http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4  

PETITIONER: GUJARAT TRAVANCORE AGENCY, COCHIN

       Vs.

RESPONDENT: COMMISSIONER OF INCOME-TAX,KERALA, ERNAKULAM

DATE OF JUDGMENT02/05/1989

BENCH: PATHAK, R.S. (CJ) BENCH: PATHAK, R.S. (CJ) KANIA, M.H.

CITATION:  1989 AIR 1671            1989 SCR  (2)1000  1989 SCC  (3)  52        JT 1989 (2)   446  1989 SCALE  (1)1275  CITATOR INFO :  F          1992 SC1762  (10)

ACT:     Income Tax Act 1961: Section 271(1)(a) and 276C--Failure to  furnish returns--Penalty--Means rea--Not required to  be proved in proceedings under section 271(1)(a)--To be  estab- lished in proceedings under section 276-C.

HEADNOTE:     The  assessee  appellant  did not  file  its  income-tax returns  under the Income Tax Act, 1961 for  the  assessment years  1965-66, 1966-67 within the statutory period. It  was only after notices under s. 139(2) of the Act were served on the  assessee  the returns were filed. In the  said  circum- stances the Income Tax Officer initiated penalty proceedings against  the assessee under s. 271(1)(a) of the Act for  the two assessment years and imposed penalties.     The  explanation of the assessee that he was  under  the bona  fide belief that he had no assessable income and  had, therefore, not filed the returns earlier was not accepted by the Income-tax Officer.     The  Appellate  Assistant  Commissioner  dismissed   the appeal, but in second appeal the Appellate Tribunal  allowed the appeal holding that the Income Tax Officer had failed to bring on record any material to show that the explanation of the  assessee  tendered before him in regard  t9  the  delay should not be accepted, and that as the element of mens  rea was  required  to  be proved and had not  been  proved,  the penalties were liable to be cancelled.     The  Appellate Tribunal at the instance of  the  Revenue referred the question to the High Court, and a Full Bench of the  High  Court  took the view that mens rea  need  not  be established before penalty is imposed under s. 271(1)(a)  of the Act, and the Appellate Tribunal was therefore not justi- fied in cancelling the penalties levied for the two  assess- ment years.     On  the  question whether the element of mens tea  is  a mandatory requirement before a penalty can be imposed  under section 271(1 )(a) of 1001 the Income Tax Act, 1961.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4  

Dismissing the appeal, the Court.     HELD:  1.  A  penalty  may  be  imposed  under   section 271(1)(a)  if the Income Tax Officer is satisfied  that  any person  has without reasonable cause failed to  furnish  the return  of  total income. while s. 276C provides that  if  a person  wilfully fails to furnish in due time the return  of income required under s. 139(1) he shall be punishable  with rigorous  imprisonment which may extend to one year or  with fine.  It is, therefore, clear that in the former case  what was  intended  was a civil obligation, while in  the  latter what is imposed is a criminal sentence. [1003E-F]     2.  There  can be no dispute that having regard  to  the provisions of s. 276C, which speaks of wilful failure on the part  of defaulter and taking into consideration the  nature of  the penalty, which is punitive, no sentence can  be  im- posed under that provision unless the element of mens rea is established. [1003G-H]     3. The creation of an offence by Statute proceeds on the assumption  that society suffers injury by the act or  omis- sion  of the defaulter and that a deterrent must be  imposed to discourage the repetition of the offence. [1004A-B]     4.  Unless  there is something in the  language  of  the statute indicating the need to establish the element of mens rea  it is generally sufficient to prove that a  default  in complying with the statute has occurred. [1004B-C]     5. In a proceeding under s. 271(1)(a), it seems that the intention  of  the legislature is to emphasise the  fact  of loss  of.  Revenue and to provide a remedy  for  such  loss, although no doubt an element of coercion is present. in  the penalty.  In this connection the terms in which the  penalty falls to be measured is significant. [1004B]     Corpus Juris Secundum, volume 85, page 580, para.  1023, referred to.     6. There is nothing in s. 271(1)(a) which requires  that mens  rea must be proved before penalty can be levied  under that provision. [1004C]

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 63031 of 1975. 1002     From  the  Judgment  and Order dated  10.9.1974  of  the Kerala High Court in Income Tax Reference Nos. 85 and 86  of 1972.     Soli  J.  Sorabjee, Udayu Lalit, D. Vidyanandan  and  M. Raghuraman for the Appellant. D.V. Gauri Shankar and Ms. A. Subhashini for the Respondent. The Judgment of the Court was delivered by     PATHAK, CJ. These appeals, by certificate granted by the High  Court of Kerala, are directed against the judgment  of that  High  Court answering the following  question  of  law referred  to it in an Income-tax Reference in favour of  the Revenue and against the assessee:               "Whether,  on  the facts and  in  the  circum-               stances of the case, the Tribunal is justified               in  law  in cancelling  the  penalties  levied               under  s.  271(1)(a) of  the  Income-tax  Act,               1961,  for the assessment years  1965-66,  and               1966-67?"     The  assessee is a registered firm trading in hill  pro- duce. The assessee did not file its income-tax return  under the  Income-tax  Act, 1961 for the assessment  year  1965-66 within  the  statutory period, that is to say  by  30  June,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4  

1965, and instead applied for time to file the return.  Time was granted up to 31.August, 1966. Yet no return was  filed. It  was  only after notice under s. 139(2) of  the  Act  was served on the assessee on 22 September, 1967 that it filed a return  on the next day. Similarly for the  assessment  year 1966-67 no return was filed upto 30 June, 1966. No  applica- tion  for  extension of time was made  either.  When  notice under s. 139(2) was served on the assessee on 21 June,  1966 it  filed  a return on 23 September, 1967.  In  the  circum- stances,  the Income-tax Officer initiated penalty  proceed- ings against the assessee under s. 271(1)(a) of the Act  for the two assessment years. A sum of Rs. 14,784 was levied  as penalty  for  the assessment year 1965-66 and a sum  of  Rs. 11,447 was imposed as penalty for the assessment year  1966- 67.  The explanation of the assessee that he was  under  the bona  fide belief that he had no assessable income and  had, therefore, not filed the returns earlier was not accepted by the  Income-tax  Officer.  In appeal  before  the  Appellate Assistant  Commissioner of Income Tax, the assessee did  not press  the ground that there was no deliberate  omission  on his part to file the returns and that therefore s. 271(1)(a) of  the Act was not attracted. In second appeal  before  the Income-tax Appellate Tribunal permission was granted to  the assessee to raise the 1003 ground.  The Appellate Tribunal allowed the appeals  holding that  the Income-tax Officer had failed to bring  on  record any  material to show that the explanation of  the  assessee tendered  before  him in regard to the delay should  not  be accepted,  and that as the element of mens rea was  required to  be  proved and had not been proved, the  penalties  were liable to be cancelled.     At  the instance of the Revenue the  Appellate  Tribunal referred the question set forth earlier to the High Court of Kerala.  It may be mentioned that another question was  also referred, which related to the Appellate Tribunal entertain- ing the additional ground of appeal, but the appeals  before us  are not concerned with that question. The question  with which  we are concerned was referred to a Full Bench of  the High Court, and the High Court has taken the view that  mens rea need not be established before penalty is imposed  under s. 271(1)(a) of the Act, and that, therefore, the  Appellate Tribunal  was  not  justified in  cancelling  the  penalties levied for the two assessment years.     Learned  counsel for the assessee has addressed  an  ex- haustive argument before us on the question whether a penal- ty  imposed under s. 271(1)(a) of the Act:involves the  ele- ment  of mens rea and in support of his submission  that  it does  he has placed before us several cases decided by  this Court  and the High Courts in Order to demonstrate that  the proceedings by way of penalty under s. 271(1)(a) of the  Act are quasi criminal in nature and that therefore the  element of mens rea is a mandatory requirement before a penalty  can be imposed under s. 271(1)(a). We are relieved of the neces- sity  of referring to all those decisions. Indeed,  many  of them  were considered by the High Court and are referred  to in  the  judgment under appeal. It is sufficient for  us  to refer to s. 271(1)(a), which provides that a penalty may  be imposed  if  the Income Tax Officer is  satisfied  that  any person  has without reasonable cause failed to  furnish  the return  of total income, and to s. 276C which provides  that if a person wilfully fails to furnish in due time the return of  income required under s. 139(1), he shall be  punishable with  rigorous imprisonment for a term which may  extend  to one  year or with fine. It is clear that in the former  case

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4  

what  is intended is a civil obligation while in the  latter what  is  imposed is a criminal sentence. There  can  be  no dispute  that  having regard to the provisions of  s.  276C, which speaks of wilful failure on the part of the  defaulter and  taking  into consideration the nature of  the  penalty, which  is  punitive, no sentence can be imposed  under  that provision  unless the element of ’ mens rea is  established. In  most cases of criminal liability, the intention  of  the Legislature is that the penalty should serve as a deterrent. The 1004 creation of an offence by Statute proceeds on the assumption that  society suffers injury by and the act or  omission  of the  defaulter and that a deterrent must be imposed to  dis- courage  the  repetition of the offence. In the  case  of  a proceeding  under s. 271(1)(a), however, it seems  that  the intention  of  the legislature is to emphasise the  fact  of loss  of  Revenue  and to provide a remedy  for  such  loss, although  no doubt an element of coercion is present in  the penalty.  In this connection the terms in which the  penalty falls  to be measured is significant. Unless there is  some- thing in the language of the statute indicating the need  of establish the element of mens tea it is generally sufficient to  prove that a default in complying with the  statute  has occurred.  In our opinion, there is nothing in s.  271(1)(a) which  requires that mens tea must be proved before  penalty can be levied under that provision. We are supported by  the statement  in  Corpus Juris Secundum, volume 85,  page  580, paragraph 1023:               "A penalty imposed for a tax delinquency is  a               civil obligation, remedial and coercive in its               nature, and is far different from the  penalty               for  a crime or a fine or forfeiture  provided               as punishment for the violation of criminal or               penal laws."     Accordingly,  we hold that the element of mens  rea  was not  required to be proved in the proceedings taken  by  the Income tax Officer under s. 271(1)(a) of the Income-tax  Act against  the assessee for the assessment years  1965-66  and 1966-67. In the result the appeals fail and are dismissed with costs. N.V.K.                                Appeals failed. 1005