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Wealth-tax Officer Vs. S.P. Jayakumar - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1983)3ITD221(Mad.)
AppellantWealth-tax Officer
RespondentS.P. Jayakumar
Excerpt:
.....compliance, therewith the assistance of tax practitioners specialising in this field, is a well known fact. it is equally well known fact that the legislation in this field undergoes so frequent changes and amendments that it is not possible for even a person specialising in this field, including the tax administrator, to claim that he knows what exactly the law is on a particular given day or period without making references to the history of the enactments.in such circumstances, [it would be a travesty of truth and justice to hold that the assessee knew or ought to have known the correct law and comply therewith, even though, in fact, he was not aware of the provisions.7. it is well established by the decision of the supreme court in hindustan steel ltd. v. state of orissa [1972] 83.....
Judgment:
1. These six appeals relating to the assessee, Shri S.P. Jayakumar, involving identical facts and dispute for our consideration are conveniently disposed of by this consolidated common order.

2. The appeals are by the department and relate to the levy of penalty under Section 18(1)(a) of the Wealth-tax Act, 1957 ('the Act'), for the assessment years 1970-71 to 1975-76, for the assessee's default in filing the returns of net wealth within the prescribed time. The wealth-tax returns for all these years were filed by the assessee on 27-1-1976 voluntarily, in the sense that before any notice was issued to him to submit the returns. In response to the notice issued by the WTO under Section 18(2) proposing levy of penalty, the assessee submitted that he was not aware of the provisions of the Act and Rules and it is only when the Government of India publicised the Voluntary Disclosure Scheme ('VDS') that he consulted his tax practitioner and it is on his advice, that he filed the returns. The WTO refused to accept this explanation, on the ground that ignorance of the provisions of the Act is no reasonable cause and further held that the assessee has not availed the VDS. He, accordingly, levied penalties of varying amounts for the relevant years. In the appeals preferred by the assessee, the AAC cancelled the penalties accepting the assessee's plea that he had reasonable cause for not filing the returns of net wealth within time.

Aggrieved by his order, the department is in appeal before the Tribunal. It was vehemently contended by the learned departmental representative that the AAC erred in accepting the assessee's plea of ignorance of law as a reasonable cause. He argued that ignorance of law can be no excuse and cannot be pleaded as a valid or sufficient cause for the statutory default committed by the assessee. He relied in this connection on the decisions in CIT v. Gujarat Travancore Agency [1976] 103 ITR 149 (Ker.)(FB), Nemichand Ganeshmalv. CIT [1980] 124 ITR 438 (MP), Addl. CIT v. Dargapandarinath Tuljayya and [1977] 107 ITR 850 (AP)(FB) and CIT v. Patram Dass Raja Ram Beri [1981] 132 ITR 671 (Punj.

and Har)(FB). He also reiterated to the objections taken in the ground pertaining to the AAC's observation that the appellant would have got the same relief at the hands of the Commissioner, if he had approached him under Section 18B, as he satisfied all the requirements prescribed therein, to deserve the relief. It is also the departmental representative's contention that when the assessee, according to his claim, came to know of his obligation as a result of the publicity of the VDS, which made him to consult his tax practitioner, he ought to have availed of the VDS itself, but instead, it is pointed out, he has chosen to file the returns and get the assessments made in the regular way and in such circumstances, to uphold his claim for cancellation of penalty would amount to putting a premium on the defaulters who do not choose to come under the VDS and defeat its very purpose. The learned representative for the assessee relied on the orders of the AAC.3. On a consideration of the facts and the contention of the parties, we do not find any merit in the department's objections. The salient features which eminently make the claim made by the assessee that he was ignorant of the provisions of the Act and Rules are firstly, that he has not been assessed to income-tax at all in the past as his mainstay was agricultural income which is exempt from income-tax liability, secondly, that bulk of his wealth was also agricultural lands which was not amenable to charge of wealth-tax till recently and lastly, there was undisputedly wide-spread publicity about the VDS introduced by the Govern ment which is likely to have evoked his curiosity in this matter. It was argued that the wealth-tax charge was extended to agricultural properties from the assessment year 1970-71 onwards by the Finance Act, 1969 and the assessee ought to have known this fact. As we have already stated the features mentioned above largely support the credibility and probability of the assessee's plea that he was ignorant of the charge brought about in the wealth-tax by extending its charge to agricultural properties. The maxim that ignorance of law is no excuse is, no doubt, a well known time honoured principle, but it appears to us that it has lost much of its relevance in the context of the present day legal system replete with complex legislation touching upon every aspect of life. As the learned departmental representative vehemently attempted to support the application of this principle, it is necessary to examine this in a little more detail. In Sal-mond's Jurisprudence, 12th edition, pp.

395-396, it is stated that the principle that ignorance of Jaw is of no excuse for breaking it, is recognised in many systems and the rule is also expressed in the form of a legal presumption that every one knows the law. The presumption is stated to be irrebuttable. Three reasons are said to be rendered for this somewhat rigorous principle. In the first place, the law is in legal theory definite and knowable, secondly, that even if invincible ignorance of the law is in fact possible, as indeed it is, the evidential difficulties in the way of the judicial recognition of such ignorance are insuperable and for the sake of any benefit derivable therefrom it is not advisable to weaken the administration of justice by making liability dependent on well-nigh inscrutable conditions touching knowledge or means of knowledge of the law and thirdly, that the law is in most instances derived from and in harmony with the rules of natural justice as it is a public declaration by the state of its intention to maintain by force, those principles or rights and wrongs which have already a secured place in the moral consciousness, of men and that the common law is in great part nothing more than common honesty and common sense of man and, therefore, although a man may be ignorant that he is breaking the law, he knows very well in most cases that he is breaking the rule of right. If not to his knowledge lawless, he is at least dishonest and unjust. In such circumstances, it is observed that he has little ground of complaint, if the law refuses to recognise his ignorance as an excuse and deals with him according to his moral deserts.

4. It may be remembered that this legal maxim originated at a time when the function of the State in most part was merely to govern the country, by maintaining law and order within the country and protect it from external aggression and, as stated in Salmond's Jurisprudence, the law in most instances was derived from and in harmony with the rules of natural justice, but in the modern days, as we have already stated, the law of a State govern almost every aspect of life of its citizens and it is well-nigh impossible for anyone to know all the statutory laws and every provision thereof. As a matter of fact, efficacy and justification of this principle that every one is presumed to know the law is doubted very much in the observations at page 396 of Salmond's Jurisprudence where it is stated that it must be admitted, however, that while each of the reasons on which the principle is based is valid and weighty, they do not constitute altogether sufficient basis for so stringent and severe a rule and the theory that the law is knowable throughout by all to whom it concerns is an ideal rather than a fact in any system as indefinite and mutable, that in a complex legal system a man requires other guidance than that of common sense and a good conscience and the fact seems to be that the rule in question, while in general sound, does not in its full extent and uncompromising rigidity admit of any sufficient justification. It is further observed that certain exceptions to it are being developed, particularly in respect of the defence of 'claim of right' in criminal law.

5. In P.V. Devassy v. CIT [1972] 84 ITR 502 (Ker.) this principle was also considered. We can do no better than reproduce an extract from the judgment : ...Public policy requires that ignorance of law should be no excuse.

But, there is no presumption that everybody knows the law, though it is often so stated.

Sometimes it is said that every man is presumed to know the law, but this is only a slovenly way of stating the truth that ignorance of the law is not in general an excuse. (See A First Book of Jurisprudence by Pollock, at page 163.) There is no presumption in this country that every person knows the law ; it would be contrary to common sense and reason if it were so.' In Criminal Law by Glanville Williams, at page 385, it is stated: The view that every one is presumed to know the law is now generally rejected; it is not a true proposition of law and even if it were, it would only be a legal fiction, not a moral justification. Lord Mansfield Drily observed that it would be very hard upon the profession, if the law was so certain, that everybody knew it; and Maule J. is credited with the observation that everybody is presumed to know the law except His Majesty's judges, who have a Court of Appeal set over them to put them right. The idea that the law can be known by every one is today, in the planned and welfare State, more ludicrous than ever.(p. 507) 6. That the tax laws of this country are complex and complicated and often require for compliance, therewith the assistance of tax practitioners specialising in this field, is a well known fact. It is equally well known fact that the legislation in this field undergoes so frequent changes and amendments that it is not possible for even a person specialising in this field, including the tax administrator, to claim that he knows what exactly the law is on a particular given day or period without making references to the history of the enactments.

In such circumstances, [it would be a travesty of truth and justice to hold that the assessee knew or ought to have known the correct law and comply therewith, even though, in fact, he was not aware of the provisions.

7. It is well established by the decision of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 that the liability to pay penalty does not arise merely upon proof of default in complying with the statutory requirements and an order imposing penalty for failure to carry out a statutory obligation being the result of a quasi-criminal proceeding, will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest or acted in conscious disregard of its obligation and penalty will also not be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform the statutory obligation, it is stated, is a matter of discretion of the authority concerned to be exercised judicially on a consideration of all relevant circumstances and even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose it when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute. In the present case, we are satisfied that the assessee was under the bonafide belief that as substantially his assets consist of agricultural properties, he was not amenable to the wealth-tax liability until he came to know of it on consulting his tax practitioner in view of the wide publicity given to the VDS. We are, therefore, satisfied that the assessee had reasonable cause in not filing the return within the time prescribed and, therefore, the penalty was not justified. In the result, the objections of the department are rejected and the orders of the AAC cancelling the penalty are upheld. The appeals are dismissed.


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