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1981 Supreme(P&H) 88
PUNJAB & HARYANA HIGH COURT
Bhopinder Singh Dhillon, J.V.Gupta and S.S.Sandhawalia JJ.
Commissioner Of Income-tax, Patiala-ii
Versus
Patram Dass Raja Ram Beri
Income tax Reference No. 56 of 1976,57 of 1976,
Decided On : MARCH 28, 1981
Headnote:
Whether mens rea is one of the relevant considerations for coming to the conclusion, if the penalty leviable under s. 271(1)(a) of the Act is exigible or not, is a question of law which should be got decided by a larger Bench.
Fact of the Case:
The assessee-firm was a partnership firm. One of the contentions raised by the assessee during the penalty proceedings was that the assessee-firm as also the partners thereof individually had paid not only advance tax as due under s. 18A of the Indian I.T. Act, 1922, but also the tax that fell due on completion of the provisional assessment under s. 23B of the Act. The ITO overruled the explanation and came to the conclusion that there was no reasonable cause for the delay in filing the return and, consequently, a penalty of rs. 63,602 was imposed by him under s. 271(1)(i) of the Act.
Finding of the Court:
The doctrine of mens rea, in essence, has application to the law of crimes and in its later day development is a rule of construction of criminal statutes. Even in the realm of criminal offences mens rea may be excluded either expressly or by necessary intendment. Classic examples of such exclusions are sometimes in crimes of strict or absolute liability and as has been noticed above by Krishna Iyer J., in offences of economic or anti-social nature. Penalty proceedings of a civil nature for a tax delinquency and punishment for a crime stricto sensu are things poles apart. Bringing considerations which are applicable basically as the essential ingredients of an offence, or as a rule of construction of criminal statutes, into the field of penalty proceedings in a taxing statute, which in essence care a coercive civil sanction for the speedy collection of revenue, would thus, on large principles, be wholly unwarranted.
Issues: Whether, on the facts and in the circumstances of the case, the Tribunal was right, in law, in holding that the penalty leviable under section 271(1)(a), Income-tax Act, 1961, had to be worked out with reference to the tax that remained payable by the assessee after being allowed credit for the tax paid under section 23B of the Indian Income-tax Act, 1922 ?
Ratio Decidendi: The scheme of the Act visualised three district kinds of sanctions against any infraction of its provisions with regard to the non-filing or the delayed filing of income-tax returns. The first amongst these is spelt out by the relevant provisions of s. 139 which may be read at the very outset: 139. Return of income. - (1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed - (a) in the case of every person whose total income, or the total income of any other person in respect of which he is assessable under this Act, includes any income from business or profession, before the expiry of four months from the end of the previous year or whether there is more than one previous year from the end of the previous year which expired last before the commencement of the assessment year, or before the 30th day of June of the assessment year, whichever is later; (b) in the case of every other person, before the 30th day of June of the assessment years : Provided that, on an application made in the prescribed manner the Income-tax Officer may, in his discretion, extend the date for furnishing the return, and, notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provisions of sub-section (8)...... (8)(a) Where the return under sub-section (1) or sub-section (2) or sub-section (4) for an assessment year is furnished after the specified date or is not furnished, then whether or not the Income-tax Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2), the assessee shall be liable to pay simple interest at twelve per cent. per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return, or, where no return has been furnished, the date of compilation of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advanced tax, if any, paid, and any tax deducted at source : Provided that the Income-tax Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this sub-section.
Final Decision: The doctrine of mens rea is not attracted to the penalty proceedings within the four corners of the aforesaid section. The only requirement of the statute thereunder is the presence or absence of reasonable cause for the tax delinquency and no other. Therefore, inducting the requirement of a deliberate defiance of law, or contumacious conduct, or dishonest intention, or acting in conscious disregard of the statutory obligations, is unwarranted under s. 271(1)(a) of the Act.
B.S.DHILLON, J.
1. The facts giving rise to these references are that a notice under s. 22(2) of the Indian I.T. Act, 1922 (hereinafter called "the Act"), was served on the assessee for the assessment year 1961-62. In compliance with the said notice, the return was furnished by the assessee on of June 13, 1962, which was due to be furnished by of June 25, 1961. Thus, a delay of 11 complete months was involved. The ITO initiated penalty proceedings against the assessee for late furnishing of the return. The assessee furnished a written explanation.
2. The assessee was a partnership firm. One of the contentions raised by the assessee during the said penalty proceedings was that the assessee-firm as also the partners thereof individually had paid not only advance tax as due under s. 18A of the Act, but also the tax that fell due on completion of the provisional assessment under s. 23B of the Act. The ITO overruled the explanation and came to the conclusion that there was no reasonable cause for the delay in filing the return and, consequently, a penalty of rs. 63,602 was imposed by him under s. 271(1)(i) of the Act.
3. On appeal, the AAC reduced the penalty from Rs. 63,602 to Rs. 57,244. The assessee filed an appeal before the Appellate Tribunal. The Tribunal found that no reasonable cause existed, but relying on the observations made in CIT V/s. Vegetable Products Ltd. [1973] 88 ITR 192(SC), held that a refund of Rs. 3,676 fell due to the assessee and thus no tax was payable by the assessee with reference to which the penalty could be computed.
4. The following two questions have been referred to this court for its opinion at the instance of the revenue :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right, in law, in holding that the penalty leviable under section 271(1)(i), Income-tax Act, 1961, had to be worked out with reference to the tax that remained payable by the assessee after being allowed credit for the tax paid under section 23B of the Indian Income-tax Act, 1922 ?
2. Whether, on the facts and in the circumstances of the came while holding that the assessee-firm had no reasonable cause for not filing the return in time, the Appellate Tribunal was right, in law, in holding that penalty under section 271(1)(a), Income-tax Act, 1961, was not exigible ?"
5. The relevant observations made by the Tribunal which concern question No. 1 are as follows :
"In this connection, we would first extract the following observations from the judgment reported in [1967] 64 ITR 664, 668 (Raj) in the case of Indra & Co. V/s. Union of India : It is to be borne in mind that penalties prescribed under the Income-tax Act for failure to submit returns of income in time are not in the nature of punishment imposed for conviction of an offence. Such penalties are more or less compensatory in character to make good the loss that may be cause to the State revenues on account of late submission of return of income and in consequence late realisation of the tax....
The said observation to our mind suggests that the payment of tax by toe partners on their share income is a relevant consideration to determine the question of levy of penalty under section 271(1)(a). In these circumstances we are inclined to agree with the assessee that there was on its part no contumacious or deliberate disregard of its statutory obligation."
6. Mr. D. N. Awasthy learned counsel for the revenue, while making his submissions on question No. 2, has placed implicit reliance on a Division Bench decision of this court in Smt. Kamal Vati V/s. CIT [1978] 111 ITR 248. In that case, on the assessees own showing that the assessee had failed to furnish the return of her income for the assessment year 1961-62, without reasonable excuse, it was held that it was sufficient to attract the provisions of s. 271(1)(a) of the Act. While so holding, the Bench observed as follows (at p. 250) :
"The doctrine of mens rea has no application to such s
