CHINNAPPA REDDY J. - The respondent-assessee, a firm, failed to file its returns for the years 1965-66 to 1969-70, within the time stipulated by the Act. The firm submitted an explanation that the returns could not be filed in time because the person who was in-charge of the accounts of the firm was unable to attend to its affairs for some time owing to some personal reasons. The Income-tax Officer did not accept the explanation. He levied penalties. The assessee preferred revision petitions before the Commissioner of Income-tax. Before the Commissioner it was represented that the delay was due to family troubles. The Commissioner did not accept the explanation. He rejected the revision petitions. The assessee filed write petitions in the High Court, Obul Reddy J. (as he then was) quashed the orders of the Commissioner on the ground that penalties could only be imposed if it was found that the assessee acted deliberately in defiance of the law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of his obligations and not otherwise. He directed the Commissioner to reconsider the matters. The Commissioner has preferred these write appeals.
We find it extremely difficult to agree with the view expressed by Obul Reddy J. But that view approved by a Division Bench of this court consisting of Obul Reddy C.J. and Punnayya J. in Additional Commissioner of Income-tax v. Narayanadas Ramkishan : [1975]100ITR18(AP) . In the circumstances, we think that the question should be resolved by a Full Bench.
We would, however, like to express our view in the matter. Section 271(1)(a) of the Income-tax Act provides that if the Income-tax Officer is satisfied that any person 'has without reasonable cause' failed to furnish the returns of total income, etc., he may levy a penalty on such person. All that the Income-tax Officer to be satisfied about is that the failure of the assessee to submit return is 'without reasonable cause' neither more nor less. Parliament has thus prescribed an objective test to determine the mental state of the person proposed to be proceeded against. There is no reason for importing the doctrine of mens rea into a situation where the requisite mental state is already defined. More about it later. Nor is there any reason for qualifying the failure to furnish a return with expressions like 'contumacions', 'dishonest', 'in deliberate defiance of law', etc., To do so is to rewrite section 271(1)(a).
The doctrine of mens rea, in origin and in practice, is a rule of construction. In England, in 18th and 19th centuries, with the growth of statute law, a conflict arose between the common law and the statute law. The common law judges and lawyers evolved a rule of construction to avoid the conflict. They said :
'It is a sound rule to construe a statute in conformity with the common law rather than against it, except where and so far the statute is plainly intended to alter the course of the common law.'
Now, it was one of the principles of English common law that mens rea was an essential ingredient of an Offence. An application of the rule of construction to this principle meant that there was no presumption that mens rea was excluded form statutory offences. This led to the development of presumption stated thus by Wright J :
'There is a presumption that mens rea, an evil intention or a knowledge of the wrongfulness of the act, is an essential ingredient in every offence, but that presumption is liable to be displaced either by the words of the statute creating the offence or by the subject-matter with which it deals, and both must be considered. ' [Sherras v. De Rutzen [1895] 1 QB 918].
This presumption or rule of construction is a sound rule to apply where traditional crime is given statutory form or where a new crime is added to the general criminal law. But it has no application or it is of very weak application to offences created by modern, social, industrial, fiscal and economic legislation. Some judges have altogether denied the existence of any such presumption in the case of modern statutory offences while other judges have 'manifested a marked tendency to readily displace or minimise the application of the presumption'. Vide Stephen J. in Cundy v. Le Cocq [1884] 13 QBD 207 Kennedy L.J. in Hobbs v. Winchester Corporation [1910] 2 KB 417 and Donovan J. in Regina v. St Margarets Trust Ltd., [1958] 1 WLR 522. We may refer here to Bruhn (Jacob) v. The King [1909] Ac 317 where dealing with a case arising out of a contravention of revenue laws, Lord Atkinson said :
'In many cases connected with the revenue certain things are prohibited unless done by certain persons, or under certain conditions. Unless the person who does one of these things can establish that he is one of the privileged class, or that the prescribed conditions have been fulfilled, he will be adjudged guilty of the offence, though in fact he knew nothing of the prohibition.'
In Lim Chin Aik v. The Queen [1963] AC 160 the Privy Council recognised that where 'public welfare offences' (which most modern statutory offences are) were concerned there was a presumption of strict liability and the presumption of mens rea was displaced. In Indo-China Steam Navigation Co. Ltd., v. Jasjit Singh : 1964CriLJ234 the Supreme Court attached great importance to the social purpose of the legislation rather than to the so called presumption relating to mens rea. In State of Maharashtra v. Mayer Hans George : [1965]1SCR123 the Supreme Court expressed the view that the rule of construction laid down by the Court of Criminal Appeal of England in Regina v. St. Margarets Trust Ltd., [1958] 1 WLR 522 was nearer to the point having regard to the objects and purposes of the legislation with which they were dealing. In Nathulal v. State of Madhya Pradesh AIR 1966 SC 43, Subba Rao J. held that mens rea was an essential ingredient of a criminal offence but, all the same, accepted the position that the rule relating to mens rea was a rule of constitution. He observed :
'It is, however, a sound rule of construction which is adopted in England and also accepted in India, to construe a provision which creates an offence in conformity with the common law rather then against it except where the statute expressly or by necessary implication excludes mens rea.'
If the true position is that the principles of mens rea is a rule of construction raising a presumption that criminal intent is not to be considered as excluded unless so excluded expressly or by necessary implication, it must follow that where the requisite mental state is defined by the statute itself (as, for instance, in the present case) there is no scope for the application of the doctrine of mens rea. In India, the requisite mental state is almost always defined by the statute itself, and generally, there is no scope for application of the doctrine of mens rea. The question of the application of the doctrine of mens rea arises only in cases where the requisite mental state is not defined by statute. In such cases, it is necessary first to consider the words in their true and natural sense; to consider the object of the statute; if necessary, to consider further the attendant circumstances such as the nature of the duty imposed and on whom, whether a particular construction will render the Act effective or ineffective to achieve its object, whether it will permit the observance of the statute. If the evidence afforded by these considerations is insufficient to conclude whether mens rea is included or excluded as an ingredient of the offence then only recourse should be had to the presumption. As we said earlier, in the present case, Parliament has provided an objective test to determine the mental element. There is, therefore, no occasion to invoke the doctrine of mens rea.
We would further like to point out that it is wrong to classify proceedings for levy of penalty under taxation statutes as offences of a criminal nature. In Corpus Juris Secundum. Vol. 85, p. 580, it is said.
'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.'
In Ummali Umma v. Inspecting Assistant Commissioner of Income-tax : [1967]64ITR669(Ker) Mathew J. said :
'I cannot say that the penalty imposed under section 28 of the repealed Act or under section 271 of the Act was or is imposed on the basis that it was or is an offence. For the offence punishment was or is prescribed such as imprisonment, fine or both. The imposition of penalty on the basis of an act or omission by an assessee is not because the act or omission constitutes and offence, but because that act or omission would constitute an attempt at evasion. Therefore, penalty is exacted not because an act or omission is an offence but because it is an attempt at evasion of tax on the part of the assessee.'
In R.C. No. 64/1970 [Commissioner of Income-tax v. Maduri Rajeswar : [1977]107ITR832(AP) ] a Division Bench of this court of which one of us was a member observed :
'The object of the two provisions appeal to be different : the one entailing the prosecution and punishment is to vindicate public justice by punishing the offender, whereas the object of penalty proceedings is to render evasion unprofitable and to secure to the State the compensation for damages or attempted evasions.'
In W. Ps. Nos. 7974 and 7839/1973 [Kashiram v. Income-tax Officer : [1977]107ITR825(AP) ] the question of the constitutional validity of section 140A(3) was raised before us. In that case, we had occasion to point out that the provision of levy of penalty for failure to pay the tax on self-assessment was no more than a mere provisions ensuring compliance with sub-section (1), making such non-compliance unprofitable. We also observed as follows :
'Now, there are provisions in the Income-tax Act providing for levy of penalties for non-compliance with the provisions relating to filing of return, non-furnishing of accounts or particulars, failure to pay advance tax, concealment or evasion of Income-tax, etc., Criminal prosecution is also provided for by Chapter 22 of the Act in certain cases which, inter alia, include failure to file a return of income, failure to produce accounts and documents, making of false statements and declaration, failure to deduct and pay tax when required to do so. These provisions relating to levy of penalties and criminal prosecutions are twin sanctions provided by law for ensuring compliance with law on the part of the assessees.'
We may mention that in Abraham v. Income-tax Officer : [1961]41ITR425(SC) the Supreme Court held that the character of penalty was that of an additional tax. In Collector of Malabar v. Ebrahim Hajee : 1957CriLJ1030 the Supreme Court held that even the provision for arrest for non-payment of taxes was only a measure to compel payment of taxes and not a measure of punishment.
Obul Reddi C.J. referred to the observations of the Supreme Court in Hindustan Steel Ltd., v. State of Orissa : [1972]83ITR26(SC) where, dealing with the provision for levy of penalty under the Orissa Sales Tax Act, the Supreme Court observed :
'Under the Act penalty may be imposed for failure to register as a dealer : section 9(1), read with section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law of was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the company in failing to register the company as a dealer acted in the honest and genuine belief that the company was not a dealer. Granting that they erred, no case for imposing penalty was made out.'
We think that the Supreme Court was merely trying to explain the possible manner in which discretion may be exercised for imposing a penalty. They were emphasising that mere failure to register as a dealer ought not to attract a penalty. In each case the discretion to levy penalty had to be exercised, not mechanically, but, judicially after taking into account all the facts and circumstances of the case relevant for the exercise of discretion. It is no authority for the proposition that under section 271(1)(a) of the Act the Income-tax Officer must find some extra mental element in addition to finding that the assessee had failed to furnish a return 'without reasonable cause'.
The views expressed by us are shared by a Full Bench of the Kerala High Court in Commissioner of Income-tax v. Gujarat Travancore Agency : [1976]103ITR149(Ker) and a Full Bench of the Orissa High Court in Commissioner of Income-tax v. Gangaram Chapolia : [1976]103ITR613(Orissa) .
In the light of this discussion we are unable to agree with the view expressed by Obul Reddy C.J. and Punnayya J. in Additional Commissioner of Income-tax v. Narayanadas Ramkishan : [1975]100ITR18(AP) . We, therefore, direct that the papers may be placed before the Honorable the Chief Justice for the constitution of Full Bench.