Skip to content


Commissioner of Income-tax, Patiala-ii Vs. Patram Dass Raja Ram Beri. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference Nos. 56 & 57 of 1976
Reported in(1981)24CTR(P& H)258; [1981]132ITR671(P& H)
AppellantCommissioner of Income-tax, Patiala-ii
RespondentPatram Dass Raja Ram Beri.
Cases ReferredKhemka & Co. (Agencies) Pvt. Ltd. v. State of Maharashtra
Excerpt:
.....under the income-tax act for failure to submit returns of income in time are not in the nature of punishment imposed for conviction of an offence. such penalties are more or less compensatory in character to make good the loss that may be cause to the state revenues on account of late submission of return of income and in consequence late realisation of the tax. cit .in that case, on the assessees own showing that the assessee had failed to furnish the return of her income for the assessment year 1961-62, without reasonable excuse, it was held that it was sufficient to attract the provisions of s......to make good the loss that may be cause to the state revenues on account of late submission of return of income and in consequence late realisation of the tax....the said observation to our mind suggests that the payment of tax by toe partners on their share income is a relevant consideration to determine the question of levy of penalty under section 271(1)(a). in these circumstances we are inclined to agree with the assessee that there was on its part no contumacious or deliberate disregard of its statutory obligation.'mr. d. n. awasthy learned counsel for the revenue, while making his submissions on question no. 2, has placed implicit reliance on a division bench decision of this court in smt. kamal vati v. cit . in that case, on the assessees own showing that the assessee had.....
Judgment:

B. S. DHILLON J. - The facts giving rise to these references are that a notice under s. 22(2) of the Indian I.T. Act, 1922 (hereinafter called 'the Act'), was served on the assessee for the assessment year 1961-62. In compliance with the said notice, the return was furnished by the assessee on of June 13, 1962, which was due to be furnished by of June 25, 1961. Thus, a delay of 11 complete months was involved. The ITO initiated penalty proceedings against the assessee for late furnishing of the return. The assessee furnished a written explanation.

The assessee was a partnership firm. One of the contentions raised by the assessee during the said penalty proceedings was that the assessee-firm as also the partners thereof individually had paid not only advance tax as due under s. 18A of the Act, but also the tax that fell due on completion of the provisional assessment under s. 23B of the Act. The ITO overruled the explanation and came to the conclusion that there was no reasonable cause for the delay in filing the return and, consequently, a penalty of rs. 63,602 was imposed by him under s. 271(1)(i) of the Act.

On appeal, the AAC reduced the penalty from Rs. 63,602 to Rs. 57,244. The assessee filed an appeal before the Appellate Tribunal. The Tribunal found that no reasonable cause existed, but relying on the observations made in CIT v. Vegetable products Ltd. : [1973]88ITR192(SC) , held that a refund of Rs. 3,676 fell due to the assessee and thus no tax was payable by the assessee with reference to which the penalty could be computed.

The following two questions have been referred to this court for its opinion at the instance of the revenue :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right, in law, in holding that the penalty leviable under section 271(1)(i), Income-tax Act, 1961, had to be worked out with reference to the tax that remained payable by the assessee after being allowed credit for the tax paid under section 23B of the Indian Income-tax Act, 1922 ?

2. Whether, on the facts and in the circumstances of the came while holding that the assessee-firm had no reasonable cause for not filing the return in time, the Appellate Tribunal was right, in law, in holding that penalty under section 271(1)(a), Income-tax Act, 1961, was not exigible ?'

The relevant observations made by the Tribunal which concern question No. 1 are as follows :

'In this connection, we would first extract the following observations from the judgment reported in in the case of Indra & Co. v. Union of India :

It is to be borne in mind that penalties prescribed under the Income-tax Act for failure to submit returns of income in time are not in the nature of punishment imposed for conviction of an offence. Such penalties are more or less compensatory in character to make good the loss that may be cause to the State revenues on account of late submission of return of income and in consequence late realisation of the tax....

The said observation to our mind suggests that the payment of tax by toe partners on their share income is a relevant consideration to determine the question of levy of penalty under section 271(1)(a). In these circumstances we are inclined to agree with the assessee that there was on its part no contumacious or deliberate disregard of its statutory obligation.'

Mr. D. N. Awasthy learned counsel for the revenue, while making his submissions on question No. 2, has placed implicit reliance on a Division Bench decision of this court in Smt. Kamal Vati v. CIT . In that case, on the assessees own showing that the assessee had failed to furnish the return of her income for the assessment year 1961-62, without reasonable excuse, it was held that it was sufficient to attract the provisions of s. 271(1)(a) of the Act. While so holding, the Bench observed as follows (at p. 250) :

'The doctrine of mens rea has no application to such situations under taxing statutes. The decision of the Andhra Pradesh High Court in Additional Commissioner of Income-tax v. Narayandas Ramkishan : [1975]100ITR18(AP) , has since been overruled by a Full Bench : (See Addl. Commissioner of Income-tax v. Dargapandarinath Tuljayya & Co. : [1977]107ITR850(AP) ;

It may thus be observed that, on the facts of that case, there cannot be any dispute that the provisions of s. 271(1)(a) of the Act were attracted. But, at the same time, the Bench made the observation that the doctrine of mens rea had no application to such situations under the taxing statutes.

On the other hand, Mr. S. S. Mahajan, learned counsel for the assessee, places reliance on a decision of their Lordships of the Supreme Court in Khemka & Co. (Agencies) Pvt. Ltd. v. State of Maharashtra [1975] 35 STC 571, wherein their Lordships observed as under :

'The Income-tax Act, 1961, imposes penalty under sections 270 and 271. These sections in the Income-tax Act provide for imposition of penalty on contentious or fraudulent assessees.'

The learned counsel contends that mens rea in one of the relevant considerations while deciding whether penalty under s. 271(1)(a) of the Act is leviable or not.

Mr. Awasthy, on the other hand, relies on the following cases in support of his contention : 1 CIT v. Gujarat Travancore Agency : [1976]103ITR149(Ker) , 2. Addl. CIT v. Dargapandarinath Tuljayya & Co. : [1977]107ITR850(AP) , 3. Nemichand Ganeshmal v. CIT [1979] 124 ITR 438 and 4. R. S. Joshi, STO v. Ajit Mills Ltd. : [1978]1SCR338 .

Mr. Mahajan, on the other hand, relies on the following cases in support of his contention : 1. Addl. CIT v. I. M. Patel and Co. : [1977]107ITR214(Guj) 2. S. Loonkaran and Sons v. CIT : [1977]108ITR92(Mad) .

We are prima facie of the view that the observations made in the Bench decision of this court in Smt. Kamla Vatis case are too wide, but sitting in Division Bench, it is not possible for us to go into that question finally. It is also apparent that different views of the matter have been taken by different High Courts. The question involved is of substantial importance and is likely to arise in a number of cases. We are, therefore, of the opinion that the question whether mens rea is one of the relevant considerations for coming to the conclusion, if the penalty leviable under s. 271(1)(a) of the Act is exigible or not, is a question of law which should be got decided by a larger Bench. Let the papers be placed before the honble the Chief Justice for constituting a larger Bench to decide this legal question.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //