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Mullapudi Venkatarayudu Vs. Union of India (Uoi) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petition No. 24 of 1969
Judge
Reported in[1975]99ITR448(AP)
ActsIncome Tax Act, 1961 - Sections 139(1), 139(2), 139(4), 139(7) and 271(1); ;Constitution of India - Article 14
AppellantMullapudi Venkatarayudu
RespondentUnion of India (Uoi)
Appellant AdvocateA.V. Koteswara Rao, Adv.
Respondent AdvocateP. Rama Rao, Adv.
Excerpt:
direct taxation - mens rea - sections 139 (1), 139 (2), 139 (4), 139 (7) and 271 (1) of income tax act, 1961 and article 14 of constitution of india - whether non-compliance of provisions of section 139 (1) of act of 1961 was done with wrongful intention or culpable negligence - section 271 (1) says penalty can be levied only in cases where assessee has without reasonable cause failed to furnish return in accordance with section 139 (1) - income tax officer on basis of material facts concluded that mere impression that petitioner would be served with notice to file returns was insufficient to prove reasonable cause not to comply with provisions of section 271 (1) - held, element of mens rea being sufficiently established writ petition liable to be dismissed. - - 1,958.44, being a.....vaidya, j.1. the petitioner is an assessee liable to pay income-tax from the assessment year 1959-60, for the previous year ending with 30th september, 1958. the petitioner had been submitting the returns inpursuance of notices issued under section 22(2) of the indian income-tax act, 1922. the income-tax act of 1961 (hereinafter referred to as 'the act') came into force from the 1st april, 1962, and the petitioner submitted his return pursuant to a notice issued by the income-tax officer under section 139(2) of the act. no return was filed by the petitioner under section 139(2) of the act and no action was taken by the income-tax officer against the petitioner in that behalf. for the assessment year 1963-64, the petitioner under a bona fide belief that he has to file the return after.....
Judgment:

Vaidya, J.

1. The petitioner is an assessee liable to pay Income-tax from the assessment year 1959-60, for the previous year ending with 30th September, 1958. The petitioner had been submitting the returns inpursuance of notices issued under Section 22(2) of the Indian Income-tax Act, 1922. The Income-tax Act of 1961 (hereinafter referred to as 'the Act') came into force from the 1st April, 1962, and the petitioner submitted his return pursuant to a notice issued by the Income-tax Officer under Section 139(2) of the Act. No return was filed by the petitioner under Section 139(2) of the Act and no action was taken by the Income-tax Officer against the petitioner in that behalf. For the assessment year 1963-64, the petitioner under a bona fide belief that he has to file the return after receipt of a notice under Section 139(2) of the Act, waited for such a notice. He got such a notice on 8th September, 1963, and sumitted his return in the prescribed form on 3rd October, 1963, Prior to the issuance of the notice under Section 139(2) by the Income-tax Officer, he had received notices for payment of advance tax and he has also paid advance tax in pursuance of those notices. After the filing of the return, on 24th December, 1963, the Income-tax Officer assessed him provisionally under Section 140 of the Act. On 22nd April, 1964, the Income-tax Officer made the assessment order holding that the petitioner was liable to pay a iax of Rs. 60,133.86. Out of this amount, he deducted the amounts paid under Sections 210 and 141 and arrived at Rs. 1,998.07 as the balance payable. To that he added interest for two days under Section 139 arriving at the total figure of Rs. 2,015.71. He further adjusted a sum of Rs. 57.27 being the refund for 1960-61 and also an amount of Rs. 1,958.44, being a part of refund for 1962-63. Thus he held that the net tax payable by the petitioner was 'nil'. On the same day on which the Income-tax Officer passed the assessment order, he issued a notice under Section 271 of the Act stating that the petitioner bad without reasonable cause failed to furnish the return of income which he was required to furnish under Section 139(2) within the time allowed and in the manner required by the said section. The petitioner was, therefore, requested to appear before the Income-tax Officer on 15th May, 1964, and show cause why an order imposing penalty should n6t be made under Section 271 of the Act. In pursuance of this notice, the petitioner made his representation before the Income-tax Officer wherein he stated that he was under the bona fide impression that he would be served with a notice to file a return of income as was being done in the previous years. He had no intention to avoid the payment of tax and that he has been a regular taxpayer. This explanation of the petitioner was considered by the Income-tax Officer and by his order dated 23rd October, 1964, he rejected the explanation offered by the petitioner and came to the conclusion that there was no reasonable cause for not filing the return within the time prescribed under Section 139(2) of the Act. He, therefore, levied a penalty at the rate of two per cent, of the net tax pay-able, the period of default being three months. The Income-tax Officer thereafter issued a notice on 22nd April, 1965, under Section 154 of the Act for rectification of the mistake. The mistake sought to be rectified was that in ihe order dated 23rd October, 1964, the penalty was calculated on the tax as reduced by the compulsory deposit and the advance tax paid which was not correct, and that the amount on which the penalty was to be calculated would be Rs. 60,998*86, i.e., the tax chargeable according to the Finance Act, 1963. After hearing the petitioner, the Income-tax Officer made his order under Section 154 on 7th May, 1965, enhancing the penalty from Rs. 3,200 to Rs. 3,687. The assessee filed an appeal before the Appellate Assistant Commissioner aggrieved by the order of the Income-tax Officer dated 23rd October, 1964. He also filed an appeal against the order of the Income-tax Officer dated 7th May, 1965. Both these appeals were disposed of by the Appellate Assistant Commissioner by a common order dated 20th August, 1966. He held that the Income-tax Officer was justified in imposing the penalty for default in complying with the provisions of Section 139. He, however, held that as the notice under Section 139(2) was served on the assessee on 8th September, 1963, pursuant to which he filed the return, the assessee could be considered as having reasonable ciuse for not filing the return under Section 139(2). He, therefore, held that the period of default was from 30th June, 1963, to 8th September, 19.63, i.e., the date on which the notice under Section 139(2) was issued by the Income-tax Officer. Accordingly, the Appellate Assistant Commissioner fixed the period of default as two months and reduced the penalty from Rs. 3,687 to Rs. 2,458.

2. Against the order of the Appellate Assistant Commissioner, both the Income-tax Officer as well as the assessee came up in appeal before the Tribunal. The Tribunal allowed the appeal filed by the department and dismissed the appeal filed by the assessee. In the result, the order of the Income-tax Officer was upheld and that of the Appellate Assistant Commissioner set aside. The petitioner seeks to set aside the aforesaid orders of the income-tax authorities levying penalty on him.

3. The contentions raised by the petitioner are :

(1) Section 139(1)(a) and (b) of the Act are violative of article 14 of the Constitution.

(2) Section 271(1) also infringes article 14 of the Constitution.

(3) Under Section 271(1) penalty can be imposed only in case an assessee fails to file a return under Section 139(2) of the Act. In the instant case, there was only an omission on the part of the assessee to file the said return and, therefore, the provisions of Section 271(1) are not attracted.

(4) Once a return is filed under Section 139(2) of the Act, an assessee is discharged of his liability to file the return under Section 139(2). No proceedings, therefore, for an imposition of penalty can be taken against such an assessee.

(5) Penalty proceedings are vitiated as the Income-tax Officer had not satisfied himself before the passing of the assessment order that the petitioner had failed to furnish his return in accordance with Section 139(2).

(6) The Income-tax Officer was biased against the petitioner and the order made by him, therefore, is void and illegal.

(7) Failure to file a return under Section 139(1) of the Act has been made punishable and, therefore, is an offence. For every offence, there should be a mens rea which should be established by the prosecution. In the instant case, the department has not established that the petitioner wilfully or purposely failed to file the return so as to evade payment of tax.

4. Section 139(1)(a) and (b) of the Act read :

' 139. Return of income.--(1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed-

(a) in the case of every person whose total income, or the total income of any other person in respect of which he is assessable under this Act, includes any income from business or profession before the expiry of six months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or before the 30th day of June of the assessment year, whichever is later ;

(b) in the case of every other person, before the 30th day of June of the assessment year :......... '

5. It is argued by the learned counsel for the petitioner that this section divides the assessees into two classes ; (i) whose income includes income from business or profession, and (ii) others who are not in that category. By Clause (a) of Sub-section (1), a period of six months has been prescribed for the assessees whose income includes income from business or profession from the end of the previous year or before the 30th day of June of the assessment year, whichever is later. In the case of assessees whose income does not include an income from business or profession, the last day for filing of the return is 30th day of June, of the assessment year. The argument is that persons coming under Clause (a) get a period of six monthswhereas persons who come under Clause (b) get only a period of three months from the date of the commencement of the assessment year, i e,, 1st of April. It is argued that there is no reasonable classification in making this distinction and, even if there is any classification, there is no nexus between the classification and the object sought to be achieved by this classification. It is urged that the object in enacting Section 139(2) is the speedy collection of income-tax and by providing for different periods in the aforesaid two cases, this object is not in any manner achieved. It is further argued that assuming the assessee whose income includes income from business or profession can be separated from assessees whose income does not include income from business or profession, there is discrimination between the assessees whose income includes income from business or profession. In regard to the assessees contemplated in Clause (a) of Section 139(2), different periods have been prescribed.

6. To illustrate : Assessees whose income includes any income from business or profession and whose previous years expire on or before the 31st day of December, of the year immediately preceding the assessment year, will get a period of more than six months. In the instant case the assessee whose previous year terminated on 30th September, 1963, gets a period of nine months for submitting the return of income. It is also argued that when calculated from the beginning of the assessment year for persons whose previous year coincides with the financial year, they get a period of about six months, i.e., up to the end of September, of the assessment year whereas other assessees get time up to the end of June, i.e., only a period of three months. The purpose of enacting Section 139(2) being aspeedy recovery of tax, the difference between the periods as stated above is discriminatory.

7. It is argued by the learned counsel for the department that by a reading of Clause (a) of Section 139(2), it is clear that the period of six months has to be reckoned from the end of the previous year and not from the beginning of the assessment year. Income-tax is charged on the income accrued during the previous year and not on income derived during the assessment year. For purposes of income-tax, it is always the previous year that is taken into consideration though the tax is levied during the assessment year. Considering from this point of view, three broad divisions of assessees can be made under the aforesaid Clause (a); one, of those persons whose previous year coincides with the calendar year; the second of those assessees whose previous year coincides with the financial year; and the third class is of other assessees who do not come either under class 1 or class 2. As regards the assessees belonging to classes 1 and 2, the period during which they can file the returns is the same and no different periods have been prescribed in those cases. It is only in the cases of assessees who belong to the third class that the period forfiling the return may vary from assessee to assessee depending upon the fact where the previous year ends between April and November. In such cases, if a period of six months alone is calculated from the end of the previous year, it may fall even before the beginning of the assessment year. It was, therefore, thought fit by the legislature to fix a particular date before which the assessees belonging to the third class should file their returns. The variation in the period is a result of the circumstance that the previous years vary. As the assessees belonging to the third category get a minimum period of six months, it cannot be said that they are in any manner discriminated against other assessees belonging to classes 1 and 2. It is only the persons belonging to classes 1 and 2 who can complain about a longer period given to the assessees belonging to the third class. The petitioner who belongs to the third class cannot be heard to say that he has been in any manner adversely affected by the provisions of Clause (a) of Section 139(2) of the Act.

8. As far as the classification between the assessees mentioned in Clauses (a) and (b) is concerned, it is argued that for the assessees who do not have any income from business or profession, the filing of the return is comparatively easier when compared to the filing of the returns of the assessees who have an income from business or profession. That being so, it was thought fit by the legislature to fix a particular date for all the assessees within Clause (b) irrespective of the end of the previous year. The classification of the assessees is a reasonable one and there is nexus between the classification and the object sought to be achieved by the enactment.

9. The complaint of the petitioner is that the assessees whose previous year coincides with the financial year get a period of six months from the date of the commencement of the assessment year whereas other assessees get only a period of three months from the date of the commencement of the assessment year, and therefore, there is discrimination between the assessees. According to him, for the purposes of Section 139(2), it is the commencement of the assessment year which has to be taken into consideration and not the end of the previous year, as the purpose of this particular provision is to speedily collect the income-tax. We do not agree with this contention of the learned counsel for the petitioner. According to Section 4 of the Act, which is the charging section, income-tax is chargeable in respect of the total income of the previous year of every person. Thus, it is very clear that the charge of income-tax is on the income during the previous year and for the purpose of levy of income-tax it is the income of the previous year that has to be computed. That being so, the argument that it is the commencement of the assessment year that has to be taken into consideration and not the end of the previous year, inour opinion, is not sound. All assessees whose previous year coincides with the calendar year or the financial year get a period of six months to file the return, it is only the assessees whose previous year does not coincide with the calendar year and the financial year who get a period of more than six months. Even in this class of assessees, the previous years vary from person to person and it is very difficult for the legislature to fix any particular period from the end of the previous year. The legislature, therefore, had to fix a particulur date after the commencement of the previous year during which the said class of assessees should file their returns. The legislature in its wisdom thought it fit to give a period of three months even to such assessees from the commencement of the assessment year so as to enable them to file the returns. It is a matter of common knowledge that the Finance Act is usually passed in the month of May, after the financial year and after the assessment year starts and sometimes it becomes necessary to file the returns after taking into consideration the provisions of the new Finance Act. It is with the intention of facilitating the filing of the returns by the assessees and also from the point of convenience to the income-tax department that the legislature has fixed 30th June of the year as the date by which the assessees belonging to the third class have to file their returns. The object of Section 139(2) is to give a reasonable time to the assessees to file the returns and at the same time enable the department to complete the assessment proceedings and collect the tax. Further, in matters of taxation, the legislature has to be given a, wider amplitude for classification than in other cases as taxation law has to deal with cases of diverse and complicated nature. In this view of the matter, the classification made in Clause (a) is a reasonable classification and it has a nexus with the object of the enactment. Similarly, the classification between the assessees mentioned in Clause (a) and the assessees mentioned in Clause (b) is also reasonable considering the classes of assessees contemplated in the said two clauses. It is a matter of common knowledge that assessees who have their income from business or profession take a longer time to file their returns and in many cases such returns are usually complicated ones whereas in the case of persons who do not have an income from business or profession, the filing of returns is comparatively an easier job. The persons covered by Clause (b) are persons having an income from salary or property. As for the assessees who get salary, the return in their case is a very simple one and similar is the case with respect to persons who derive their income from property. The classification, therefore, between the two classes of assessees is reasonable and also has a nexus with the purpose of the enactment.

10. It was argued by the learned counsel for the petitioner that having made two broad classifications in Clauses (a) and (b), there could not have been a sub-classification in Clause (a). There is no warrant, in our opinion, for such an argument. Article 14 guarantees equality; but in the very nature of things absolute equality is not possible. The theory of reasonable classification has, therefore, been evolved. Of course, the theory of classification cannot be extended so as to defeat the guarantee enshrined in Article 14 of the Constitution. But that does not mean that there cannot be more than one classification if the exigencies of the situation so demand and if such classification is reasonable and has a nexus with the purpose of the enactment. In our opinion, the further classification in Clause (a) does not defeat the provisions of Article 14 of the Constitution.

11. It was argued by the learned counsel for the petitioner that all the different periods mentioned in Clause (a) of Section 139(2) of the Act could have been avoided by Parliament by prescribing the period, for the filing of a return at a particular period from the commencement of the assessment year. Even if the legislature were to fix any such period it would have resulted in different periods if the end of the previous year of the assessees concerned is to be taken into consideration. Looked at from any angle, the result would have been the same. Parliament, therefore, thought it fit to take into consideration the end of the previous year, the income of the previous year being assessable to tax. When two modes of fixing the period were available to Parliament, a court cannot say that one of such periods is discriminatory unless it comes to the conclusion that the fixing of such periods is arbitrary and has been done by the legislature with an ' evil eye '. We may also note that the petitioner who gets a longer period than six months cannot be h?ard to complain that the provisions of Clause (a) have resulted in a disadvantage to him.

12. We will now consider the decisions cited before us in this context. The learned counsel for the petitioner relied upon the decisions where general observations have been made in regard to the contravention of Article 14 of the Constitution. The first case relied upon by him is State of Andhra Pradesh v. Nalla Raja Reddy : [1967]3SCR28 . The passage upon which the learned counsel for the petitioner laid great stress appears at pages 1468 and it reads :

' A statutory provision may offend Article 14 of the Constitution both by finding differences where there are none and by making no difference where there is one. Decided cases laid down two tests to ascertain whether a classification is permissible or not, viz., (i) the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group; and (ii) thatthe differentia must have a rational relation to the object sought to be achieved by the statute in question. The said principles have been applied by this court to taxing statutes.'

13. The second decision relied upon is Jalan Trading Co. v. Mill Mazdoor Sabha : (1966)IILLJ546SC . Our attention is drawn to paragraphs 29, 32 and 33 of the said judgment. Their Lordships of the Supreme Court were considering the provisions of Section 33 of the Payment of Bonus Act which was held to be patently discriminatory. While coming to this conclusion their Lordships held that though it may be assumed that there was some classification based on some intelligible differentia which distinguishes an establishment from other establishments, the differentia has no rational relation to the object sought to be achieved by the statutory provision, viz., of ensuring peaceful relations between capital and labour by making an equitable distribution of the surplus profits of the year.'

14. The third decision relied upon is Lachhman Das v. State of Punjab : [1963]2SCR353 . Great stress is laid by the learned counsel for the petitioner on the passage occurring at page 240 :

' It shall also be remembered that a citizen is entitled to a fundamental right of equality before the law and that the doctrine of classification is only a subsidiary rule evolved by courts to give a practical content to the said doctrine. Over-emphasis on the doctrine of classification or an anxious and sustained attempt to discover some basis for classification may gradually and imperceptibly deprive the Article of its glorious content. That process would inevitably end in substituting the doctrine of classification for the doctrine or equality ; the fundamental right to equality before the law and equal protection of the laws may be replaced by the doctrine of classification.'

15. The conclusion arrived at by us is after taking into consideration thedicta of the Supreme Court referred to in the above three cases. We havenot over-emphasised the doctrine of classification nor have we shown anyanxiety to discover some basis for classification. The basis for the classification is evident from the section itself which speaks of the end of theprevious year. Section 139(2) has not made any difference where therewas none nor has it overlooked the difference where there is one. It cannotbe gainsaid that there are assessees with different previous years andParliament had to make a provision taking into consideration all suchassessees. The three decisions cited do not persuade us to hold that Section 139(2), Clauses (a) and (b), are violative of Article 14 of the Constitution.The view we have taken is supported by a decision of the Supreme Courtrelied upon by the learned counsel for the department. The decision isKhandige Sham Bhat v. Agricultural Income-tax Officer : [1963]48ITR21(SC) , wherein their Lordships of the Supreme Court observed as follows:

'......it is not the phraseology of a statute that governs the situationbat the effect of the law that is decisive. If there is equality and uniformity within each group, the law will not be condemned as discriminative, though due to some fortuitous circumstances arising out of a peculiar situation some included in a class get an advantage over others, so long as they are not singled out for special treatment. Taxation law is not an exception, to this doctrine. But in the application of the principles, the courts, in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the legislature in the matter of classification, so long it adheres to the fundamental principles underlying the said doctrine. The power of the legislature to classify is of 'wide range and flexibility ' so that it can adjust its system of taxation in all proper arid reasonable ways. '

16. In coming to the conclusion, we have followed the aforesaid dicta of the Supreme Court. Persons who belonged to the third category get an advantage over the persons belonging to the other two categories because of the fortuitous circumstance that they have their previous years differing from the previous years of the assessees belonging to the other two classes. Even amongst the persons in the third class, some again have an advantage over others because of the fortuitous circumstance that their previous years differ. But that is not sufficient to come to the conclusion that there is an invidious discrimination made against the petitioner.

17. We have, therefore, no hesitation in rejecting the first contention of the learned counsel for the petitioner that Section 139(2). Clauses (a) and (b), are violative of Article 14 of the Constitution of India,

18. We also have no hesitation in rejecting the contention of the petitioner that Section 271(1) of the Act infringes Article 14 of the Constitution of India. It was argued that Section 271(1) vests in the Income-tax Officer an unguided and arbitrary discretion to pick and choose between the assessees who have not filed the returns as contemplated by Section 139(2) of the Act. This argument rests on the word 'may' found in the said section. The relevant portion of the said section reads :

' 271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner, 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 total income which he was required to furnish under Sub-section (1)of Section 139(2) or by notice given under Sub-section (2) of Section 139(2) 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(2) or by such notice, as the case may be, or......

he may direct that such person shall pay by way of penalty,--

(i) in the cases referred to in Clause (a), in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax......'

19. It is argued that a plain reading of this section shows that the Income-tax Officer, even after coming to the conclusion that an assessee has violated the provisions of Section 139(1) of the Act, need not in every case levy penalty as contemplated in Clause (i). He can, therefore, choose between the assessees similarly situated and thus the section infringes Article 14 of the Constitution. We cannot agree with this contention of the learned counsel for the petitioner. It has to be remembered that the penalty can be levied by the Income-tax Officer after he comes to a conclusion that the assessee has, without reasonable cause, failed to furnish a return of the total income as contemplated in Section 139(2) of the Act, As an order of penalty cannot be passed without a conclusion as stated above is reached, the word ' may ' has been used by the legislature. While levying the penalty, the Income-tax Officer has no discretion regarding the quantum of the same. It is two per cent. of the tax for every month during which the default continued.

20. A Division Bench of this court consisting of one of us in R.C. No. 71 of 1968 (Poorna Biscuit Factory v. Commissioner of Income-tax : [1975]99ITR41(AP) decided on 19th February, 1971, observed:

' In every penal statute, the word used is ' may '. By the use of the word ' may ' in penal Sections the legislature contemplates levy of penalty, if the essential ingredients of that section are fulfilled, and in cases where such essential ingredients are not fulfilled, not to levy penalty. Therefore, the word 'may ' occurring in Section 271(1) of the Act has been used with reference to the existence or otherwise of the circumstances justifying imposition of penalty and not in regard to the quantum of penalty that is to be imposed.'

21. We also do not find that any unguided or arbitrary discretion is vested in the Income-tax Officer. He can pass an order for levying penalty if he finds that the failure to comply with the provisions of the section is without a reasonable cause. Further, there are sufficient procedural safeguards in case the Income-tax Officer uses his discretion arbitrarily. An order levying penalty by the Income-tax Officer is appealable and the appeal lies to the Appellate Assistant Commissioner. Even if an assessee is aggrieved by the decision of the Appellate Assistant Commissioner, an appeal lies to theIncome-tax Appellate Tribunal. That being the case, if there is any arbitrary exercise of the discretion vested in the Income-tax Officer, that can be corrected by the appeals and also by a petition under Article 226 of the Constitution by this court. We, therefore, hold that Section 271(1) does not infringe Article 14 of the Constitution of India.

22. We now go to the argument of the learned counsel for the petitioner that under Section 271(1) penalty can be levied only in cases where an assessee fails to file the return under Section 139(2) of the Act, and not in cases where there was a mere omission on the part of the assessee to do so. The argument is that in the instant case there was merely an omission on the part of the assessee to file the return and as there was no failure on his part, Section 271(1) is not attracted. To distinguish between the connotation of the word ' failure ' and the word ' omission ' reliance is placed on a decision of a Division Bench of the Bombay High Court in Pannalal Nandlal Bhandari v. Income-tax Commissioner : [1956]30ITR57(Bom) . The learned judges were considering the provisions of Section 34(1) of the Indian Income-tax Act, 1922, where both the expressions ' omission ' and ' failure ' were used in the same section. Where the legislature had advisedly used the two expressions it was observed :

' Failure must connote that there is an obligation which has not been carried out and if there was no obligation upon the assessee 1o make a return then it would not be a failure on his part to carry cut that obligation. But the legislature has also used the expression ' omission '; and it is clear that the expression 'omission' does not connote any obligation as the expression ' failure ' does. ' Omission ' is a clourless word which merely refers to the not doing of something, and if the assessee in fact does not make a return, it is an omission on his part, whether the law casts any obligation upon him to make a return or Lot....'

23. It is the last portion of the aforesaid observation that is relied upon by the learned counsel and it is argued that if a return is not made by an assessee irrespective of the fact whether the law casts any obligation to make a return upon him or not, it is merely an omission We do not agree with this contention of the learned counsel for the petitioner. The passage relied upon by him has to be read in the context of the definition of the word ' failure ' given by the learned judges and the distinction drawn by them between the words ' failure ' and ' omission'. The passage relied upon by the learned counsel for the petitioner will only mean that in cases where there is no obligation to file a return, it will be a case of ' omission ' and not ' failure '.

24. In the first place, the words ' failure ' or 'omission ' do not occur in Section 271(1) of the Act as they do in Section 147. There is no reason, therefore, to suppose that the word failure ' in Section 271(1) of the Act has been used by Parliament in contradistinction to the word ' omission '. In the context in which the words ' failed to furnish the return' occur in Section 271(1) it may also take in a mere omission to file a return. But without going into the controversy whether the words ' failed to furnish the return ' take in within their ambit omission to furnish the return, we are of the opinion that in the instant case there has been a 'failure' even within the restricted meaning given to that word by the Bombay High Court in Pannalal's case, : [1956]30ITR57(Bom) cited above. Under Section 139(2) an obligation has been cast upon an assessee to file a return within the period prescribed in that section. There being an obligation, non-furnishing of the return would be a failure to furnish the return and, therefore, is within the ambit of Section 271(1) of the Act. This contention, therefore, of the learned counsel fails.

25. We may also consider the argument raised by the learned counsel for the petitoner that under the provisions of Section 271(1), penalty can be levied for the period during which the default continued. The argument is that as no return was filed by the assessee under Section 139(2) of the Act, the default continued indefinitely and co definite period could have been arrived at by the Income-tax Officer to determine the quantum of penalty. It is also argued that the Income-tax Officer in his order has not held that the default which occurred because of the non-compliance with the provisions of Section 139(2) of the Act ceased on a particular day. There is absolutely no merit in this contention. A reading of Section 139(2) clearly shows that it contemplates the filing of a return in three circumstances : one provided for in Sub-section (1); the other provided for in Sub-section (2) and the third provided for in Sub-section (4). The argument that as no return was filed under Section 139(2) the default has never ceased, does not deserve any consideration because once the return is not furnished, the default occurs on the non-compliance with, the provisions of Section 139(2) and once it is not complied with, there is no question of furnishing any return under that section. The continuance of default, therefore, can only be up to the date on which either the return under Section 139(2) or 139(4) is filed. The petitioner filed his return in compliance with the notice given under Section 139(2) of the Act on 3rd October, 1963, and the Income-tax Officer has levied the penalty on the period of three months, i.e., July, August and September. There is, therefore, no infirmity in the order of the Income-tax Officer in this behalf.

26. The fourth contention raised by the learned counsel for the petitioner is that once a return is furnished under Section 139(2) of the Act, an assessee is discharged of his liability to file the return tinder Section 139(2) of the Act In support of this argument he relied upon the fact that there is nothing in Section 139(2) to show that the Income-tax Officer cannot issue a notice under the provisions of Section 139(2) before the termination of the period prescribed in Section 139(2) of the Act. The period of thirty days prescribed in Section 139(2) of the Act may in given cases terminate before the period prescribed by Section 139(1) of the Act. That being so, the intention of the legislature could not have been to penalise a person who has furnished the return in pursuance of the notice under Section 139(2) if he fails to furnish a return under Section 139(1). It is also argued that it is not obligatory on the Income-tax Officer to issue a notice under Section 139(2) of the Act and once he issues such a notice after the termination of the period prescribed by Section 139(2) it should be deemed that he has condoned the non-compliance to furnish a return under Section 139(2) of the Act. In support of this contention, he also relied upon the provisions of Section 139(2) of the Act which reads :

' No return under Sub-section (1) need be furnished by any person for any previous year, if he has already furnished a return of income for such year in accordance with the provisions of Sub-section (2). '

27. The arguments advanced by the learned counsel for the petitioner in this context, in our opinion, are not borne out by any of the provisions of Section 139(2) of the Act. It is true that under Section 139(2), the Income-tax Officer can issue a notice prior to the period prescribed in Section 139(2) terminates, and he can also issue a notice in such a manner that the period of thirty days from the date of notice may also expire before the termination of the period in Section 139(2) of the Act. It is to provide for such cases that Sub-section (7) of Section 139 has been enacted. According to that sub-section, if an assessee has already furnished his return of income in accordance with the provisions of Sub-section (2) no return under Sub-section (1) need be furnished by him. The word 'already' is of great significance and is the clue to the interpretation of that section. If that sub-section i-3 read without the word 'already', the argument advanced by the learned counsel for the petitioner may receive support. If the sub-section is read omitting the word ' already ', it may mean that if a return is furnished in accordance with Sub-section (2), no return need be furnished under Sub-section (1). In that case it can be legitimately argued that the filing of a return under Sub-section (2) is sufficient to discharge an assessee from the liability to furnish a return under Section 139(2). But the word ' already ' has been used so that the section may not have the said effect. The word 'already', to our mind, very clearly means that the return furnished under Sub-section (2) is within the period prescribed by Sub-section (1). After the filing of the return under Sub-section (2), two situations can be envisaged. One is that the said return is furnished within the period allowed in Sub-section (1), and the second after the period allowed in Sub-section (1). The provision in Sub-section (7) has been made so that it may not be said that even though a return has been filed under Sub-section (2) within the period prescribed in Sub-section (1), the assessee should also have to file a return under Sub-section (1). This provision is only by way of abundant caution and it cannot be interpreted to mean that every return under Sub-section (2) discharges an assessee from his liability under Sub-section (1).

28. The learned counsel for the petitioner brought to our notice the provisions of Section 22 of the Indian Income-tax Act, 1922. By Sub-section (1) of that section, provision was made for publication in the press and in the prescribed manner of a notice before the 1st day of May of each year requiring the assessees whose total income during the previous year exceeded the maximum amount which is not chargeable to income-tax to furnish their returns, within a period not being less than sixty days as may be specified in the said notice. Sub-section (2) of that section authorised the Income-tax Officer to serve a notice upon a person who, according to him, is assessable to income-tax, requiring him to furnish a return within such period, not being less than thirty days as may be specified in the notice. It is argued that the provisions of Sub-sections (1) and (2) of Section 22 of the 1922 Act essentially correspond to the provisions of Section 139(1) and (2) of the Act though there is no provision in Section 139(2) for the issuance of a notice by publication in the press or by publication in the prescribed manner. It is argued that even though the provisions of Section 22 of the 1922 Act materially correspond with the provisions of Section 139(2) of the Act, it was not thought necessary to enact a provision similar to Sub-section (7) of Section 139(2). The conclusion which the learned counsel draws from this circumstance is that the word ' already ' in Sub-section (7) has no significance. The legislature by enacting Sub-section (7) wanted to discharge an assessee, who has conformed to the provisions of Sub-section (2), from the liabilities cast upon him under Section 139(1). We cannot agree with this contention : We have pointed out the significance of the word ' already '. Merely because a similar provision was not made in Section 22 of the 1922 Act, Sub-section (7) of Section 139 cannot be given the meaning sought to be given by the petitioner. To our mind, there is no ambiguity in Sub-section (7) of Section 139(2) to require us to go into the history of the legislation and determine its meaning. This contention, therefore, of the learned counsel fails. The view we have taken is supported by a Division Bench decision of the Rajasthan High Court in Commissioner of Income-tax v. Indra & Co. The question for consideration was whether an assessee is liable to penalty for not submitting a return asrequired under Section 139(2) of the Act, even though he subsequently filed his return in pursuance of a notice issued under Section 139(2) and an assessment is made on the basis of that return. The provisions of Section 139(2) were referred to and the learned judges held that the assessee before them was liable to penalty for not submitting his return as required under Section 139(2) of the Act.

29. The fifth contention is that the penalty proceedings are vitiated because, before the passing of the assessment order, the Income-tax Officer had not satisfied himself that the petitioner had failed to furnish his return in accordance with Section 139(2). This argument is based on the fact that the assessment order, dated 22nd April, 1964, does not make any mention that the Income-tax Officer was contemplating any penalty proceedings against the petitioner for his non-compliance with Section 139(2). Neither the Act nor the Rules made thereunder make it obligatory upon the Income-tax Officer to state in the assessment order that he had already satisfied himself that there has been a failure on the part of an assessee which would attract the penal provisions of the Act. What is necessary as laid down by the Supreme Court in Commissioner of Income-tax v. Angidi Chettiar : [1962]44ITR739(SC) is that, before the passing of the assessment order, the Income-tax Officer has to satisfy himself that a particular non-compliance with the provisions of the Act attracting penalty has taken place. Under the provisions of Section 271(1) it is only after the Income-tax Officer in the course of any proceedings under the Act is satisfied that a particular failure has taken place, proceedings for penalty can be instituted. The order sheet of the Income-tax Officer was produced before us and it clearly shows that on 22nd April, 1964, the Income-tax Officer passed an order that a notice be issued to the petitioner under Section 271(1) of the Act After passing this order, he has entered the gist of the assessment order specifying the amount returned, the income arrived at and the tax levied upon the assessee. The notice issued by the Income-tax Officer is also dated 22nd April, 1964. From these circumstances, it cannot be said that the Income-tax Officer had not satisfied himself of the infringement of Section 139(2) of the Act by the assessee during the assessment proceedings.

30. Our attention was drawn by the learned counsel for the petitioner to the assessment order in which interest for two days was charged by the Income-tax Officer under Section 139(2). It is argued that if the Income-tax Officer was satisfied that there has been a violation by the assessee of Section 139(2)(a), he would not have charged interest for two days only when the delay in furnishing the return was three months. This argument has absolutely no merit. What he charged is interest for two days and not penalty. This interest is in accordance with the provisions of Section 139(2), proviso. According to the proviso of that sub-section if the date originally fixed for furnishing the return falls beyond the 30th day of September, interest is chargeable at the rate of 9 per cent. from the 1st day of October. The return in the instant case was filed on the 3rd October, 1963, which attracted the proviso to Sub-section (2) of Section 139(2) and interest was payable for two days. That is the interest which is charged in the assessment order. On a careful consideration of the material before us, we have come to the conclusion that the Income-tax Officer had passed an order for issuance of notices for penalty proceedings before making the assessment order. This contention also fails.

31. The sixth contention advanced is that the Income-tax Officer was biased against the petitioner, and therefore, the order made by him is void and illegal. The argument is that under the provisions of Section 271(1), no penalty can be levied unless the Income-tax Officer comes to the conclusion that there was no reasonable cause for the delay in filing the return. The notice issued by the Income-tax Officer under Section 271(1) shows that he had already made up his mind to levy the penalty contemplated under Section 271(1). He was, therefore, biased and with a biased mind considered the case of the petitioner for his non-compliance with Section 139(1)(a). We have been taken through the notice. The notice, dated 22nd April, 1964, was read out to us. That notice states that ' it appeared to the Income-tax Officer that the petitioner had without reasonable cause failed to furnish the return of income which he was required to furnish under Section 139(2) within the time allowed and in the manner required by the said section '. The petitioner was, therefore, requested to appear before the Income-tax Officer and to show cause why an order imposing penalty should not be made under Section 271(1) of the Act against the petitioner. There is nothing in the notice to show that the Income-tax Officer had come to a definite conclusion that the petitioner was liable for the penalty. The word ' appear ' in the notice clearly shows that the Income-tax Officer was still open to conviction and had not closed his mind. The petitioner could have satisfied the Income-tax Officer that there was a reasonable cause for not filing the return within the prescribed time. The petitioner not only failed to convince the Income-tax Officer but also the Appellate Assistant Commissioner and the Tribunal in that behalf. No other facts or circumstances have been shown which will go to show that the Income-tax Officer was biased against the petitioner. We do not, therefore, find any substance in this argument.

32. There is also no substance in the argument that the proceedings under Section 271(1) are against the principles of natural justice as the prosecutor and the judge are the same. The law prescribes the officer who, on finding out the non-compliance with the Act, has to levy a penalty. The concept of a prosecutor being a judge does not apply in such cases.

33. Lastly, on the strength of the observations of their Lordships of the Supreme Court in Nathulal v. State of Madhya Pradesh : 1966CriLJ71 it is argued by the learned counsel for the petitioner that the penalty prescribed in Section 271(1) for non-compliance with the provisions of Section 139(2) of the Act being by way of punishment, it is an offence for which an assessee is not liable unless the necessary mens rea is established. The argument is that the mens rea in such a case can only be the intention to avoid payment of duty. That intention not being brought out, the petitioner could not have been penalised for his failure to file the return.

34. The aforesaid decision of the Supreme Court in Nathulal's case relates to an offence committed under the Essential Commodities Act of 1955. A dealer was charged for having in stock wheat for the purpose of sale without a licence and for having thereby committed an offence under Section 7 of the said Act. The appellant pleaded that he did not intentionally contravene the provisions of the said section on the ground that he stored the said grains after applying for a licence and was in the belief that it would be issued to him. Subba Rao J. (as he then was), restated the principles applicable to such a case at page 45 thus :

' Mens rea is an essential ingredient of a criminal offence. Doubtless a statute may exclude the element of mens rea, but it is a sound rule of construction adopted in England and also accepted in India to construe a statutory provision creating an offence in conformity with the common law rather than against it unless the statute expressly or by necessary implication excluded mens rea. The mere fact that the object of the statute is to promote welfare activities or to eradicate a grave social evil is by itself not decisive of the question whether the element of guilty mind is excluded from the ingredients of an offence. Mens rea by necessary implication may be excluded from a statute only where it is absolutely clear that the implementation of the object of the statute would otherwise be defeated. The nature of the mens rea that would be implied in a statute creating the offence depends on the object of the Act and the provisions thereof.'

35. After stating the principles thus, the Supreme Court went on to determine on the facts found in that case whether the appellant therein had intentionally contravened the provisions of Section 7 of the Act and the Rules made thereunder. After referring to the statement of the appellant that he was made to believe that he had applied for a licence well in time and that the inspector had given him assurance that he need not worry and that the licence would be sent to him straight to his residence he had not been informed that Ms application for licence had been refused. He was, therefore, under the bona fide belief that a licence had been issued and on that account stored the wheat in question. On these facts, it was held by theirLordships of the Supreme Court that the storage of foodgrains was under a bona fide belief that he could legally do so and that ' he did not, therefore, intentionally contravene the provisions of Section 7 of the Act or those of the order made under Section 3 of the Act.' The order of the High Court convicting the appellant was, therefore, set aside.

36. A reading of the aforesaid decision shows that in the circumstances obtaining in a particular case it has to be determined whether there was any mens rea in the person concerned acting against the provisions of a statute. We proceed on the assumption that the non-compliance with the provisions of Section 139(2) of the Act is an offence and that there is no exclusion of mens rea either expressly or by necessary implication. Mens Yea, as has been put by Salmond on Jurisprudence (9th edition, page 516):

' may assume one or other of two distinct forms, namely, wrongful intention or culpable negligence. The offender may either have done the wrongful act on purpose, or he may have done it carelessly, and in each case the mental attitude of the doer is such as to make punishment effective. If he intentionally chose the wrong, penal discipline will furnish him with a sufficient motive to choose the right instead for the future. If, on the other hand, he committed the forbidden act without wrongful intent, but yet for want of sufficient care devoted to the avoidance of it, punishment will be an effective inducement to carefulness in the future. But if his act is neither intentional nor negligent, if he not only did not intend it, but did his best as a reasonable man to avoid it, there can be no good purpose fulfilled in ordinary cases by holding him liable for it.'

37. Applying the aforesaid principle, it will have to be determined whether the non-compliance with the provisions of Section 139(2) of the Act was with a wrongful intention or culpable negligence. In order to determine whether there was culpable negligence, it will have to be determined whether the assessee did his best as a reasonable man to avoid the non-compliance. The provision in Section 271(1) of the Act, when it says that a penalty can be levied only in cases where an assessee has without reasonable cause failed to furnish the return in accordance with Sub-section (1) of Section 139(2), points out the necessity for determination whether he had taken reasonable care to avoid non-compliance. In other words, whether on the facts found conclusion can be reached that the assessee was culpably negligent in filing the return. On the material before the Income-tax Officer, he came to the conclusion that the mere fact that the petitioner was under the impression that as in earlier years he would be served with a notice to file the return was not sufficient to hold that he had taken reasonable care to comply with the provisions of the section. This finding of fact has been upheld not only by the Appellate Assistant Commissioner but also by the Income-tax Appellate Tribunal. There is no reason why we should disturb that finding. On this finding, assuming that the element of mens rea is essential, it has been sufficiently established. This contention also, therefore, fails.

38. In the result, the writ petition is dismissed with costs. Advocate's fee Rs. 100 (rupees one hundred only).


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