1991 (2) TMI 2 - SC - Income Tax

Penalty - section 271(1)(a) - assessee under a belief that income is below the taxable limits - sine there is no any mens rea penalty was rightly set aside by tribunal

Summary

Issues:
1. Interpretation of penalty provisions under section 271(1)(a) of the Income-tax Act.
2. Requirement of mens rea in penalty proceedings.
3. High Court's jurisdiction in determining questions of law arising from Tribunal's order.

Analysis:
The Supreme Court heard an appeal against the High Court's order regarding penalty proceedings under section 271(1)(a) of the Income-tax Act. The Income-tax Appellate Tribunal held that the assessee had a bona fide belief that its income was below the taxable limit, thus not obligated to file a return voluntarily. The Tribunal emphasized the need for establishing mens rea in penalty proceedings, stating that the Revenue must prove deliberate defiance of law or dishonest conduct by the assessee. The Supreme Court referred to the Gujarat Travancore Agency case, highlighting the distinction between civil obligations and criminal penalties. It concluded that mens rea is not a prerequisite for imposing penalties under section 271(1)(a) unless expressly required by the statute.

The Supreme Court found a legal question arising from the Tribunal's order, disagreeing with the High Court's view that no question of law existed. Consequently, the Court allowed the appeals, set aside the High Court's order, and directed the Tribunal to refer the question of law to the High Court. The question pertained to the correctness of the Tribunal's decision to cancel penalty orders and remove penalties imposed under section 271(1)(a) for specific assessment years. The Court decided that costs would not be awarded in this case, and the appeals were allowed.

In summary, the judgment clarified the interpretation of penalty provisions under the Income-tax Act, emphasizing the need for mens rea in penalty proceedings unless expressly required by the statute. It addressed the jurisdiction of the High Court in determining questions of law arising from the Tribunal's order, ultimately allowing the appeals and directing the Tribunal to refer the legal question for the High Court's decision.