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Addl. Commissioner of Income-tax Vs. Khayam Constructions - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 222 of 1976
Judge
Reported in[1980]123ITR573(AP)
ActsIncome Tax Act, 1961 - Sections 285A, 285A(1) and 285A(2); Income Tax Rules, 1962 - Rule 120
AppellantAddl. Commissioner of Income-tax
RespondentKhayam Constructions
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateY.V. Anjaneyulu, Adv.
Excerpt:
.....to levy fine only directory in nature - omission or default on part of assessee was first of its kind and omission not deliberate or mala fide - tribunal directed to consider on merits whether case is fit for levy of fine - held, no mens rea required to be established for levying fine under section 285a (2). - - according to the tribunal 'fine 'is a more severe and a stronger expression than penalty, which is quasi-criminal in nature and, therefore, default per se will not expose the assessee to fine as the department has failed to prove criminal intent or contumacious conduct or deliberate intention on the part of the assessee to disregard the statutory provisions and, therefore, allowed the appeal......assessment year 1969-70, wherein the income received from the contract was shown. the quantum of fine imposed worked out to rs. 16,660, which wasdirected to be collected by the issue of a demand notice by the concerned ito.3. aggrieved by the decision of the commissioner, the assessee preferred an appeal to the income-tax appellate tribunal. the tribunal by its order dated march 14, 1973, held that ' fine ', in the very nature of things, postulates criminal intent or contumacious conduct or deliberate intention to disregard the statutory provisions. according to the tribunal ' fine ' is a more severe and a stronger expression than penalty, which is quasi-criminal in nature and, therefore, default per se will not expose the assessee to fine as the department has failed to prove criminal.....
Judgment:

C. Kondaiah, C.J.

1. Pursuant to the direction given by this court under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), the Income-tax Appellate Tribunal, Hyderabad Bench, has submitted a statement of case for the opinion of this court on the following question of law :

' Whether, on the facts and in the circumstances of the case and on a correct interpretation of Section 285A(2) of the Act, the Appellate Tribunal was justified in cancelling the fine levied by the Commissioner of Income-tax ?'

2. The assessee had entered into a contract with the Reserve Bank of India for a sum of about Rs. 5 lakhs on March 27, 1967, for the construction of a building for it at Hyderabad. The assessee did not furnish the particulars as per the provisions of Section 285A(1) read with Rule 120 of the I.T. Rules. The Commissioner initiated proceedings for the levy of fine under Section 285A(2) and issued a show-cause notice to the respondent-assessee as to why he should not be proceeded against under Section 285A(2). The assessee made oral submissions through its advocate and also filed written explanation to the effect that the omission to furnish the particulars as required under Section 285A(1) read with Rule 120 of the I.T. Rules on its part was bona fide since the provision of law was new. The Commissioner by his order dated January 6, 1970, held that the assessee had submitted such particulars earlier in respect of certain contracts in the prescribed form in the year 1969, and therefore it is not correct to state that the assessee was not familiar with the procedure in this regard. ' However, he has found that ' this is the first omission or default on the part of the assessee ' and that ' there is also nothing to establish that the omission was deliberate or mala fide '. Taking an overall view of the facts and circumstances, the Commissioner levied a fine of Rs. 20 per day of default from April 27, 1967, to August 6, 1969, on which date the assessee filed a return of income for the assessment year 1969-70, wherein the income received from the contract was shown. The quantum of fine imposed worked out to Rs. 16,660, which wasdirected to be collected by the issue of a demand notice by the concerned ITO.

3. Aggrieved by the decision of the Commissioner, the assessee preferred an appeal to the Income-tax Appellate Tribunal. The Tribunal by its order dated March 14, 1973, held that ' fine ', in the very nature of things, postulates criminal intent or contumacious conduct or deliberate intention to disregard the statutory provisions. According to the Tribunal ' fine ' is a more severe and a stronger expression than penalty, which is quasi-criminal in nature and, therefore, default per se will not expose the assessee to fine as the department has failed to prove criminal intent or contumacious conduct or deliberate intention on the part of the assessee to disregard the statutory provisions and, therefore, allowed the appeal.

4. The application filed by the department under Section 256(1) of the Act wasrejected by the Tribunal on the ground that no question of law arises outof the order of the Tribunal. Hence, this reference under Section 256(2) of theAct.

5. Sri P. Rama Rao, the learned counsel for the revenue, contended that the Tribunal erred in law in holding that fine imposable under Section 285A(2) of the Act is quasi-criminal in character and it cannot be levied unless the department establishes criminal intent or contumacious conduct or deliberate intention on the part of the assessee not to furnish the particulars as required under Section 285A(1) and no mens rea is needed to levy fine for default committed under Section 285A(1) and the view taken by the Tribunal is contrary to the provisions of Section 285A. This claim of the department is resisted by Mr. Y. V. Anjaneyulu, learned counsel for the respondent-assessee, contending inter alia that in the present case, as the Commissioner himself has found that the omission or default on the part of the assessee is the first of its kind and it was neither deliberate nor mala fide, this is not a fit case where fine is leviable under Section 285A(2).

6. For a proper understanding of the respective contentions, we may usefully refer to the provision of Section 285A(1), which requires the contractors to furnish information in certain cases to the ITO having jurisdiction to assess them under the Act. Section 285A(1) enjoins the contractor who enters into a contract with another person for carrying out any work or for the supply of goods or services in connection therewith, the value of which work or supply or both exceeds fifty thousand rupees, to furnish, within one month of the making of such contract to the ITO having jurisdiction to assess him, such particulars relating to the contract and in such form as may be prescribed. Rule 120 of the I.T. Rules prescribes Form No. 52 for furnishing the requisite particulars. Such information is really necessary for the purpose of proper computation of the income of such contractors as per the provisions of the Act. This obligation has to be discharged by the class of contractors referred to in Section 285A(1). This requirement is not applicable to contractors, the value of whose contract for carrying out any work or for the supply of goods or services is less than Rs. 50,000. It is only in the case of big contractors, where the value of the contract for carrying out any work or for the supply of goods or services or both exceeds Rs. 50,000, that the concerned person is obliged to furnish the particulars as required under Section 285A(1). Sub-section (2) of Section 285A of the Act empowers the Commissioner to impose upon any contractor, who contravenes the provisions of sub-s.'(l), such'fine not exceeding Rs. 50 for every day's default and in the aggregate not exceeding twenty, five per cent. of the value of the contract. The power vested in the Commissioner to impose fine under Sub-section (2) of Section 285A is without prejudice to the provisions of any other law for the time being in force. This statutory power of the Commissioner would not in any way affect or offend the provisions of any other law for the time being in force applicable to such contracts. On a careful reading of Section 285A(1) and (2), we are unable to think that mens rea is really necessary to attract the provisions of Sub-section (2). The provisions of Section 285A(2) are regulatory in character and they have been enacted to enforce the compliance of the provisions of Section 285A(1) by the persons mentioned therein, but not actually to punish them. Such information is needed, particularly in the case of big contractors, to enable the income-tax authorities to make a proper assessment of income and protect the interests of the public revenue. As stated above, the object and intendment of Section 285A(2) appears to be to make big contractors comply with the provisions of Section 285A(1) to facilitate easy and convenient computation of income of such big contractors. In other words, this provision is made to safeguard the interests of the revenue rather than punish big contractors. The Commissioner is not required to impose fine in each and every case as the word used is ' may '. It cannot be said that it is mandatory on the part of the Commissioner to invariably impose fine in each and every case where there is default in complying with the provisions of Section 285A(1) by any contractor. The Commissioner has to exercise the power vested in him under Sub-section (2) to Section 285A in a judicious, fair and proper manner, and not arbitrarily or whimsically. The discretionary power being statutory in character, he cannot impose the fine arbitrarily or unreasonably. The very fact that no minimum amount of fine is fixed indicates that free discretion is given to the Commissioner, who is the highest officer of the department in the State, to exercise the power properly and judiciously taking into account the facts and circumstances of each case. He is, therefore, entitled to impose even a token fine under this provision if the facts justify such imposition. He may impose the maximum fine in a case where he feels it just and proper. He may also in his discretion think it just and proper not to impose any fine because it is not mandatory on his part to impose fine in every case of default. Fine is, therefore, not automatically or invariably to be imposed in each and every case where default is committed under Section 285A(1).

7. In State of Gujarat v. Devendraprasadji Pande : 1971CriLJ760 , it was held by the Supreme Court that the requirement of mens rea is not a necessary ingredient of Section 35(1) of the Bombay Public Trusts Act, 1950. The broad principles enunciated therein are as follows (pp. 868, 870):

' Where an offence is created by a statute, however comprehensive and unqualified the language of the statute, it is usually understood as silently requiring that the element of mens rea should be imported into the definition of the crime, unless a contrary intention is expressed or implied. In other words, the plain words of the statute are read subject to a presumption, which may be rebutted, that the general rule of law that no crime can be committed unless there is mens .rea has not been ousted by the particular enactment. The mens rea means some blameworthy mental condition whether constituted by knowledge or intention or otherwise......

Section 35(1) of the Act creates a quasi-criminal offence. It is a regulatory provision. It is enacted with a view to safeguard the interests of the public regarding trust money. The offence in question is punishable only with fine. The conviction under that does not carry any stigma. The language of the provision appears to make its contravention an absolute liability. Under these circumstances, we think the offence mentioned in that section is an absolute one. Consequently we cannot read into it the requirement of mens rea. '

8. This decision supports the view expressed by us. The language of Section 285A makes its contravention an absolute liability.

9. We may refer to a decision of a Full Bench of this court in Addl. CIT v. Dargapandarinath Tuljayya & Co. : [1977]107ITR850(AP) wherein it was held that where the statute provides for judicial or quasi-judicial authorities under the Act and lays down its own objective test for levying penalty and excludes mens rea, then the statute should prevail and the question of providing mens rea does not arise. It was also held that mens rea need not be established before the levy of penalty under Section 271(1)(a) for non-submission of return in time and this penal provision is different from the penal provision envisaged under Section 271(1)(c).

10. On a fair and proper interpretation of the provisions of Section 285A, we are of the view that the Tribunal erred in law in thinking that for the imposition of fine under Section 285A(2) the department must establish criminal intent or contumacious conduct or deliberate intention on the part of the assessee to disregard the statutory provisions. The Commissioner is empowered to levy fine under this provision for the default committed by any contractor under Section 285A(1) on a consideration of the facts and circumstances of each case. We also make it clear that the power of the Commissioner to levy fine is not mandatory, but only directory. But this being a statutory discretion, the Commissioner has to apply his mind judiciously in each and every case taking into consideration the facts and circumstances of each case. Where the Commissioner finds that the omission or default on the part of the assessee is only technical or due to any reason beyond his control, he may consider it just and proper not to levy any fine. Even otherwise, he may be liberal in imposing some nominal fine depending on the circumstances of the case. However, it is open to him to impose fine in cases where the omission or default was deliberate or mala fide. With regard to the quantum of the fine, the Commissioner has to exercise his discretionary power fairly, reasonably and judiciously. In view of the finding of the Commissioner that the omission or default on the part of the assessee in this case, being the first of its kind and the omission not being deliberate or mala fide, we feel it just and proper to hold that the Tribunal has to consider, on merits, whether this is a fit case for the levy of fine and if it is a fit case to levy fine, what is the amount of fine to be levied. The Tribunal has not considered this aspect on merits as it felt that without mens rea no fine can be levied under Section 285A(2). We, therefore, answer the question in the negative holding that the Tribunal was not justified in cancelling the fine levied by the Commissioner on the ground that no mens rea has been established, on a proper interpretation of the provisions of Section 285A(2) of the Act and direct theTribunal to dispose of the appeal on merits and pass final order thereon.No costs.


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