LexGUJARAT TRAVANCORE AGENCY, COCHIN versus COMMISSIONER OF INCOME-TAX, KERALA, ERNAKULAM
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GUJARAT TRAVANCORE AGENCY, COCHIN
v.
COMMISSIONER OF INCOME-TAX,
KERALA, ERNAKULAM
MAY 2, 1989
[R.S. PATHAK, CJ. AND M.H. KANIA, J.]
Income Tax Act 1961: Section 271( /)(a) and 276C-Failure to
ji1rnish returns-Penalty-Means rea-Not required to be proved' in
proceedings under section 271(1)(a)-To be established in proceedings
under section 276-C.
The assessee appellant did not file its income-tax returns under
the Jncome 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 tiled. In the said
circumstances the Income Tax Officer initiated penalty proceedings
against the assessee nhder s. 27l(l)(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
t~ 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. 27l(l)(a) of the Act, and the Appellate Tribunal was therefore
not justified in cancelling the penalties levied for the two assessment
years.
On the question whether the clement of mens rea is a mandatory
H requirement before a penalty can be imposed under section 271(1)(a) of
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GUJARAT TRAVANCORE AGENCY v. C.I.T.
1001
the Income Tax Act, 1961.
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Dismissing the appeal, the Court.
HELD: I. A penalty may be imposed under section 27l(l)(a) if
the Income Tax Officer is satisfied that any person has without reason·
able cause failed to furnish the return of total income, while s. 276C
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. return of income required under s. 139(1) he shall be punishable with
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rigorous imprisonment which may extend to one year or with tine. It
is, therefore, clear that in ihe former case what was intended was a
civil obligation, while in the latter what is imposed is a criminal
sentence. [l003E-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 imposed under that provision unless the element of
mens rea is established. [1003G-H]
3. The creation of an offence by Statute proceeds on the assump·
lion that society suffers injury by the act or omission of the defaulter
and that a deterrent must be imposed to discourage the repetition of the
offence. I I004A-B]
4. Unless there is something in the language of the statute indi·
eating 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. 27l(l)(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 coer-
cion 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, r~fer·
red to.
6. There is nothing in s. 27l(l)(a) which requires that mens rea
must be proved before penalty can be levied under that provision. [l004C]
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CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 630·
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31of1975.
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SUPREME COURT REPORTS
[1989] 2 S.C.R.
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. Raghura-
man for the Appellant.
D.V. Gauri Shankar and Ms. A. Subhashini for the Respondent.
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