TMI Blog1974 (12) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... date of filing the return of income ? (3) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in ignoring the provisions of section 139(4)(a) of the Act under which the return was filed by the assessee ? (4) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in cancelling the penalty levied under section 271(1)(a) ? " The facts necessary for determination of the questions sought to be referred to this court may be stated : The assessee, M/s. Narayanadas Ramkishan, is an unregistered firm. For the assessment year 1966-67, it had to file the return of its income under section 139(1) of the Income-tax Act, 1961 (hereinafter referred to as " the Act "), on or before 30th June, 1966 ; but it filed the return only on 16th March, 1970, showing an income of Rs. 12,664. The Income-tax Officer, for the late filing of the return, issued a notice to the assessee to show cause why penalty should not be levied. On the ground that the assessee had not given any reasons, which prevented it from filing the return in time, the Income-tax Officer came to the conclusion that it had no reasonable cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the assessee, relying upon the decision of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa and other decisions of the Madras, Mysore, Kerala and Orissa High Courts, contended that the liability to pay penalty does not arise merely upon not filing the return in time, unless it is shown 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. It is also contended by him that the fact that the Income-tax Officer is empowered under the statute to impose penalty is not by itself sufficient to invoke the penal provision if it is found that the default is of a technical nature or is a venial breach of the provisions of the Act so long as the assessee had acted bona fide in not submitting the return in time. So, what has to be considered is whether it is necessary that the revenue should establish mens rea or guilty mind of the assessee before it can invoke the penal provisions and levy penalty on the assessee. Mens rea means a guilty mind, a guilty or wrongful purpose ; a criminal intent. It presupposes guilty knowledge and wilfulness. The contention of Mr. Ram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er clauses (a) and (b). It is not open to the authorities referred to in sub-section (1) of section 271 to arbitrarily direct an assessee to pay a certain amount by way of penalty. On the material placed before the Income-tax Officer or the Appellate Assistant Commissioner he should reasonably concluded that the assessee had failed to show any reasonable cause for not furnishing the return as provided therein. If in clause (c) the legislature as advisedly not used the words " without reasonable cause ", it is for the reason that there cannot be any question of any reasonable concealment of particulars. It is for that reason that the words " without reasonable cause " are not there in clause (c). Whether it is a case falling under clause (a), clause (b) or clause (c), the primary requirement is that the Income-tax Officer or the Appellate Assistant Commissioner must be satisfied that the assessee has failed to furnish the return without reasonable cause. In other words, the authorities are to apply their mind to the explanation offered by an assessee, irrespective of the fact whether his case falls under clause (a), clause (b) or clause (c). Mr. Rama Rao next sought to invite our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt held that mens rea need not be proved. To the same effect is the view expressed by Hidayatullah J. (as he then was) in State of Gujarat v. Kansara Manilal. That was a case of an offence under section 63 of the Factories Act. Having regard to the language of the provisions of that Act, the learned judge said : " This shows that compliance with the peremptory provisions of the Act is essential and unless the occupier or the manager brings the real offender to book he must bear the responsibility. Such a provision largely excludes the operation of section 117 in respect of persons guilty of a breach of the provisions of the Act. It is not necessary that mens rea must always be established as has been said in some of the cases above referred to. The responsibility exists without a guilty mind. An adequate safeguard, however, exists in section 101 analysed above and the occupier and manager can save themselves if they prove that they are not the real offenders but who, in fact, is. " In State of Maharashtra v. Mayor Hans George Rajagopala Ayyangar J. who spoke for the majority, after referring to the judgment of Wright J. in Sherras v. De Rutzen and that of the Privy Council ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Council in Srinivas Mall v. Emperor and two earlier decisions of the court in Hariprasada Rao v. State and Sarjoo Prasad v. State of Uttar Pradesh, observed : " Mens rea is an essential ingredient of a criminal offence. A statute may exclude the element of mens rea ; 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 than against it except where the statute expressly or by necessary implication excludes mens rea. On the question whether the element of guilty mind is excluded from the ingredients of an offence the mere fact that the object of the statute is to promote welfare activities or to eradicate a grave social evil is not by itself decisive. Only where it is absolutely clear that the implementation of the object of the statute would otherwise be defeated that mens rea may, by necessary implication, be excluded from a statute. The nature of the mens rea that would be implied in a statute creating an offence depends on the object of the Act and the provisions thereof. " We are not inclined to agree that section 271(1) excludes mens re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the dealer shall pay, by way of penalty, in addition to the amount so assessed, a sum not exceeding one and a half times that amount. " There too, as in section 271(1)(a) and (b), the words " without sufficient cause " appear, and, considering the scope of that provision, the learned Acting Chief Justice observed : " 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Bench of this court in R. C. No. 4 of 1970 dated 9-9-1971 (Commissioner of Income-tax v. Anantharam Veerasinghaiah Co.) also does not render any assistance to the case of the department. In that case, the learned judges, while dealing with the burden that the revenue has to discharge, observed : " It might be that the onus would be heavy in some cases and light in others depending on the facts and circumstances of the case. The burden on the department would not of course be higher than the burden on the prosecution in a criminal case. " The learned judge did not say anywhere in the judgment that the burden is not upon the department and that mens rea, an essential ingredient, is excluded by necessary implication when action is taken under section 271(1) of the Act. We may, in brief, refer to the view expressed by the High Courts of Madras, Mysore, Kerala and Orissa. In V. Ramanathan v. Commissioner of Income-tax , Srinivasan and Venkatadri JJ. held that it is for the department to show that the assessee who failed to submit the return did so without reasonable cause. In Michael Fernandes v. Commissioner of Wealth-tax . Govinda Bhat C.J. and Jagannatha Shetty J. held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mere failure to file the return within the time allowed will not make the assessee liable to penalty ; and that the department must prove that the assessee had no reasonable cause for not filing it within the time. It is unnecessary to multiply decisions on this point. In view of what the Supreme Court has laid down in Hindustan Steel Ltd. v. State of Orissa and in Anwar Ali's case, 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 Tribunal, in quashing the order of penalty imposed upon the assessee, has only followed, and rightly too, the decisions of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa, and held that : " Though in this case the assessee has no ostensible reason for the delay in filing the return, yet we do not find any material led in by the revenue to show that the assessee wilfully defaulted, more especially when it is seen that the return was filed voluntarily without issue of notice under section 139(2). " The Tribunal also took into consideration the facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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