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1983 (1) TMI 40

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..... Further opportunities were given to the assessee to comply with the notice issued u/s. 271(1)(a)/274. Hearing was fixed on January 29, 1965, June 8, 1965, and August 30, 1965, and the final hearing was on January 31, 1967, where a written reply was given by the assessee raising three-fold contention before the ITO: " (1) That the return could not be filed due to the disturbed condition around Kohima. (2) There was no intention to delay the return. (3) The interest u/s. 139 has been charged and so penalty u/s. 271(1)(a) cannot be imposed." The ITO rejected all the three contentions. Regarding the first contention he held that there was nothing on record to show that the conditions were disturbed around Kohima throughout 1963 and the first three months of 1964 ; that no specific instances of disturbance had been mentioned; that no request for extension of time on this ground was received; and that no such disturbance was referred to in any of the petitions asking for time. Regarding the second contention the ITO held that merely saying that there was no intention to delay without producing any evidence thereof was merely begging the question. Regarding the third contention, after ela .....

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..... interest is charged u/s. 139. On the first submission counsel relies on Hanutram Ram prasad v. CIT [1978] 112 ITR 187, 188 (Gauhati), Smt. Indu Barua v. CWT [1980] 125 ITR 436, 443 (Gauhati), V. L. Dutt v: CIT [1976] 103 ITR 634 (Mad), Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC), CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369 (SC), Anantharam Veerasinghaiah Co. v. CIT[1980] 123 ITR 457 (SC) and Bhawani Shankar Bagaria v. Asst. CED [1982] 137 ITR 801 (Gauhati). On the second submission Mr. Barua relies on T. K. Roy v. CWT [1,978] 115 ITR 746, 770 (Gauhati), CWT v. Suresh Seth [1981] 129 ITR 328, 335 (SC), CIT v. Golaprai Hoonlal and Co. [1977] 110 ITR 896, 899 (Gauhati) and CIT v. Assam Travels Shipping Service [1977] 110 ITR 359, 361 (Gauhati). Mr. G. K. Talukdar, the learned counsel for the Department, refutes the first submission of Mr. Barua stating that the ITO's order imposing penalty is very exhaustive and is unassailable ; that mens rea is not necessary in economic offences for the purpose of imposition of penalty; that the ITO having found that the delay was without reasonable cause and that the assessee showed conscious disregard of his obligation t .....

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..... l income or on the total income of any other person during the previous year, the ITO may, before the end of the relevant assessment year, issue a notice to him and serve the same upon him requiring him to furnish, within thirty days from the (late of service of the notice, 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: Provided that, on an application made in the prescribed manner, the ITO may, in his discretion, extend the date for furnishing the return, and, notwithstanding that the date is so extended, interest shall be chargeable in accordance with the revisions of Sub-s.(8). Under s. 271(1) of the Act if the ITO or the AAC in the course of any proceeding under the 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-s. (1) of s. 139 or by notice given under sub s. (2) of s. 139 or s. 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-s. (1) of s. 139 or .....

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..... the objects in enacting s. 28 was to provide a deterrent against recurrence of default on the part of the assessee, and that s. 28 was penal in character in the sense that the consequences are intended to be an effective deterrent which will put a stop to practices which the Legislature considers to be against the public interest, and that the Department must establish that the receipt of the amount in dispute constituted an income of the assessee and if there was no evidence on record except the explanation given by the assessee, which explanation had been found to be false, it did not follow that the receipt constitutes his taxable income. It has been further held that as the proceedings u/s. 28 were of a penal nature and the burden was on the Department to prove that a particular amount was a revenue receipt, it would be, legitimate to say that the mere fact that the explanation of the assessee was false, did not necessarily give rise to the inference that the disputed amount represented the income. It had been pointed out in that decision that the finding given in the assessment proceedings for determining or computing the tax was not conclusive though it might be good evidence .....

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..... ished inaccurate particulars. The appeal was accordingly dismissed. In Hindustan Steel Ltd. v. State of Orissa [19-72] 83 ITR 26 (SC), between 1954 and 1959, the appellant-company was erecting factory buildings for the steel plant, residential buildings for its employees and ancillary works such as roads, water supply, drainage, etc. Some of the constructions were done departmentally and the rest through contractors. The company supplied to the contractors for use in construction, bricks, coal, cement, steel, etc., for consideration and adjusted the value of the goods supplied at the rates specified in the tender and in addition to the cost price the company included some additional amounts which were charged by the appellant. The question was whether the supply of materials amounted to " sale " and the appellant-company was a " dealer " for the purpose of sales tax under the Orissa Sales Tax Act, 1947. In proceedings for assessment of tax under the Orissa Sales Tax Act, 4947, the STO held that the company was a dealer in building materials, and had sold the materials to contractors and was on that account liable to pay tax at the appropriate rates under the Orissa Sales Tax Act .....

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..... nalisation of the statutory audit relating to M/s. V. Ramakrishna Sons Private Ltd., which was the only source for gathering materials required for the preparation of the return, was not completed and that there were labour troubles in the workshop of K.C.P. Ltd., a sister concern. For the assessment year 1965-66, the objections and contentions were identical. The ITO rejected all of them and held that penalty was leviable u/s. 271(1)(a) and he calculated the penalty at Rs. 4,500 and Rs. 1,344 for the two years respectively. The AAC affirmed the penalty subject to reduction in assessment as a result of, the appellate proceedings and the Appellate Tribunal confirmed the levy of penalty. The real question in issue was whether penalty could be levied u/s. 271(1)(a) of the, Act. Their Lordships of the Madras High Court considered that the decision in Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC) was applicable to the penalty proceedings under the Act (p. 635 of 103 ITR). "The penalty under section 27 l(1)(a) 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 ac .....

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..... belief that the offender is not liable to act in the manner prescribed in the statute." Applying the aforesaid principles it was considered that there was no conscious or deliberate disregard of the statutory obligation on the part of the assessee and it was accordingly held that the penalty was not properly levied under the provisions of s. 271(1)(a) of the Act in that case and the question was answered in the negative and in favour of the assessee. In Hanutram Ramprasad v. CIT [1978] 112 ITR 187 (Gau), a notice dated November 14, 1958, under s. 22(2) of the Indian I.T, Act, 1922, for the assessment year 1958-59 was served on the assessee on November 15, 1958, requiring the assessee to submit the return of income within 35 days from the date of receipt of the notice but the assessee did not submit any return on the due date. He, however, submitted the return on May 25, 1961, and consequently a notice dated May 25, 1963, u/s. 274 read with s. 271 of the Act was issued requiring him to show cause why penalty should not be imposed for non-submission of the return within the time allowed. The assessee did not comply and after several dates on March 8, 1965, an application was fil .....

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..... n order to levy penalty, need not prove beyond reasonable doubt, negatively, that the assessee has, without reasonable cause, failed to furnish the return of the total income which he was required to furnish. Their Lordships approved the following statement from Wharton's Evidence in Criminal Cases, s. 201, Vol. I, II th Edn. : " As a rule affecting merely the time and manner of proof, but not for the purpose of affecting the merits of the testimony, when facts are peculiarly within the knowledge of a party, the burden is on him to prove such facts, whether the proposition be in an affirmative or a negative one. court may, therefore, properly hold that so far as the mode of offering proof but in no way touching the question of the degree of proof, it is incumbent on a party who has a peculiar proof in his possession to first produce it." Their Lordships also relied on the following lines from Halsbury's Laws of England, 3rd Edn., vol. 15, p. 270: " (i) When there exists a rebuttable presumption of law in favour of a party, the burden of rebutting it lies upon his opponent, and (ii) where the truth of a party's allegation lies peculiarly within the knowledge of his opponent, t .....

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..... the Revenue to prove those ingredients before a penalty can be imposed. Since the burden of proof in a penalty proceeding varies from that involved in an assessment proceeding, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted as a finding to that effect in the penalty proceeding. In the penalty proceeding the taxing authority is bound to consider the matter afresh on the material before it and, in the light of the burden to prove resting on the Revenue, to ascertain whether a particular amount is a revenue receipt. No doubt, the fact that the assessment order contains a finding that the disputed amount represents income constitutes good evidence in the penalty proceeding but the finding in the assessment proceeding cannot be regarded as conclusive for the purposes of the penalty proceeding. That is how the law has been understood by this court in Anwar Ali's case [1970] 76 ITR 696 (SC), and we believe that to be the law still. It was also laid down that before a penalty can be imposed the entirety of the circumstances must be taken into account and must point to the conclusion that the disputed amount represents income and th .....

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..... the doctrine of mens Yea is not attracted to the penalty proceedings within the four corners of the aforesaid section. The only requirements of the statute thereunder is the presence or absence of reasonable cause for the tax delinquency and no other. Therefore, inducting the requirement of a deliberate defiance of law, or contumacious conduct, or dishonest intention, or acting in conscious disregard of the statutory obligations, is unwarranted u/s. 271(1)(a) of the Act. It has been pointed out that s. 276 CC, which provides for stringent punishment, is different from s. 271(1)(a) and that while the former prescribes rigorous imprisonment and fine, the latter only financial penalty; while the proceeding under the former is criminal and requires mens rea, the latter is of coercive civil nature and mens rea is not required. From the above decisions there remains no doubt that a finding in the assessment proceedings as to cause of failure to or delay in filing return cannot provide, the foundation for penalty. The finding has to be made in the penalty proceedings. The finding in assessment proceedings may be good evidence. It is also settled that penalty proceedings are penal in na .....

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..... (1)/274, the burden of proof as a matter of law in the sense of establishing a case will be on the Department to prove that the failure or delay in filing return was without reasonable cause. Once this is done, the onus probandi will be on the assessee to prove the reasonability or otherwise of his decision, by introducing evidence. It may, therefore, be said that in a penalty proceeding, the Department having shown that for failure to file return a all or for delay in filing return without reasonable cause the assessee has rendered himself liable to penalty, subject to the rule that when it is within the special knowledge of the assessee, the burden of proof will be on him, the burden to show that there was a reasonable cause for failure to file the return of income, or to file within required time will always lie on the assessee. If this burden is not discharged the Department shall be justified in holding that the assessee by his failure to file return or to file within time made himself liable to penalty. If a cause is shown, the burden of providing the truth and reasonability of the cause will always be with the assessee. If he fails to discharge that burden then the asses see .....

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..... ships of the Supreme Court it is somewhat difficult to reconcile with the proposition that the doctrine of actus non facit reum, nisi mens sit rea, as originally stated by St. Augustine and re-stated by Coke, is not applicable in the matter of penalty u/s. 271(1)(a) of the Act. This doctrine as applied to crimes makes a clear distinction between a man's deed (actus) and his mental process (mens) at the time he was engaged in the activity which resulted in the deed.. According to it, there are two necessary elements in the crime, physical element and a mental element, and it makes plain that at common law no man may be found guilty of a crime and, there fore, legally punishable unless in addition to having brought about a harm which law forbids, he had at times a legally reprehensible state of mind. The word actus connotes a deed, a physical result of human conduct. Law prohibits it and seeks to prevent its occurrence by imposing a penalty for its omission. Actus reus may be defined as such result of human conduct as the law seeks to prevent. It is the result of the conduct and, therefore, an event and is to be distinguished from the conduct which produced it. Mens rea is the person .....

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..... neral proposition that mens rea must be presumed to be necessary in any crime created by statute. If the offence created is independent of guilty intention, it may be regarded as an exception to the general rule that there can be no guilty man without a guilty mind. In the instant case, we find that the cause shown, namely, the disturbance around Kohima is not one that would naturally be reflected in the accounts or other records but its effects in general may have been reflected in loss of business, loss of profits, etc., if its truth and reasonability was within the special knowledge of the assessee. Considered from another angle, in the absence of its reflection in business and profits the cause would be so prima facie unreasonable that it would not impose any real burden on the Department to show that it was unreasonable. Considering the entirety of the facts and circumstances of the case, including that no facts of the disturbance were reflected in the books of accounts, profits and volume of business of the assessee during the relevant period, and that the assessee never earlier mentioned about it or prayed for extension of time on that ground and the assessee itself having .....

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