1985 (11) TMI 28 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of amended Section 275 of the Income-tax Act, 1961.
2. Applicability of the Income-tax Act amendments to penalty proceedings.
3. Burden of proof regarding reasonable cause for delay in filing the return.

Detailed Analysis:

1. Applicability of amended Section 275 of the Income-tax Act, 1961:
The first issue addressed whether the amended provisions of Section 275, which provide the time limit for completing penalty proceedings, were procedural and had retrospective effect. The court referred to its previous decision in CIT v. Sadhu Ram [1981] 127 ITR 517, which held that "the law of limitation being a procedural law always has retrospective effect unless the amending statute provides otherwise." The court concluded that the amended Section 275, effective from April 1, 1971, applied to the case, allowing penalty proceedings to be completed within two years of the financial year in which the proceedings were initiated. Therefore, the Tribunal's decision that the penalty proceedings were not time-barred was upheld, answering the first question in the affirmative, against the assessee and in favor of the Revenue.

2. Applicability of Income-tax Act amendments to penalty proceedings:
The second issue was whether the amendments to the Income-tax Act effective from April 1 of any financial year applied to penalty proceedings of that year. The court again referred to the judgment in CIT v. Sadhu Ram, which clarified that procedural laws, including those related to the time limit for penalty proceedings, have retrospective effect. The court affirmed that the amended provisions of Section 275 were rightly invoked, thus answering the second question in the affirmative, against the assessee and in favor of the Revenue.

3. Burden of proof regarding reasonable cause for delay in filing the return:
The third issue concerned whether the burden of proof was on the Revenue to show that the delay in filing the return was without reasonable cause. The assessee relied on the Full Bench decision of the Gujarat High Court in Addl. CIT v. I. M. Patel and Co. [1977] 107 ITR 214, which held that penalty proceedings under Section 271(1)(a) are quasi-criminal, requiring the Revenue to prove all ingredients of the offence, including the absence of reasonable cause for the delay.

However, the court dissented from this view, citing its Full Bench decision in CIT v. Patram Dass Raja Ram Beri [1981] 132 ITR 671, which held that the doctrine of mens rea does not apply to penalty proceedings under taxing statutes. The court emphasized that the burden to show reasonable cause for the delay lies with the assessee, as the facts constituting reasonable cause are within the assessee's knowledge. The court concluded that the Revenue's role is to establish a prima facie case of delay without reasonable cause, after which the burden shifts to the assessee to demonstrate reasonable cause. Consequently, the third question was answered in the affirmative, in favor of the Revenue and against the assessee.

Conclusion:
All three questions were answered in the affirmative, upholding the Tribunal's decisions and favoring the Revenue. The court confirmed that the amended procedural provisions of Section 275 applied retrospectively, the amendments to the Income-tax Act did not apply to penalty proceedings of that year, and the burden of proof regarding reasonable cause for delay in filing the return lies with the assessee.