Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4
PETITIONER:
GUJARAT TRAVANCORE AGENCY, COCHIN
Vs.
RESPONDENT:
COMMISSIONER OF INCOME-TAX,KERALA, ERNAKULAM
DATE OF JUDGMENT02/05/1989
BENCH:
PATHAK, R.S. (CJ)
BENCH:
PATHAK, R.S. (CJ)
KANIA, M.H.
CITATION:
1989 AIR 1671 1989 SCR (2)1000
1989 SCC (3) 52 JT 1989 (2) 446
1989 SCALE (1)1275
CITATOR INFO :
F 1992 SC1762 (10)
ACT:
Income Tax Act 1961: Section 271(1)(a) and 276C--Failure
to furnish returns--Penalty--Means rea--Not required to be
proved in proceedings under section 271(1)(a)--To be estab-
lished in proceedings under section 276-C.
HEADNOTE:
The assessee appellant did not file its income-tax
returns under the Income Tax Act, 1961 for the assessment
years 1965-66, 1966-67 within the statutory period. It was
only after notices under s. 139(2) of the Act were served on
the assessee the returns were filed. In the said circum-
stances the Income Tax Officer initiated penalty proceedings
against the assessee under s. 271(1)(a) of the Act for the
two assessment years and imposed penalties.
The explanation of the assessee that he was under the
bona fide belief that he had no assessable income and had,
therefore, not filed the returns earlier was not accepted by
the Income-tax Officer.
The Appellate Assistant Commissioner dismissed the
appeal, but in second appeal the Appellate Tribunal allowed
the appeal holding that the Income Tax Officer had failed to
bring on record any material to show that the explanation of
the assessee tendered before him in regard t9 the delay
should not be accepted, and that as the element of mens rea
was required to be proved and had not been proved, the
penalties were liable to be cancelled.
The Appellate Tribunal at the instance of the Revenue
referred the question to the High Court, and a Full Bench of
the High Court took the view that mens rea need not be
established before penalty is imposed under s. 271(1)(a) of
the Act, and the Appellate Tribunal was therefore not justi-
fied in cancelling the penalties levied for the two assess-
ment years.
On the question whether the element of mens tea is a
mandatory requirement before a penalty can be imposed under
section 271(1 )(a) of
1001
the Income Tax Act, 1961.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4
Dismissing the appeal, the Court.
HELD: 1. A penalty may be imposed under section
271(1)(a) if the Income Tax Officer is satisfied that any
person has without reasonable cause failed to furnish the
return of total income. while s. 276C provides that if a
person wilfully fails to furnish in due time the return of
income required under s. 139(1) he shall be punishable with
rigorous imprisonment which may extend to one year or with
fine. It is, therefore, clear that in the former case what
was intended was a civil obligation, while in the latter
what is imposed is a criminal sentence. [1003E-F]
2. There can be no dispute that having regard to the
provisions of s. 276C, which speaks of wilful failure on the
part of defaulter and taking into consideration the nature
of the penalty, which is punitive, no sentence can be im-
posed under that provision unless the element of mens rea is
established. [1003G-H]
3. The creation of an offence by Statute proceeds on the
assumption that society suffers injury by the act or omis-
sion of the defaulter and that a deterrent must be imposed
to discourage the repetition of the offence. [1004A-B]
4. Unless there is something in the language of the
statute indicating the need to establish the element of mens
rea it is generally sufficient to prove that a default in
complying with the statute has occurred. [1004B-C]
5. In a proceeding under s. 271(1)(a), it seems that the
intention of the legislature is to emphasise the fact of
loss of. Revenue and to provide a remedy for such loss,
although no doubt an element of coercion is present. in the
penalty. In this connection the terms in which the penalty
falls to be measured is significant. [1004B]
Corpus Juris Secundum, volume 85, page 580, para. 1023,
referred to.
6. There is nothing in s. 271(1)(a) which requires that
mens rea must be proved before penalty can be levied under
that provision. [1004C]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 63031 of
1975.
1002
From the Judgment and Order dated 10.9.1974 of the
Kerala High Court in Income Tax Reference Nos. 85 and 86 of
1972.
Soli J. Sorabjee, Udayu Lalit, D. Vidyanandan and M.
Raghuraman for the Appellant.
D.V. Gauri Shankar and Ms. A. Subhashini for the Respondent.
The Judgment of the Court was delivered by
PATHAK, CJ. These appeals, by certificate granted by the
High Court of Kerala, are directed against the judgment of
that High Court answering the following question of law
referred to it in an Income-tax Reference in favour of the
Revenue and against the assessee:
"Whether, on the facts and in the circum-
stances of the case, the Tribunal is justified
in law in cancelling the penalties levied
under s. 271(1)(a) of the Income-tax Act,
1961, for the assessment years 1965-66, and
1966-67?"
The assessee is a registered firm trading in hill pro-
duce. The assessee did not file its income-tax return under
the Income-tax Act, 1961 for the assessment year 1965-66
within the statutory period, that is to say by 30 June,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4
1965, and instead applied for time to file the return. Time
was granted up to 31.August, 1966. Yet no return was filed.
It was only after notice under s. 139(2) of the Act was
served on the assessee on 22 September, 1967 that it filed a
return on the next day. Similarly for the assessment year
1966-67 no return was filed upto 30 June, 1966. No applica-
tion for extension of time was made either. When notice
under s. 139(2) was served on the assessee on 21 June, 1966
it filed a return on 23 September, 1967. In the circum-
stances, the Income-tax Officer initiated penalty proceed-
ings against the assessee under s. 271(1)(a) of the Act for
the two assessment years. A sum of Rs. 14,784 was levied as
penalty for the assessment year 1965-66 and a sum of Rs.
11,447 was imposed as penalty for the assessment year 1966-
67. The explanation of the assessee that he was under the
bona fide belief that he had no assessable income and had,
therefore, not filed the returns earlier was not accepted by
the Income-tax Officer. In appeal before the Appellate
Assistant Commissioner of Income Tax, the assessee did not
press the ground that there was no deliberate omission on
his part to file the returns and that therefore s. 271(1)(a)
of the Act was not attracted. In second appeal before the
Income-tax Appellate Tribunal permission was granted to the
assessee to raise the
1003
ground. The Appellate Tribunal allowed the appeals holding
that the Income-tax Officer had failed to bring on record
any material to show that the explanation of the assessee
tendered before him in regard to the delay should not be
accepted, and that as the element of mens rea was required
to be proved and had not been proved, the penalties were
liable to be cancelled.
At the instance of the Revenue the Appellate Tribunal
referred the question set forth earlier to the High Court of
Kerala. It may be mentioned that another question was also
referred, which related to the Appellate Tribunal entertain-
ing the additional ground of appeal, but the appeals before
us are not concerned with that question. The question with
which we are concerned was referred to a Full Bench of the
High Court, and the High Court has taken the view that mens
rea need not be established before penalty is imposed under
s. 271(1)(a) of the Act, and that, therefore, the Appellate
Tribunal was not justified in cancelling the penalties
levied for the two assessment years.
Learned counsel for the assessee has addressed an ex-
haustive argument before us on the question whether a penal-
ty imposed under s. 271(1)(a) of the Act:involves the ele-
ment of mens rea and in support of his submission that it
does he has placed before us several cases decided by this
Court and the High Courts in Order to demonstrate that the
proceedings by way of penalty under s. 271(1)(a) of the Act
are quasi criminal in nature and that therefore the element
of mens rea is a mandatory requirement before a penalty can
be imposed under s. 271(1)(a). We are relieved of the neces-
sity of referring to all those decisions. Indeed, many of
them were considered by the High Court and are referred to
in the judgment under appeal. It is sufficient for us to
refer to s. 271(1)(a), which provides that a penalty may be
imposed if the Income Tax Officer is satisfied that any
person has without reasonable cause failed to furnish the
return of total income, and to s. 276C which provides that
if a person wilfully fails to furnish in due time the return
of income required under s. 139(1), he shall be punishable
with rigorous imprisonment for a term which may extend to
one year or with fine. It is clear that in the former case
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4
what is intended is a civil obligation while in the latter
what is imposed is a criminal sentence. There can be no
dispute that having regard to the provisions of s. 276C,
which speaks of wilful failure on the part of the defaulter
and taking into consideration the nature of the penalty,
which is punitive, no sentence can be imposed under that
provision unless the element of ’ mens rea is established.
In most cases of criminal liability, the intention of the
Legislature is that the penalty should serve as a deterrent.
The
1004
creation of an offence by Statute proceeds on the assumption
that society suffers injury by and the act or omission of
the defaulter and that a deterrent must be imposed to dis-
courage the repetition of the offence. In the case of a
proceeding under s. 271(1)(a), however, it seems that the
intention of the legislature is to emphasise the fact of
loss of Revenue and to provide a remedy for such loss,
although no doubt an element of coercion is present in the
penalty. In this connection the terms in which the penalty
falls to be measured is significant. Unless there is some-
thing in the language of the statute indicating the need of
establish the element of mens tea it is generally sufficient
to prove that a default in complying with the statute has
occurred. In our opinion, there is nothing in s. 271(1)(a)
which requires that mens tea must be proved before penalty
can be levied under that provision. We are supported by the
statement in Corpus Juris Secundum, volume 85, page 580,
paragraph 1023:
"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."
Accordingly, we hold that the element of mens rea was
not required to be proved in the proceedings taken by the
Income tax Officer under s. 271(1)(a) of the Income-tax Act
against the assessee for the assessment years 1965-66 and
1966-67.
In the result the appeals fail and are dismissed with costs.
N.V.K. Appeals failed.
1005