Full Judgment Text
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PETITIONER:
MAYA RANI PUNJ
Vs.
RESPONDENT:
COMMISSIONER OF INCOME TAX, DELHI.
DATE OF JUDGMENT11/12/1985
BENCH:
MUKHARJI, SABYASACHI (J)
BENCH:
MUKHARJI, SABYASACHI (J)
TULZAPURKAR, V.D.
MISRA RANGNATH
CITATION:
1986 AIR 293 1985 SCR Supl. (3) 827
1986 SCC (1) 444 1985 SCALE (2)1267
ACT:
Income Tax Act 1922 : Section 28, Income Tax Act 1961:
Sections 271 (1)(a), 297(1) and 297(2)(j).
Delay in filing return for assessment year under 1922
Act - Penalty - Quantum of - Determination - 1961 Act coming
into effect - Discretion to reduce penalty fixed under new
Act - Provision of new Act - Availability of.
Imposition of penalty - Assessment year or date of
filing return - Not material - Satisfaction of assessing
authority that default occurred - Importance of.
Return - Non-filing of - Whether a continuing default.
HEADNOTE:
The appellant is the assessee. The year of assessment
was 1961-62. The return was due by September 28, 1961 but
the same was neither filed within that time, nor was any
extension asked for. The assessee filed the return on May 3,
1962 beyond more than seven months of the due date. With
effect from April 1, 1962 the Income Tax Act of 1961 had
come into force. The Income Tax Officer finding that the
assessee had not been prevented by any reasonable cause for
not complying with the statutory obligation to make the
return, took proceedings under section 271(1)(a) of the 1961
Act and imposed a penalty of Rs.4,060 for failure to furnish
the return within time.
The assessee challenged the imposition of penalty by
preferring an appeal to the Appellate Assistant Commissioner
who refused to interfere and dismissed the appeal.
On further appeal the Appellate Tribunal held that
penalty was leviable under the 1961 Act, but the amount of
penalty had to be quantified according to the provisions of
section 28 of the Income Tax Act, 1922 and applying the
provisions of the said Act reduced the penalty to Rs. 400.
The question whether ’the Tribunal was in law competent
to reduce the penalty levied under section 271(1)(a) to a
figure
828
lower than the sum equal to 2% of the tax for every month
during which the default continued’, was referred at the
instance of the Revenue to the High Court which answered the
reference in favour of the Revenue and against the assessee
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by relying upon section 297(2)(j) of the 1961 Act and
holding that section 271(1) of the Act was applicable to the
levy of penalty for defaults committed under the 1922 Act,
and that the word ’may’ used in section 297(1) of the 1961
Act vested in the Income Tax Officer discretion either to
levy or not to levy a penalty but if he did decide to levy
one, he had no option but to levy the penalty at the
prescribed rate.
Dismissing the appeal of the assessee, this Court,
^
HELD: 1. The assessment was made on June 30, 1964 and
proceedings for imposition of penalty were directed to be
initiated that day. Provisions of section 271(1)(a) of the
1961 Act were fully applicable and the demand of penalty was
thus justified being within the limits of law. [842 C]
2. Under the 1922 Income Tax Act liability to make a
return was contingent upon service of notice under section
22, while under the 1961 Income Tax Act every person having
a taxable income has under section 139 the liability to make
a return within the time provided by the Act. [833 D]
In the instant case, clause (f) of section 297(2) of
the 1961 Act is not attracted because the return was filed
on May 3, 1962 and assessment was made subsequent to April
1, 1962. [833 D]
3. For the imposition of penalty it was not the
assessment year or the date of the filing of the return that
was important but it was the satisfaction of the income tax
authorities that a default had been committed by the
assessee which attracted the provisions relating to penalty.
Whatever be the stage at which the satisfaction was reached,
the scheme of section 274(1) and 275 of the Act of 1961 was
that the order imposing penalty must be made after the
completion of the assessment. The crucial date, therefore,
for the purpose of penalty is the date of such completion,
and the satisfaction of the authority that proceedings for
levy of penalty be initiated. [834 F-G]
In the instant case, though the default occurred in
September 1961 the date relevant for the purpose of
initiating proceedings for imposition of penalty is when,
following the
829
assessment made, the Income Tax Officer decided to initiate
the penalty proceedings. The proper provision to apply for
dealing with the situation relating to penalty is as
provided in section 271(1)(a) of the 1961 Act. [837 A-B]
Jain Brothers & Ors. v. U.O.I. & Ors., 77 I.T.R. 107;
Third Income Tax Officer, Mangalore v. M. Damodar Bhat, 71
I.T.R. 806 - [1969] 2 S.C.R. 29, referred to.
4. Under section 28 of the 1922 Act the upper limit of
penalty only was provided and there was no prescription of
any particular rate as found in section 271(1)(a) of 1961
Act. Penalty contemplated under the respective sections of
the two Acts is quasi-criminal in character.[834 H - 835A]
5. Accrual of penalty depends upon the terms of the
statute imposing it and in view of the language used in
section 271(1)(a) of the 1961 Act, the position is beyond
dispute that the Legislature intended to deem the non-filing
of the return to be a continuing default the wrong for which
penalty is to be visited, commences from the date of default
and continues month after month until compliance is made and
the default comes to an end. The rule of de die in diem is
applicable not on daily but on monthly basis. [840 H]
Corpus Juris Secundum, Vol 85, p. 1027, referred to.
6. The imposition of penalty not confined to the first
default but with reference to the continued default is
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obviously on the footing that noncompliance with the
obligation of making a return is an infraction as long as
the default continued. Without sanction of law no penalty is
impossible with reference to the defaulting conduct. The
position that penalty is impossible not only for the first
default but as long as the default continues and such
penalty is to be calculated at a prescribed rate on monthly
basis is indicative of the legislative intention in
unmistakable terms that as long as the assessee does not
comply with the requirements of law he continues to be
guilty of the infraction and exposes himself to the penalty
provided by law. [841 D-E]
Third Income Tax Officer, Mangalore v. M.Damodar Bhat,
[1969] 2 S.C.R. 29, referred to and Commissioner of Wealth
Tax, Amritsar v. Suresh Seth, [1981] 3 S.C.R. 419, explained
and over-ruled.
830
7. If a duty continues from day to day, the non-
performance of that duty from day to day is a continuing
wrong. The legislative scheme under section 271(1)(a) of the
1961 Act in making provision for a penalty conterminous with
the default to be raised provides for a situation of
continuing wrong. [842 B]
Ajit Kumar Sarkar v. Assistant Registrar of Companies,
West Bengal, [1979] Tax Law Reports 2001; United Savings and
Finance Co. Pvt. Ltd. & Anr. v. The Deputy Chief Officer,
Reserve Bank of India, [1980] Crl. L.J. 607; Oriental Bank
of Commerce & Anr. v. Delhi Development Authority & Ors.,
[1982] Crl. L.J. 2230; G.D. Bhattar & Ors. v. The State,
A.I.R. 1957 Cal. 483, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1943 of
1974.
From the Judgment and Order dated 21.12.1972 of the
Delhi High Court in Income Tax Reference No. 50 of 1968
S.K. Dholakia, R.C. Bhatia and P.C. Kapoor for the
Appellant.
S.C. Manchanda, M.N. Tandon and Miss A. Subhashini for
the Respondent.
The Judgment of the Court was delivered by
SABYASACHI MUKHARJI, J. The assessee is in appeal by
special leave challenging the decision of the Delhi High
Court reported in 92 I.T.R. 394.
The year of assessment is 1961-62. The return was due
by September 28, 1961, but the same was neither filed within
that time, nor was any extension asked for. The assessee
filed the return on May 3, 1962 beyond more than seven
months of the due date. With effect from April 1, 1962, the
Income Tax Act of 1961 (’1961 Act’ for short) had come into
force. The Income Tax Officer took proceedings under section
271(1)(a) of the 1961 Act and imposed a penalty of Rs. 4,060
for failure to furnish the return within the time on a
finding that the assessee had not been prevented by any
reasonable cause for not complying with the statutory
obligation to make the return. The assessee challenged the
imposition of penalty by preferring an appeal to the
Appellate Assistant Commissioner who refused to interfere
and dismissed the appeal. On further appeal the Appellate
Tribunal
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held that penalty was leviable under the 1961 Act but the
amount of penalty had to be quantified according to the
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provisions of section 28 of the Income Tax Act, 1922 (’1922
Act’ for short). Applying the provisions of the 1922 Act,
the Tribunal reduced the penalty to Rs.400. At the instance
of the Revenue the following question was referred to the
High Court under section 256(1) of the 1961 Act:
"Whether, on the facts and in the circumstances of
the case, the Tribunal was in law competent to
reduce the penalty levied under section 271(1)(a)
to a figure lower than the sum equal to 2% of the
tax for every month during which the default
continued but not exceeding the aggregate 50% of
the tax?"
The High Court answered the reference in favour of the
revenue and against the assessee.
Though the quantum of penalty is small, the question of
law is of substantial importance, and covers on aspect which
often arises for determination before the tax authorities
and the High Courts.
Provisions of three sections, one of the 1922 Act and
two of the 1961 Act, are relevant for the decision of the
point at issue. Section 28 of the 1922 Act, as far as
relevant, provided :
"Penalty for concealment of income or improper
distribution of profits:-
(1) If the Income Tax Officer, or the Appellate
Assistant Commissioner or the Appellate Tribunal,
in the course of any proceedings under this Act,
is satisfied that any person -
(a) has without reasonable cause failed to furnish
the return of his total income which he was
required to furnish, by notice given under sub-
section (1) or sub-section (2) of section 22 or
section 34, or has without reasonable cause failed
to furnish it within the time allowed and in the
manner required by such notice, or
(b) x x x x
832
(c) x x x x
he or it may direct that such person shall pay by
way of penalty in the case referred to in clause
(a) in addition to the amount of the income tax
and super tax, if any, payable by him, a sum not
exceeding one and a half times that amount..... "
The two sections relevant to the point of the 1961 Act
are sections 271 and 297. Section 271 is the corresponding
provision of section 28. Sub-section (1)(a) thereof is the
relevant provision. It provides :
"If the Income Tax Officer ... is satisfied that
any person :
(a) has without reasonable cause failed to furnish
the return of total income which he was required
to furnish under sub-section (1) of section 139 or
by notice given under sub-section (2) of section
139 or section 148 or has without reasonable cause
failed to furnish it within the time allowed and
in the manner required by sub-section (1) of
section 139 or by such notice, as the case may be,
or
(b) x x x x x
(c) x x x x x
he may direct that such person shall pay by way of
penalty :
(a) x x x x x
(b) in any other case, in addition to the amount
of the tax, if any, payable by him, a sum equal to
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2% of the assessed tax for every month during
which the default continued."
Section 297(1) repealed the 1922 Act. Sub-section (2), as
far as relevant, provided :
"Notwithstanding the repeal of the Indian Income
Tax Act, 1922 (hereinafter referred to as the
repealed Act),-
833
(a) to (e) x x x
(f) any proceeding for the imposition of a penalty
in respect of any assessment completed before the
first day of April, 1962 may be initiated and any
such penalty may be imposed as if this Act had not
been passed ;
(g) any proceeding for the imposition of a penalty
in respect of any assessment for the year ending
on March 31, 1962, or any earlier year which is
completed on or after first day of April, 1962 may
be initiated and any such penalty may be imposed
under this Act ..."
It is sufficient to take note of the position that
under the 1922 Act liability to make a return was contingent
upon service of notice under section 22 while under the 1961
Act every person having a taxable income has under section
139 the liability to make a return within the time provided
by the Act. On the facts of the case before us, clause (f)
of section 297(2) of the 1961 Act is not attracted because
the return was filed on May 3, 1962, and assessment was made
subsequent to April 1, 1962.
The Income Tax Officer found that there was default for
a little more than seven months. He imposed penalty at the
rate of 2% as provided in section 271(1)(a) of the 1961 Act
and raised a demand of Rs. 4,060. That demand has been
upheld in appeal. The Tribunal did not refer to the
provisions of section 271 (1)(a) while reducing the penalty
to Rs. 400 but the reduction was directed on the basis that
the assessee was ill and had been absent from headquarters
on that account. Before the High Court the Revenue had taken
the stand that there was statutory prescription in the
matter of imposition of penalty and the Act having provided
that the penalty shall be a sum equal to 2% of the assessed
tax for every month during which the default continued, a
sum equal to the prescribed rate had to be imposed and could
not be reduced. The High Court accepted the stand of the
Revenue and found support for its conclusion by relying upon
section 297(2)(j) of the 1961 Act and holding that section
271(1) of that Act was applicable to the levy of penalty for
defaults committed under the 1922 Act. According to the High
Court the words "such penalty" occurring in clause (g) of
section 297(2) of the 1961 Act related to penalty which was
referred to in the earlier part of that clause, namely,
penalty impossible under section 271 of the 1961 Act and had
no reference to penalty under section 28 of the 1922 Act. It
was of the further view that the
834
word ’may’ under section 297(1) of the 1961 Act vested in
the Income Tax Officer discretion either to levy or not to
levy a penalty but if he did decide to levy one, he had no
option but to levy penalty at the prescribed rate. In the
instant case, the Income Tax Officer was, therefore, obliged
to levy penalty at the rate of 2% per month subject to a
maximum of 50% of the demanded tax. Exercising the same
powers as the Income Tax Officer did, the Appellate Tribunal
had no jurisdiction to reduce the penalty to a sum lesser
than the prescribed rate. Support for the conclusion of the
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High Court was drawn from a Constitution Bench decision of
this court in Jain Brother & Ors. v. Union of India &
Ors., 77 I.T.R. 107.
In Jain Brothers’ Case this Court mainly examined and
decided about the vires of section 297(1)(g) as also the
justification of fixing the commencement of the Act of 1961
with effect from April 1, 1962. Challenge was on the basis
of Article 14 of the Constitution. This Court took the view
that it was for the Legislature to fix the date when a
particular statute would come into force and with the
repealing of the 1922 Act Parliament was fully competent and
it was within its legislative jurisdiction to fix April 1,
1962, as the date of commencement of the 1961 Act. The
validity of section 297 (2) and in particular clauses (f)
and (g) thereof was upheld. The Court held that penalty
proceedings were not necessarily a continuation of the
assessment proceedings. It was well settled that in fiscal
enactments the legislature has a larger discretion in the
matter of classification so long as there was no departure
from the rule that persons included in a class are not
singled out for special treatment. It was not possible to
say that while applying the penalty provisions contained in
the Act of 1961 to cases of persons whose assessments were
not completed after April 1, 1962, any class has been
singled out for special treatment. It was obvious that for
the imposition of penalty it was not the assessment year or
the date of the filing of the return that was important but
it was the satisfaction of the income tax authorities that a
default had been committed by the assessee which attracted
the provisions relating to penalty. Whatever the stage at
which the satisfaction was reached the scheme of sections
274(1) and 275 of the Act of 1961 was that the order
imposing penalty must be made after the completion of the
assessment. The crucial date, therefore, for the purpose of
penalty is the date of such completion, and the satisfaction
of the authority that proceedings for levy of penalty be
initiated.
Under section 28 of the 1922 Act the upper limit of
penalty only was provided and there was no prescription of
any particular rate as found in section 271(1)(a) of 1961
Act. That penalty
835
contemplated under the respective sections of the two Acts
is quasi-criminal in character is not disputed. Mr. Dholakia
for the appellant canvassed before us that in Jain Brothers’
case the challenge raised by the assessee was not examined
with reference to the provisions of Art. 20(1) of the
Constitution. Under sub-art. (1) of Art. 20 no person is to
be subjected to a penalty greater than that which might have
been inflicted under the law in force at the time of the
commission of the offence. According to counsel, when there
was default in furnishing the return within September 28,
1961, the breach had occurred and the assessee had exposed
himself to be visited with penalty. That was a time when the
Act of 1922 was in force. Therefore, for levying penalty on
the assessee resort should have been made to the provisions
of section 28 of the 1922 Act and not to section 271(1)(a)
of the 1961 Act. If the 1922 Act applied, in the absence of
a prescription of any particular rate or the minimum, it was
open to the Tribunal to reduce the penalty in the manner it
has done and no objection could be raised to the reduction
of the quantum of penalty. In Jain Brothers’ case the
conclusions of a three Judge Bench in Third Income Tax
Officer, Mangalore v. M. Damodar Bhat, 71 I.T.R. 806 -
[1969] 2 S.C.R. 29, were quoted with approval. In Damaodar
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Bhat’s case this Court had said :
"In other words, the procedure of the new Act will
apply to the cases contemplated by section
297(2)(j) of the new Act mutatis mutandis."
In Jain Brothers’ case the Court held that "similarly the
provisions of section 271 of the Act of 1961 will apply
mutatis mutandis to proceedings relating to penalty
initiated in accordance with section 297(2)(g) of that Act."
Learned counsel for the appellant has taken the stand
that the observations in Damodar Bhat’s case which were
approved by the five Judge Bench in Jain Brother’s case
related only to the procedural part of it and this Court did
not decide the question of quantum.
The contention of Mr. Dholakia that in providing a
prescribed rate of penalty for imposition under section
271(1)(a) of the 1961 Act there has been breach of Article
20(1) of the Constitution cannot be accepted. A five Judge
Bench of this Court in K. Satwant Singh v. The State of
Punjab, [1960] 2 S.C.R. 89, examined a similar submission at
great length keeping Article 20 of the Constitution in view.
In the matter before the Constitution Bench this question
arose for consideration in view
836
of the fact that no minimum sentence of fine had been
provided under section 420 of the Indian Penal Code which
was the law in force at the time of the occurrence but the
provisions of Ordinance No. 29 of 1943 made imposition of a
minimum fine compulsory. Imam, J. who spoke for the
Constitution Bench, at page 113 of the report stated :
"In the present case even if it be assumed that
section 10 of the Ordinance was an ex post facto
law in that in the matter of penalty a minimum
sentence of fine was directed to be imposed by a
court whereas at the time that the appellant
committed the offence, section 420 contained no
such provision, what is prohibited under Article
20 of the Constitution is the imposition of a
penalty greater than that which might have been
inflicted under the law in force at the time of
the commission of the offence. The total sentence
of fine - ’ordinary’ and ’compulsory’ - in the
present case cannot be said to be greater than
that which might have been imposed upon the
appellant under the law in force at the time of
the commission of the offence, because the fine
which could have been imposed upon him under
section 420 was unlimited. A law which provides
for a minimum sentence of fine on conviction
cannot be read as one which imposes a greater
penalty than that which might have been inflicted
under the law at the time of the commission of the
offence where for such an offence there was no
limit as to the extent of fine which might be
imposed.
Mr. Dholakia candidly accepts that his submission is
contrary to the ratio of the decision. It is conceded that
under section 28 of the 1922 Act in the facts of the case a
fine of more than Rs. 4,060 (being within the limit of 1/2
times of the tax amount) could have been levied. While
conceding to that extent, Mr. Dholakia submits that the
decision of the Constitution Bench of this Court in Satwant
Singh’s case requires reconsideration as it has not taken
into account the ratio of an important decision of the
United States Supreme Court in the case of Elbert B. Lindsay
v. State of Washington, (1937) 81 L. Ed. 1182. We are bound
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by the decision of the Constitution Bench. It has held the
field for a quarter of a century without challenge and non-
consideration of an American decision which apparently was
not then cited before this Court does not at all justify the
837
submission at the Bar for a reconsideration of the decision
of this Court in Satwant Singh’s case. On the ratio of Jain
Brothers’ case, the following conclusions are reached :
(a) Though the default occurred in September, 1961
the date relevant for the purpose of initiating
proceedings for imposition of penalty is when,
following the assessment made, the Income Tax
Officer decided to initiate penalty proceedings;
(b) The proper provision to apply for dealing with
the situation relating to penalty is as provided
in section 271(1)(a) of the 1961 Act.
The question that remains for consideration now is as
to whether the default of non-filing of the return within
the time stipulated by law is not a continuing offence. This
aspect is relevant in the matter of imposition of penalty
and its quantification. In the decision of this Court in
Commissioner of Wealth Tax, Amritsar v. Suresh Seth, 129
I.T.R. 328 = [1981] 3 S.C.R. 419, the default related to
non-filing of the return under section 18(1)(a) of the
Wealth Tax Act. The law relating to penalty under that Act
was amended in 1964 and again in 1969. These amendments were
not retrospective. With reference to the application of
these amendments the question as to whether the default was
a single one or a continuing one fell for consideration. The
amended Wealth Tax provided for imposition of penalty with
reference to every month during which the default continued.
This Court took the view that such a provision indicated the
legislative intention that a multiplier had to be adopted
for determining the quantum of penalty and did not have the
effect of making the default a continuing one. The default
having already occurred prior to the enforcement of the
amendments, the amending provisions had no application.
Dealing with the point this Court observed :
"A liability in law ordinarily arises out of an
act of commission or an act of omission. When a
person does an act which law prohibits him from
doing it and attaches a penalty for doing it, he
is stated to have committed an act of commission
which amounts to a wrong in the eye of law.
Similarly, when a person omits to do an act which
is required by law to be performed by him and
attaches a penalty for such omission, he is said
to have committed an act of omission which is also
a wrong in the eye of law.
838
Ordinarily a wrongful act or failure to perform an
act required by law to be done becomes a completed
act of commission or omission, as the case may be,
as soon as the wrongful act is committed in the
former case and when the time prescribed by law to
perform an act expires in the latter case and the
liability arising therefrom gets fastened as soon
as the act of commission or of omission is
completed. The extent of that liability is
ordinarily measured according to the law in force
at the time of such completion. In the case of
acts amounting to crimes the punishment to be
imposed cannot be enhanced at all under our
Constitution by any subsequent legislation by
reason of Article 20(1) of the Constitution which
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declares that no person shall be subjected to a
penalty greater than that which might have been
inflicted under the law in force at the time of
the commission of the offence."
There can be no dispute to what has been stated above. In
Suresh Seth’s case this Court proceeded to say :
"In other cases, however, even though the
liability may be enhanced it can only be done by a
subsequent law (of course subject to the
Constitution) which either by express words or by
necessary implication provides for such
enhancement. In the instant case the contention is
that the wrong or the default in question has been
altered into a continuing wrong or default giving
rise to a liability de die in diem, that is, from
day to day. The distinctive nature of a continuing
wrong is that the law that is violated makes the
wrong doer continuously liable for penalty. A
wrong or default which is complete but whose
effect may continue to be felt even after its
completion is, however, not a continuing wrong or
default. It is reasonable to take the view that
the court should not be eager to hold that an act
or omission is continuing wrong or default unless
there are words in the statute concerned which
make out that such was the intention of the
legislature. In the instant case whenever the
question of levying penalty arises what has to be
first considered is whether the assessee has
failed without reasonable cause to file the return
as required by law and if it is held that the he
has failed to do so then penalty has to be levied
in
839
accordance with the measure provided in the Act.
When the default is the filing of a delayed return
the penalty may be correlated to the time lag
between the last day for filing it without penalty
and the day on which it is filed and the quantum
of tax or wealth involved in the case for purposes
of determining the quantum of penalty but the
default however is only one which takes place on
the expiry of the last day for filing the return
without penalty and not a continuing one. The
default in question does not, however, give rise
to a fresh cause of action every day.
This conclusion has been seriously disputed by learned
counsel for the Revenue and according to him the amended
Wealth Tax Act and section 271(1)(a) of the 1961 Act
provides for a continuing default. A Bench of this Court in
State of Bihar v. Deokaran Nenshi, [1973] 1 S.C.R. 1004,
while examining the provisions of section 66 of the Mines
Act, very appropriately drew the distinction between
continuing offence and offences which take place when an act
or omission is committed once and for all. Shelat, J.
speaking for the Court stated :
"A continuing offence is one which is susceptible
of continuance and is distinguishable from the one
which is committed once and for all. It is one of
those offences which arises out of a failure to
obey or comply with a rule or its requirement and
which involves a penalty, the liability for which
continues until the rule or its requirement is
obeyed or complied with. On every occasion that
such disobedience or non-compliance occurs and
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recurs there is the offence committed. The
distinction between the two kinds of offences is
between an act or omission which constitutes an
offence once and for all and an act or omission
which continues and therefore, constitutes a fresh
offence every time or occasion on which it
continues. In the case of a continuing offence,
there is thus the ingredient of continuance of the
offence which is absent in the case of an offence
which takes place when an act or omission is
committed once and for all."
Under Regulation 3 read with section 66 of the Mines Act
failure to file the annual return by the appropriate date
becomes an offence. There was no scope for applying the rule
or de die in diem.
840
VENKATARAMIAH, J. in Suresh Seth’s case quoted Lord
Lindley in Hole v. Chard Union, [1894]1 Ch. D. 293, where
the following observation had been made :
"What is a continuing cause of action? Speaking
accurately, there is no such thing; but what is
called a continuing cause of action is a cause of
action which arises from the repetition of acts or
omissions of the same kind as that for which the
action was brought."
Some decisions of different High Courts were also
quoted with approval by Venkataramiah, J. in support of the
conclusion that the default had been committed on the last
day allowed to file the return and there was no case of a
continuing default. We are inclined to agree with counsel
for the Revenue that the conclusion reached in Suresh Seth’s
case is contrary to law. Jain Brother’s case was not
referred to all in Suresh Seth’s case. On the facts found in
Suresh Seth’s case where the returns for the assessment
years 1964-65 and 1965-66 had been filed on March, 18, 1971,
and for which assessment was made on March 22, 1971, the
ratio of Jain Brothers’ case would have been fully
applicable. Though Jain Brothers’ case was with reference to
the Income Tax Act, 1961, the provisions of section 18(1)(a)
of the Wealth Tax Act, as amended, brought in a similar
provision and a sum equal to 2% of the tax for every month
during which the default continued with an optimum of 50% of
the tax due become payable. As rightly pointed out in Jain
Brothers’ case, the question of imposition of penalty would
arise only after assessment of tax is made and, therefore,
in Suresh Seth’s case on the analogy of the ratio accepted
by this Court in Jain Brothers’ case the amended provisions
would become applicable.
In ’Words & Phrases’, Permanent Edition, under the head
’Continuing Offence’, instances have been given which
indicate that as long as the default continues the offence
is deemed to repeat and, therefore, it is taken as a
continuing offence. As has been appropriately indicated in
Corpus Juris Secundum, Vol. 85, p. 1027, accrual of penalty
depends upon the terms of the statute imposing it and in
view of the language used in section 271(1)(a) of the 1961
Act, the position is beyond dispute that the Legislature
intended to deem the non-filing of the return to be a
continuing default - the wrong for which penalty is to be
visited, commences from the date of default and continues
month after month until compliance is made and the default
comes to an end. The rule of de die in diem is applicable
not on daily but on monthly basis.
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In State v. A.H. Bhiwandiwalla, A.I.R. 1955 Bombay 161,
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(a decision referred to in Suresh Seth’s case),
Gajendragadkar, J. (as he then was), after quoting the
observations of Beaumount, C.J. in an earlier Full Bench
decision of that Court observed:
Even so, this expression has acquired a well-
recognised meaning in criminal law. If an act
committed by an accused person constitutes an
offence and if that act continues from day to day,
then from day to day a fresh offence is committed
by the accused so long as the act continues.
Normally and in the ordinary course an offence is
committed only once. But we may have offences
which can be committed from day to day and it is
offences falling in this latter category that are
described as continuing offences."
The imposition of penalty not confined to the first
default but with reference to the continued default is
obviously on the footing that non-compliance with the
obligation of making a return is an infraction as long as
the default continued. Without sanction of law no penalty is
imposable with reference to the defaulting conduct. The
position that penalty is imposable not only for the first
default but as long as the default continues and such
penalty is to be calculated as a prescribed rate on monthly
basis is indicative of the legislative intention in
unmistakable terms that as long as the assessee does not
comply with the requirements of law he continues to be
guilty of the infraction and exposes himself to the penalty
provided by law.
There are several statutory provisions where such
default is stipulated to be visited with daily penalty. For
instance, see Ajit Kumar Sarkar, v. Assistant Registrar of
Companies, West Bengal 1979 Tax Law Reports 2001, where the
Calcutta High Court dealing with the provisions of section
159 and 162 of the Companies Act of 1956, held the liability
to be a continuous one; United Savings and Finance Co. Pvt.
Ltd. & Anr. v. The Deputy Chief Officer, Reserve Bank of
India, 1980 Crl.L.J. 607, where referring to section 58B(2)
of the Reserve Bank of India Act it was held that refusal to
comply with the terms of the said section created an offence
and continued to be an offence so long as such failure or
refusal persisted; Oriental Bank of Commerce Anr. v. Delhi
Development Authority & Ors., 1982 Crl.L.J. 2230, where
referring to the provisions of the Delhi Development Act of
1957, the Court held that the offence was a continuous one.
In G.D. Bhattar & Ors. v. The State, A.I.R. 1957 Cal. 483,
it was
842
pointed out that a continuing offence or a continuing wrong
is after all a continuing breach of the duty which itself is
continuing. If a duty continues from day to day, the non-
performance of that duty from day to day is a continuing
wrong. We are of the view that the legislative scheme under
section 271(1)(a) of the 1961 Act in making provision for a
penalty conterminus with the default to be raised provides
for situation of continuing wrong.
In the instant case assessment was made on June 30,
1964, and proceedings for imposition of penalty were
directed to be initiated that day. Provisions of section
271(1)(a) of the 1961 Act were fully applicable and the
demand of penalty was thus justified being within the limits
of law. In our opinion the High Court had taken the right
view and the appeal has, therefore, to be dismissed. In the
facts of the case we direct parties to bear their own costs.
N.V.K. Appeal dismissed.
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