vil Appeal Nos
63031 of 1975
1002 From the Judgment and Order dated 1091974 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
DV 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 section 2711a 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 1965 and instead applied for time to file the return
Time was granted up to 31August 1966
Yet no return was filed
It was only after notice under section 1392 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 section 1392 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 section 2711a of the Act for the two assessment years
A sum of Rs 14784 was levied as penalty for the assessment year 1965 66 and a sum of Rs 11447 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 section 2711a 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 section 2711a 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 section 2711a of the Actinvolves 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 section 2711a 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 section 2711a
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 section 2711a 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 section 276C which provides that if a person wilfully fails to furnish in due time the return of income required under section 1391 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 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 section 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 section 2711a 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 section 2711a 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 section 2711a 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
NVK Appeals failed


Summary:
The petitioners revenue filed petitions for review of the judgment and order dated December 20 1986 passed by this Court
The respondent manufacturers objected to the same on the ground that finality of the judgment should be maintained and not disturbed lightly
Allowing the Review petitions this Court HELD Prima facie an inconsistency is present in the judgment in respect of certain items when regard is had to the law laid down by this Court in Union of India vs Bombay Tyres International Limited  Besides the points raised by the petitioners are of substantial public importance and call for reconsideration 818D Accordingly the judgment and order dated December 20 1986 are recalled and the cases directed to be listed again for fresh consideration
818D Union of India vs Bombay Tyres International Limited  relied on