TMI Blog2003 (2) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... D.K. SETH J.-The question referred to this court for answer is as follows: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in cancelling the penalty imposed under section 271B of the Act on the ground that there was no absolute default on the part of the assessee to get the accounts audited?" Mr. Mihir Lal Bhattacharjee, learned senior counsel for the assessee, had pointed out that though the learned Tribunal had rejected the assessee's explanation with regard to the reasonable cause for default contemplated under section 271B in respect of furnishing the audited accounts required under section 44AB, it is a quasi-criminal matter as was held in the case of CIT v. Anwar Ali [1970] 76 ITR 696 (SC), therefore, according to him, the default does not automatically attract the mischief of penalty in view of the changed proposition of law now prevailing and accepted by the Supreme Court and various other High Courts. He relied on the decisions in CIT v. ASK Enterprises [1998] 230 ITR 48 (Bom); CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC); Calcom Electronics Ltd. v. Sales Tax Officer [2001] 121 STC 600 (Delhi); Mysore Minerals L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has suffered in consequence of such violation, no penalty can be imposed. It is not an absolute proposition for imposing penalty. The propositions of law enunciated by the respective counsel are already well-settled. But such proposition is applicable in given facts. Section 44AB requires an assessee to get his accounts audited within the stipulated time, which, in this case, expired on June 30, 1987. The assessee had submitted the audited accounts on December 4, 1989, long after the expiry of the period, but admittedly before the assessment was complete. Section 271B inserted with effect from April 1, 1985, began with the phrase. "If any person fails without reasonable cause, to get his accounts audited" within the time stipulated, then the concerned income-tax authority "may direct that such person shall pay by way of penalty", the sum mentioned therein. By the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, the phrase "without reasonable cause" was omitted with effect from September 10, 1986. By the said 1986 Act, section 273B was introduced in the Act. This section provides that no penalty shall be imposed under section 271B if the assessee is able to prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonable cause. Immediately thereafter, it had observed that the learned Tribunal was of the view that there was no absolute default on the part of the assessee to get the accounts audited. Therefore, at the time when the penalty was being intended to be imposed, there was no existing failure. This proposition seems to be doubtful. If there was a default, then the penalty can be imposed. It is not necessary that the default is to continue till imposition of penalty. The reading of section 271B does not imply that the default must be a continuous one and that if the audit is made before the completion of the assessment then the penalty is not imposable. Such a construction cannot be made having regard to the language employed in section 271B read with section 273B. In Mayarani Punj v. CIT [1986] 157 ITR 330 (SC), dealing with section 271(1)(a), it was held that the wrong for which the penalty was to be visited, commenced from the date of default and continued month after month until compliance and the default came to an end. The rule of de die in them was applicable not on daily but on monthly basis. That imposition of penalty is not confined to the first default but with refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held that the imposition of penalty being a quasi-criminal proceeding can be imposed only when there is some deliberate attempt in the flouting of the provision. Mr. Deb, however, contended that this decision in Anwar Ali's case [1970] 76 ITR 696 (SC) is no more a good law and the questions of mens rea is not necessary for the purpose of imposing penalty. However, Mr. Bhattacharjee did not want to cite this case on the question of mens rea. He had cited this decision only to impress upon us that the proceeding for imposition of penalty is quasi-criminal in nature. The principle of conscious omission or deliberate misinformation propounded in Anwar Ali's case [1970] 76 ITR 696 (SC) had undergone change as we find from the decision in Jeevan Lal Sah's case [1994] 205 ITR 244 (SC). That a proceeding to impose penalty is quasi-criminal in character is not always correct. The concept, that all penalties in civil matters assume the character of quasi-criminal one, has of late undergone a change. In fact, the question is dependent on the characteristic of the proceedings. A distinction has to be drawn between the two kinds of proceedings in order to ascertain whether the proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1)(c) under consideration in K.R. Sadayappan's case [1990] 185 ITR 49 (SC). At the relevant point of time section 271(1)(c) contained an exception which made the liability imposable only when the failure could be attributed to any fraudulent act or omission, or gross or wilful negligence of the assessee. The decisions in Mussadilal Ram Bharose's case [1987] 165 ITR 14 (SC); B.A. Balasubramaniam and Bros. Co. v. CIT [1999] 236 ITR 977 (SC) following Mussadilal Ram Bharose's case [1987] 165 ITR 14 (SC) and Jeevan Lal Sah's case [1994] 205 ITR 244 (SC) were also concerned with the same proposition where the liability arose out of wilful or gross neglect or from fraudulent act or omission on the part of the assessee, which bears an element of criminality or a quasi-criminal implication. Similarly, the decision in A.S.K. Enterprises' case [1998] 230 ITR 48 (Bom), proceeded on the footing that the penalty was a result of deliberate action, which made the proceedings quasi-criminal. Mr. Deb's reliance on Kil Kotagiri Tea and Coffee Estates Ltd.'s case [1989] 177 ITR 458 (Ker), however, in our view, has no manner of application in the present facts and circumstances of the case. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention of Mr. Bhattacharjee that the procedure being a quasi-criminal in nature, there must be some element of deliberate omission is immaterial. By reason of the change in law as was then applicable, it is only the reasonable cause for the default that could be gone into and nothing more, nothing less. Therefore, if there is a default, whether there was mens rea or not is immaterial; the liability in the form of penalty can be imposed simply on the default if it is not explained by proving reasonable cause for the default. In Rupa Ashok Hurra v. Ashok Hurra [2002] 4 SCC 388, at page 413, in paragraph 41, the apex court had held that the question of imposition of penalty is not an automatic proposition. In order to impose such penalty, the court has to take into account various other materials and has to look into the surroundings so as to enable the authority to impose the penalty. In Calcom Electronics Ltd. v. Sales Tax Officer [2001] 121 STC 600 (Delhi) followed in Pawan Kumar Agarwal's case--W.P.T.T. No. 19 of 2000 disposed of on November 15, 2002, a Division Bench of this court had also followed the same principle, which, in our view, is distinguishable in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cause as sufficient, it was incumbent on the taxing authority to impose penalty. There was no escape from the same. But at the same time, a particular portion cannot be read out of context. The order has to be read as a whole. Though not happily coined, the observation that there was no absolute default, in effect, if read together, would go to show that the learned Tribunal was of the view that there was some reasonable cause for default. We cannot read the latter part of the order at paragraph 5 bereft of the first part or vice versa. If both the parts of the order are reconciled, then it would appear that even after having rejected the ground mentioned, yet the taxing authority had found that it is a case where such discretion could have been exercised. The rejection was made on the technical ground that certain documents were not available before the Assessing Officer and was sought to be produced only before the learned Tribunal. On the technical ground, the learned Tribunal could not accept the said evidence and the explanation given and had rejected the same, but ultimately it had found that there was something in favour of the assessee. In the facts and circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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