein section 271 occurs. It has already been noticed that u/s 271(1)(a), the Income Tax Officer or the Appellate Assistant Commissioner has power subject to the fulfilment of the conditions mentioned therein to direct any person to pay by way of penalty for failure to furnish among others things, the return of total income under sub-section (1) of section 139. Sub-section (4A) of that section empowers the Commissioner to reduce or waive the amount of minimum penalty imposable on a person under clause (i) of sub-section (1) for failure, without reasonable cause, to furnish the return of total income which such person was required to furnish under sub-section (1) of section 139. Section 274 provides for the procedure to be adopted for passing an order imposing a penalty under Chapter XXI according to which no order imposing a penalty under that Chapter shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard.
I(b). Income Tax Act-Object and policy : Taxation-Directive principles of State policy :
"(c) Redistributive techniques-taxation and social services.
Taxation is no longer just a way of raising revenue. Since the end of the nineteenth century, it has become in conjunction with the social services an increasingly important way of redistributing income according to need." (Social Principles and the Democratic State by S.I. Benn and R. S. Peters, at page 153).
Robert Murray Haig in a brilliant article in Encyclopaedia of the Social Sciences referring to the views of Wagner, said at page 533 of Volume XIV thus :
"In all his writing in the field of taxation Wagner gave great weight to socio-political principles. He considered it a primary function of Government to regulate the distribution of wealth and urged the use of taxation as a means not only of raising sufficient revenue to meet the fiscal needs of the State but of consciously levelling the inequalities of distribution brought about by the workings of the market. Indeed even in defining taxation he stresses this function of regulating and correcting the distribution and use of private property."
Julius Stone in his classic work Social Dimensions of Law and Justice (1966) observed at page 324 thus :
"Taxation as the source of the public revenue is, of course, a foundation of all political institutions. The public interest of substance, therefore, is really but one aspect of the social interest in political institutions. The greater revenue required for modern expanded State functions has extended and intensified the need for protection of the public purse. Taxes, more than ever, are the life blood of government,......
Peacetime taxation is increasingly directed to social welfare and services, and countering economic cyclical movements or conjectures as distinct from the rudimentary functions of law, order, external defence or serving the monarchs pleasure of the seventeenth century.
Taxation is one of the most important weapons by which the State can mitigate the two objectionable aspects of unrestricted private property : first, the inequalities of wealth, and secondly, the power to use property for private profit, and without regard to community purpose. In popular consciousness the first aim still predominates. By graded taxation and surtax on high incomes, gross inequalities of wealth are evened out more easily than by the equalisation of income or the abolition of private property. But the second aspect of taxation policy is becoming increasingly more important. On the one hand, taxation is a cheap means by which the State finances its costly social service scheme. Under the British National Health Services Act, 1946, medical services are free for all. The cost of medical services is no longer met by millions of contributions of varying magnitude from private pockets, but out of public revenue. This means that income and property taxes largely pay for the medical services of the poorer classes. To the extent that the State contributes to the cost of national insurance (National Insurance Act, 1946) the same applies. "(Law in a Changing Society by W. Friedmann at page 85).
My learned brother is also of the view that the taxation statutes are intended not only to collect revenue for the State but also for bringing about social justice and to enable the State to implement social welfare schemes undertaken by it.
Directive Principles-Fundamentality, Enforceability and Judicial process. -This device of taxation policy in raising revenue s both for the extended and expanded functions of the modern welfare State as well as for securing the redistribution of wealth, was utilised by the founding-fathers of the Constitution through making provision for the enactment of taxation laws by formulating the same as one of the Directive Principles of State Policy, as is manifest from article 39 of the Constitution, particularly from clauses (b) and (c) thereof, registering thus the shift of emphasis in the conception of State from what it was-"an instrument of power"-to what it has come to be "an agency of service" and further emphasising the factum of the movement in the society away from individualism towards collectivism.
Part IV deals with Directive Principles of State Policy. The framers of the Constitution visualised a welfare State. The State, including Parliament, shall have to strive to promote the welfare of the people by securing and protecting, as effectively as it may, a social order in which justice, social, economic and political, shall have to inform all the institutions of the national life (article 38).
The responsibility for the ushering in of such a welfare State is committed to the care of Parliament. Parliament is required to accomplish that objective through the process of law. While making law, Parliament is required to apply the principles laid down in Part IV. Those principles are declared to be fundamental in the governance of the country though the provisions containing those principles in that Part are rendered unenforceable by any court (article 37).
Certain principles of policy comprehending tax policy as well, to enumerate only a few, to be followed by the State are then mentioned in article, 39, as per which the State shall have to," in particular, direct its policy towards securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good and that the operation of the economic system does not result in the concentration of wealth and means of production of the common detriment."
Note the constitutional mandate in articles 37 : "It shall be the duty of the State to apply these principles in making laws", principles declared to be fundamental in the governance of the country.
The process of the governance of this court as per article 37 of the Constitution is to be carried on by law-making instrumentalities by applying the Directive Principles of State Policy as laid down in Part IV, while making laws and by law applying and enforcing instrumentalities, by interpreting and construing such laws embodying such principles. There is a duty cast on the courts to interpret the Constitution and the laws to further the Directive Principles. While interpreting the laws, the courts shall have to make a functional and pragmatic approach to the problems in terms of utility and social consequence. That is the sociological applicantroach. It is only through this approach, that the aspirations of the people, enshrined in the Preamble and embodied in Part IV of the Constitution, can be realised.
It is mistake to suppose that the Directive Principles in Part IV are subordinate to the right conferred by Part III because of articles 32 and 226 providing for the enforceability of rights and of articles 37 providing for the unenforceability of provisions contained in Part IV. In the first place, there is nothing in common between rights and principles to be compared and contrasted. In the second place, the distinction between the provisions contained in Part IV rendered unenforceable by any court and the principles laid down therein with a constitutional declaration that they are fundamental in the governance of the county with a duty cast upon Parliament to apply those principles in making laws is too vital and too fundamental to be lost sight of.
The provisions contained in Part IV are as much unenforceable by any court, as any other provision contained in any other part of the Constitution, say like those contained in Part XI, in the sense that they cannot be enforced. At best it is only a neutral circumstances. But that is not to say that the principles contained in law made by Parliament are unenforceable. There is no warrant to project the inhibition of unenforceability of provisions into the principles contained in laws made by Parliament.
Directive Principles, the founding-fathers of the Constitution declared through article 37 in Part IV as fundamental, but no such constitutional reckoning is accorded through any of the articles contained in the Constitution to the rights conferred by Part III. These rights, as a matter of fact, are referred to even in articles 32 and 226 not as fundamental rights but merely as rights conferred by Part III. The rights are also not absolute. The Principles in Part IV, therefore, are fundamental but not the rights in Part III. The fundamentality of the principles shall have to be maintained by courts through interpretative process.
That is the nature, subject-matter, object and policy of the Income Tax Act, 1961. That takes us to the next aspect of the matter as regards the nature of judical approach towards this legislation.
II. COMMON LAW TRADITION OF JUDICIAL APPROACH TOWARDS MODERN LEGISLATION :
The emphasis of the common law was on freedom of property, freedom of contract and freedom of the person. Interference with these freedoms was not to be countenanced.
The common law antedates Parliament and the legislative process. It did not and could not by its own process of development meet all the challenges of changing society. The remedy had to be found in the legislature which evolves the legislative process passing into law its own statutes. Certain rules of common law and equity we find in their statutorised form in England in Acts like the Bills of Exchange Act, 1882, Sale of Goods Act, 1893, and Law of Property Act, 1925. There are other statutes containing welfare legislation addition new dimensions to the law, creating rights and obligations where before there were none. The common law is treated as a private law system, concerned essentially with the persons, the property, and the reputation of the individual. Its primary concern has been to defend private property and to distribute justice between individuals in disputes with each other. The business of the courts has thus been distributive justice, the interest of the State being to do justice between man and man. From that outlook and approach, there has arisen the common laws lack of concern with public law which is concerned with the rights and obligations of the State in the setting of municipal law. The welfare State is challenging the relevance, or at least the adequacy of the common laws concepts and classifications and rules and principles. (See Sir Leslie Scarman English Law- The New Dimension).
"A body of law which will satisfy the demands of the society of today cannot be made of the ultra-individualist materials of eighteenth century jurisprudence and nineteenth century law based thereon...." (The Spirit of Common Law by Roscoe Pound at page 190).
"Indeed fundamental changes have been taking place in our legal system almost unnoticed, and a shifting was in progress in our case law from the individualist justice of the nineteenth century which has passed so significantly by the name of legal justice, to the social justice of today even before the change in our legislative policy becomes so marked." The Spirit of Common Law by Roscoe Pound at page 185).
Lord Wright said in Rose v. Ford [1937] AC 826
"I venture respectfully to think that the view of the Court of Appeal illustrates a tendency common in construing an Act which changes the law, that is, to minimise or neutralise its operation by introducing notions taken from or inspire by the old law which the words of the Act were intended to abrogate and did abrogate."
G. W. Paton, in his A text book of Jurisprudence, third edition, at page 218, said :
"When an individualist common law is modified by collectivist legislation, we sometimes see an unsympathetic construction. Thus, the real basis of housing legislation is a sacrifice of private rights of ownership in order to make possible a planned attack on the problem of the provision of suitable accommodation-hence an over-emphasis on the presumption against interference with the private rights of the landowner sometimes in the past lead to a defeat of the real purpose of an Act. Pennsylvania has attempted to overcome rigid interpretation by a Statutory Construction Act which abolishes the rule that statues in derogation of the common law are to be strictly construed."
"The common lawyer is at his worst when confronted with a legislative text". (Roscoe Pound, Future of Common Law, page 18).
Julius Stone, in his Legal System and Lawyers Reasonings, said at page 348 thus :
"It is certainly clear that there has long been a canon of construction requiring, within vague limits, that statutes in derogation of the common law shall be strictly construed. The effect of such canon today when legislation is a major (perhaps the major) source of law, must obviously be serious. It has been well said that English courts have often inhibited themselves from seizing the spirit of institutions and situations which are in substance the creatures of modern legislation . These effects have been the subject of critical comment in connection with many major fields of legislation, for instance public health, the emancipation of married women, and the related matter of family life insurance policies, road traffic legislation, workmens compensation legislation, industrial safety legislation, industrial reorganisation legislation, trade union legislation, criminal law, sale of goods legislation, housing legislation, town planning legislation, legislation on the adoption and custody of infants, and many others......"
"The antithetical relationship between the common law and statute law, the law deposited and preserved in the hearts of the judges and law propounded by Parliament" is admirably brought out in a brilliant essay written as early as in the year 1908 and published in 21 Harvard Law Review at page 383 by Roscoe Pound under the heading "Common Law and Legislation" :
"Four ways may be conceived of in which courts in such a legal system as ours might deal with a legislation innovation :
(1) They might receive it fully into the body of the law as affording not only a rule to be applied but a principle from which to reason, and hold it, as a later and more direct expression of the general will, of superior authority to judge-made rules on the same general subject; and so reason from it by analogy in preference to them.
(2) They might receive it fully into the body of the law to be reasoned from it by analogy the same as any other rule of law, regarding it, however, as of equal or co-ordinate authority in this respect with The Judgment of the Court was delivered byge - made rules upon the same general subject.
(3) They might refuse to receive it full into the body of the law and give effect to it directly only; refusing to reason from it by analogy but giving it, nevertheless, a liberal interpretation to cover the whole filed it was intended to cover.
(4) They might not only refuse to reason from it by analogy and apply it directly only, but also give to it a strict and narrow interpretation, holding it down rigidly to those cases which it covers expressly.
The fourth hypothesis represents the orthodox common law attitude towards legislative innovations. Probably the third hypothesis, however, represents more nearly the attitude towards which we are tending. The second and first hypothesis doubtless appeal to the common law lawyer as absurd. He can hardly conceive that a rule of statutory origin may be treated as a permanent part of the general body of the law. But it is submitted that the course of legal development upon which we have entered already must lead us to adopt the method of the second and eventually the method of the first hypothesis."
According to Morris Cohen, "the meaning of a statute consists in the system of social consequences to which it leads or the solutions, to all the possible social questions that can arise under it. In essence, then, statutory interpretation involves a choice between uncertainties, and sociological jurisprudence suggests that the choice should be made in the light of the social consequences of decision, rather than in terms of judicial like or dislike of the particular statute or statutes generally."
Roscoe Pound finds no justification whatever for the maxim that statutes in derogation of the common law are to be strictly construed, and says that the rule has survived because of judicial jealously of the reform movement. The judge should not substitute his will for that of the legislature, said Hand, even though he might have more wisdom, because statutes embody the will of the elected representative of the people. Sociological jurisprudence insists, as a matter of value, that the social advantage of the rule is its major test, since the welfare of society is the general aim of the law. (From Society and the Law).
The joint report of the two Law Commissions, i.e., Law Commission and Scottish Law Commission Report on the interpretation of Statutes of 1969 says that "the rule in Heydons case [1584] 3 Co Rep 7a while not without merits, is somewhat outdated, because it assumes that statute is subsidiary or supplemental to the common law, whereas in modern conditions many statutes mark a fresh point of departure rather than a mere addition to, and qualification of the principles of common law. " (From Introduction to Jurisprudence by Lord Lloyd of Hampstead, third edition, at page 741).
One of the rules deduced by Sri, L. Scarman from the speech of Lord Herschell in Vagliano v. Bank of England [1891] AC 107 is "The law is to be deduced from an examination of the language of the statute. It is improper to try to make the language comply with the old law."
Doctrine of mens rea : One of the cardinal principles of English criminal law is expressed in the maxim actus non facit reum nisi mens sit rea, i.e., that "a person cannot be convicted and punished in a proceeding of a criminal nature unless it can be shewn that he had a guilty mind" [Chisholm v. Doulton [1889] 22 QBD 736].
"At common law, mens rea was an essential element of every crime and there would seem to be no case in which Parliament in giving statutory form to an old common law crime has dispensed with the need for mens rea. Nevertheless there is a long line of authorities which hold that Parliament has intended in one particular field or another to penalise persons, whether or not it can be said that they had mens rea for the particular offence. Offences of this kind are known as offences of strict or absolute liability, and in such cases it has been held that the belief, intention or state of mind of the accused person is immaterial and irrelevant if he has in fact done the actus reus which constitutes the offence......
The reason for the creation of offences of strick liability is an obvious one. Where mens rea is constitutent of an offence, the burden of proving it is upon the prosecution; and while the proof of the actus reus is generally effected by merely calling witness to the facts, the burden of proving mens rea is often a difficult and onerous one." (From Harriss Criminal Law at pages 40 & 41).
The maxim actus non facit reum nisi mens sit rea is not of general application to modern statutes, though it is a maxim generally applicable to offences at common law and possibly also to offences under the earlier statutes which are to be treated on the same basis as offences under the common law.
Wills J. in R. v. Tolson [1889] 23 QBD 168 suggested at pages 172 to 177 that "an element in determining whether or not mens rea is required is the nature and extend of the penalty attached to the offence, and that it will normally by required in construing a statutes constituting an offence entailing severe and degrading punishment."
W.T.S. Stallybrass in his article The Eclipse of Mens Rea in (1936) LQR 66 referring to the maxim actus non facit reum nisi mens sit rea held the view that "In the case of modern statutory offences the maxim has no general application and the statutes are to be regarded as themselves prescribed the mental element which is a prerequisite to a conviction". The learned author suggests that much of the confusion can be avoided if reference to mens rea in modern statutory offences is avoided.
In Hobbs v. Winchester Corporation [1910] 2 KB 471 Kennedy L. J. said that : "There is a clear balance of authority that in construing a modern statutes this presumption as to mens rea does not exist."
Donovan J. in R. v. St. Margarets Trust Ltd. [1958] 1 WLR 522 said that "modern statutes create offences where knowledge on the part of an offender is not essential, and that accordingly there is no universal prior presumption of mens rea."
In Lim Chin Aik v. R. [1963] AC 160 Lord Evershed said about the strict liability with respect to statutory functions thus :
"Where the subject-matter of the statute is the regulation for the public welfare of a particular activity-statutes regulating the sale of food and drink are to be found among the earliest examples-it can be and frequently has been inferred that the legislature intended that such activities should be carried out under conditions of strict liability."
Among the exceptions to the rule underlying the doctrine of mens rea, revenue legislation is one, as observed by Wright J. in Sherras v. De Rutzen [1895] 1 QB 918
".... the principal classes of exceptions may perhaps be reduced to three. One is a class of acts which, in the language of Lush J. in Davies v. Harvey [1874] LR 9 QBD 433 are not criminal in any real sense, but are acts which in the public interest are prohibited under a penalty. Several such instances are to be found in the decisions on the Revenue Statutes, e.g., Attorney-General v. Lockwood [1842] 9 M&W 378 where the innocent possession of liquorice by a beer retailer was held an offence. So under the Adulteration Acts. Reg v. Woodrow 15 M & W 404 as to innocent possession of adulterated tobacco; Fitzpatrick v. Kelly [1873] LR 8 QBD 337 and Roberts. Egerton [1824] 2 B& C 717. So, as to the liability of a guardian of the poor, whose partner, unknown to him, supplied goods for the poor Davies v. Harvey [1874] LR 9 QBD 433. To the same head may be referred Reg v. Bishop [1880] 5 QBD 259 where a person was held rightly convicted of receiving lunatics in an unlicensed house, although the jury found that he honestly and on reasonable grounds believed that they were not lunatics. Another class comprehends some, and perhaps all, public nuisances : Reg v. Stephens [1866] LR 1 QB 702 where the employer was held liable on indictment for a nuisance caused by workmen without his knowledge and contrary to his orders; and so in Rex v. Medley [1834] 6 C & P 292 and Barnes v. Akroyd [1872] LR 7 QB 474. Lastly, there may be cases in which, although the proceeding is criminal in form, it is really only a summary mode of enforcing a civil right : See per Williams and Willes JJ. in Morden v. Porter [1860] 7 CB (NS) 641 as to unintentional trespass in pursuit of game; Lee v. Simpson [1947] 3 CB 871 as to unconscious dramatic piracy; and Hargreaves v. Diddams [1875] LR 10 QB 582 as to a bona fide belief in a legally impossible right to fish."
The doctrine of mens rea may be the foundation of liability in criminal law but need not necessarily be under statutory law.
Speaking about the offences of absolute liability, J. C. Smith, in his article "The Guilty Mind in the Criminal Law" [1960] 76 LQR 78, thus :
"Not only are these offences a departure from the principle discussed above in that they do not require mens rea, but it is not even necessary to prove negligence, the usual criterion of liability in the civil law. A person may be convicted of one of these even though he was taking all reasonable care. All that the prosecution have to do is to prove that D (defendant) caused the actus reus by a voluntary act..."
R. M. Jackson, in his article "Absolute Prohibition in Statutory Offences" published in [1936] 6 CLJ 83, said :
"In all common law crimes, other than common nuisance, it appears that some culpable mental mental element or mens rea is required. The mental element is culpable in the sense that the actus is only criminal when it is coupled with a realization of the probable consequence of the act or omission. In statutory offences this rule does not hold good; the actus may be prohibited in such language that a person may be liable for doing an act whether or not he did, or could, have foreseen the consequences. Such offences create what is commonly called Absolute Liability...... The statutory offence of absolute liability depend on the particular wording of the statutes by which they are created; the elements of each offence must be ascertained by construing the statute."
"The conclusion to be drawn is that in statutory offences nothing more, and nothing less, is required than that the statute should be carefully read and the rules of construction properly applied in each case." (at page 92)
Brett J. in R. V. Prince, [1875] LR 2 CR 154 said that the doctrine of mens rea is not applicable to revenue statutes.
A Division Bench of the Calcutta High Court in Legal Remembrancer v. Ambika Charan Dalal ILR [1946] Cal 127 observed at page 129 regarding the applicability of mens rea doctrine of common law to India, as follows :
"The maxim does undoubtedly embody a fundamental principle of English common law; and common law, modified and supplemented by statute, is still the law in England. But the English common law is not the criminal law in force in India. Every offence, of which the Indian courts take cognizance, is clearly defined by statute. The Indian legislature has embodied many of the principles of English common law modified to suit Indian conditions in the criminal law of India. But instead of enacting a general principle such as nemo set reus nisi mens sit rea, the Indian legislature has included in the definition of each offence a clear statement of the mental condition necessary to constitute of the offence. If, in any case, the Indian legislature has omitted to prescribe a particular mental condition, the presumption is that the omission is intentional.
Where an Indian statute is ambiguous or its meaning obscure, it is proper to refer to the principles of English common law to resolve the ambiguity or to elucidate the meaning; but where the statute is free from ambiguity and the meaning is clear, the courts are not justified, in my opinion, in importing words into the statute, or refusing to give effect to the clear meaning of the statute, or giving a forced or unnatural meaning to the words of the statute in order to make it conform with the principles of the common law."
M C Setalvad in The Hamlyn Lectures on The Common Law in India, summed up very neatly the position as regards the applicability of the maxim actus non facit reum nisi mens sit rea to statutory offences in India thus at page 139 to 141 :
"Unlike in England all offences in India, excepting contempts of the courts of record like the Supreme Court and the High Courts, are statutory. The offences defined in the Penal Code and also in various other statute incorporate in the definition of the offence itself the guilty mind needed in order that the crime may be committed. Under the English common law mens rea may vary from crime to crime. So does it very in the Indian statutory definitions of crime (page 139). What the Indian Code seems to have done is to incorporate into the common law crime the mens rea needed for the particular crime so that the guilty intention is generally to be gathered not from the common law but from the statute itself. This may be regarded as a modification of the common law worked into the Code of Macaulay and his colleagues to make it suit Indian conditions. By adopting this course they have also avoided the doubt and obscurity which has not infrequently arisen in regard to the mens rea required for certain common law crime like homicide, assault and false imprisonment. It has been pointed out that the English system in which changes in the law are made gradually by The Judgment of the Court was delivered byicial decisions, has often created a situation in which old and new doctrines have been employed in the course of the same period, according as the judges are inclined one way or the other, giving rise to conflicting principles with puzzling results. Such uncertainty cannot exist in India as the necessary guilty mind is indicated in the statutory definition of the crime.
In a sense, therefore, it may be said that the maxim actus non facit reum nisi mens sit rea has, as a maxim, no application to offences under the code. By specifying the varying guilty intention for each offence the code has in effect built the maxim into each of its definitions and given it statutory effect. Where the code omits to indicate a particular guilty intent, the presumption, having regard to the general frame of the definitions, would be that the omission must be intention (page 140). In such cases it would perhaps not be permissible to import the maxim in arriving at a conclusion whether the person charged with that particular offence has been guilty." (page 141).
What flows or follows from the foregoing discussion is that the Income Tax Act of 1961 is a self contained one. It contained within itself the provisions for its enforcement. Chapter 21 deals with penalties imposable u/s 271. The Income Tax Officer or the Appellate Assistant Commissioner, in the course of any proceeding under the Act, if satisfied that any person has without reasonable cause failed to furnish the return of total income as required u/s 139(1) of the Act within the time stipulated therein, he may direct that such person shall pay penalty. Failure to furnish return within time is the occasion for the levy of penalty and the authorities concerned, if satisfied that the failure of the assessee is attributable to unreasonable cause, may levy the penalty. There are also further provisions contained in the same Chapter either to reduce or waive the amount of penalty imposable. That Chapter is self-contained as regards the occasion for the levy of penalty as well as with respect to the procedure for the imposition of the same with a remedy to have the said penalty reduced or waived. When the framers of the Act have defined all the ingredients of the penalty, there is absolutely no need to import into this something which is not there. The docrine of mens rea is, therefore, not applicable to the situation contemplated u/s 271 of the Act. The infringement of the law cannot be considered to be a crime or an offence in the nature of a crime as to attract the applicability of the doctrine of mens rea.
The next Chapter XXII provides for offences and prosecutions. Even there, the ingredients of the offence have been defined statutorily. The punishment is indicated. They are rendered compoundable too. The person at whose instance and the court before whom proceedings shall have to be initiated were indicated therein. The contravention of provisions of the Act mentioned in various sections under that Chapter were rendered punishable with rigorous imprisonment ranging from six months to two years, with further liability to fine also. Having regard to the definition of offence, as contained in the General Clauses Act, 1897, in the Indian Penal Code and the Code of Criminal Procedure the offences in Chapter XXII are offences under any other law as envisaged by sub-section (2) of section 5 of the Code of Criminal Procedure to be investigated, inquired into, tried and otherwise dealt with according to the provisions of law contained in the Income Tax Act. The contravention of the provisions of the Act were rendered punishable and the expression punishment described in section 53 of the Indian Penal Code takes within its ambit imprisonment and fine. The framers of the enactment utilised the machinery envisaged in the Code of Criminal Procedure subject to what is contained in the Income Tax Act for securing the implementation of the provisions of the Act through the sanctions recognised under the criminal law. The principles of common law applicable to common law crimes and offences are, therefore, to be taken to have been not applied as offences under the Act are clearly defined and, therefore, the extent to which the nature and ambit of the offence under the Act was defined, to that extent the applicability of the common law presumptions must be taken to have been excluded.
If the doctrine of mens rea is to be applied to the penalties imposable under Chapter XXI of the Income Tax Act, 1961, there will be cast a heavy burden upon the department to prove the mens rea and the importation of that doctrine. Under those circumstances, far from furthering the object of the Act, it would certainly defeat it and any such construction which has the effect of not effectuating the purpose of the Act should not be indulged in.
To sum up : (1) The Income Tax Act, 1961, was enacted by Parliament, with a view to securing the implementation of the Directive Principles of State Policy, particularly those embodied in clauses (b) and (c) of article 39 of the Constitution, providing among other things, for the redistribution of wealth, and providing further for the raising of revenue for the extended and expanded functions of the welfare State visualised by the Constitution.
(2) Unlike in the United Kingdom, we have a written Constitution. Unlike in the United States of America, we have the Directive Principles of State Policy Chapter in our Constitution. Unlike in both those countries, we have "social justice" proclaimed in the preamble and transformed into Directive Principles of State Policy. The process of governance of this country is to be carried on by law-making instrumentalities by applying the Directive Principles of State Policy, while making laws and by law applying and enforcing instrumentalities by interpreting and construing such laws enforcing those principles embodies therein.
(3) Individualism and collectivism : The key note of the nineteenth century thought was individualism. The emphasis of common law was on freedom of property, freedom of contract and freedom of the person. Interference with those freedom was not to be countenanced. That concept was carried into the American Constitution. This reflects the philosophy underlying Part III of our Constitution. With the changes in the purpose and function of Government from its traditional role which is negative to the modern role which is positive, laissez faire died with the dawn of the 20th century and today the State has to concern itself with the welfare of its members. This reflects the philosophy underlying Part IV of the Constitution.
(4) Legislative innovation and judicial approach : The judiciary shall have to receive the legislative innovations into the body of the law as affording not only a rule to be applied but a principle from which to reason and hold it as a later and more direct expression of the general will of superior authority to judge made rules on the same general subject and so reasons from it by analogy in preference to them.
(5) It is archaic and anachronistic to apply the principles of common law with its individualist outlook to the interpretation or construction of modern welfare legislation with its collectivist outlook. Such an approach far from furthering the object of legislation frustrates the same. The welfare State is challenging the relevance or at least the adequacy of the common law concepts and classifications and principles. The meaning of a statute consists in the system of social consequences to which it leads, and sociological jurisprudence insists as a matter of value that the social advantage of the rule is its major test since the welfare of society is the general aim of the law.
(6) The Income Tax Act, 1961, is sufficiently self-sufficient as not to need any supplementing or supplanting from the principles of common law for its interpretation, construction or application. It provides both for the imposition of penalties by Chapter XXI and infliction of punishment by way of imprisonment and fine by Chapter XXII. The doctrine of "mens rea" is of common law origin developed by judge-made law. It has no place in the legislators law where offences are defined with sufficient accuracy. There is involved no element of infliction of punishment by way of imprisonment of fine or loss of liberty in the imposition of penalty under Chapter XXI, even to answer the description of "offence" as defined under the General Clauses Act, 1897, or under the Indian Penal Code or the Code of Criminal Procedure.
(7) The presence of Chapter XXII dealing with "Offences and prosecutions" immediately after Chapter XXI dealing with "Penalties imposable", indubitably establishes the intention of the framers of the Act that "penalties" are not intended to be dealt with as offences to which provisions of the Criminal Procedure Code can be applied.
(8) Even otherwise, there is no universal prior presumption of mens rea. Every statute is to be considered according to its own terms. The law of the land does not allow creation of offences through judicial construction or interpretation. Reading the requirement of mens rea into section 271 either as an ingredient of the concept of offence or as a presumption of law, results in imposing heavy and impossible burden on the revenue to be discharged resulting in the practical nullification of this taxing statute which has for its object the implementation of Directive Principles of State Policy as embodied in article 39(b) and (c). The status of fundamentality secured constitutionally to the Directive Principles could be impaired if not imperilled if such a construction of section 271 is permitted.
There is absolutely no justification, judged by whatever cannot of construction it be, to read into section 271 qualifying the failure to furnish a return with expressions like "contumacious", "dishonest", "in deliberate defiance of law", etc.,
For the aforesaid reasons, I hold, agreeing with my learned brother, that there is no occasion to introduce the doctrine of mens rea into section 271(1) of the Income Tax Act, 1961, and that these appeals should be allowed.
Addl. Commissioner Of Income Tax, A.p., And Another v. Dargapandarinath Tuljayya And Co
Addl. Commissioner Of Income Tax, A.p., And Another v. Dargapandarinath Tuljayya And Co
(High Court Of Andhra Pradesh)
| 17-03-1976
Advocate List
Bench
- HON'BLE JUSTICE CHINNAPPA REDDY, J
Eq Citations
- [1977] 107 ITR 850 (AP)
- LQ/APHC/1976/10
Head Note
Income Tax** * **Return of total income - Failure to furnish within time - Levy of penalty u/s 271(1) - Mens rea - Held, not applicable** 1. The legislature has prescribed an objective test to determine the mental state of the person proposed to be proceeded against. 2. Parliament has prescribed an objective test to determine the mental state of the person proposed to be proceeded against. There is no reason for importing the doctrine of mens rea into a situation where the requisite mental state is already defined. 3. Mens rea is a doctrine of common law origin developed by judge-made law. It has no place in the legislator’s law where offences are defined with sufficient accuracy. 4. The law of the land does not allow creation of offences through judicial construction or interpretation. 5. Reading the requirement of mens rea into section 271 either as an ingredient of the concept of offence or as a presumption of law, results in imposing heavy and impossible burden on the revenue to be discharged resulting in the practical nullification of this taxing statute which has for its object the implementation of Directive Principles of State Policy as embodied in article 39(b) and (c). 6. The status of fundamentality secured constitutionally to the Directive Principles could be impaired if not imperilled if such a construction of section 271 is permitted. 7. Therefore, there is absolutely no justification, judged by whatever cannot of construction it be, to read into section 271 qualifying the failure to furnish a return with expressions like “contumacious”, “dishonest”, “in deliberate defiance of law”, etc. **Relevant Sections** * Income Tax Act, 1961, Section 271(1) **Case Reference** * CIT v. Eli Lilly & Co. (India) (P) Ltd. (2009) 15 SCC 1
