V.K. Singhal, J. - (1.) THE Income-tax Appellate Tribunal has referred the following two questions of law arising out of its order dated August 25, 1980, in respect of the assessment year 1974-75 : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that non-completion of the books of account either for the earlier year or the current year without good reasons, cannot constitute a reasonable cause within the meaning of Section 271(1)(a) of the Income-tax Act, 1961, for the year under appeal?
(2.) WHETHER, on the facts and in the circumstances of the case, the Tribunal is justified in holding that mens rea was established on the part of the assessee ?" 2. The brief facts of the case are that the assessee was required to file the return on or before July 31, 1974. No return was submitted and a notice was issued to the assessee under Section 139(2) of the Income-tax Act, 1961, which was served on the assessee on October 15, 1974, in which the assessee was called upon to file the return on or before November 14, 1974. The return was filed on July 14, 1976. Penalty proceedings were initiated against the assessee under Section 271(1)(a) of the Act. The explanation given that audit was completed on August 31, 1976, was not found satisfactory. It was also submitted that the accounts were not completed by the accountant and, therefore, there was delay in audit and in the submission of the return. The penalty was calculated in respect of default for 23 months starting from August 1, 1976, and a penalty of Rs. 4,183 was imposed. Against this order, an appeal was preferred to the Commissioner of Income-tax (Appeals), Jaipur, and the appellate authority came to the conclusion that no application in Form No. 6 was filed for extending the time for filing of the return and since written permission was not obtained nor any extension granted, the responsibility could not be shifted to the accountant. The contention that there was no mala fide intention which should have been proved by the Department was also rejected but the period of default was reduced to 19 months taking into consideration the time allowed after service of notice under Section 139(2). Against the order of the Commissioner of Income-tax (Appeals), the Revenue as well as the assessee preferred appeals. It was submitted that the return could not be filed in time as the accounts were not completed by the accountant for reasons best known to him and since the audit was not completed for that reason, the return could not be submitted. No explanation was given by the assessee as to why the account books were not completed in time. The Income-tax Appellate Tribunal came to the conclusion that it was for the assessee to explain as to why the books were not completed in time and whether the assessee was prevented by sufficient cause from completing the books of account. The accountant was considered to be the agent of the assessee and it was held that since the assessee has failed to establish reasonable cause, the levy of penalty was justified. Non-completion of the books of account was held to be without any explanation and, therefore, the fact of delay in audit was held to be of no consequence. The argument of the assessee that there should be mens rea was also rejected as it was found that the notice was served on the assessee on October 11, 1974, and the return was filed on July 14, 1976, Even non-completion of the accounts of the preceding year was held not to be reasonable cause. It was held that the assessee was in default within the meaning of Section 271(1)(a). The penalty which was reduced by the appellate authority was also restored relying upon the decision in CIT v. Indra and Co. [1971] 79 ITR 702 (Raj). The arguments of both learned counsel have been heard. In the present matter, no explanation was given by the assessee as to why the accounts were not completed. There should have been some reasons by which the assessee was prevented from completing the books of account which must be beyond the power of the assessee like seizure of the books of account by a competent authority or the like. No application for extension of time was submitted by the assessee nor was any extension granted. This court in Tiwari Kanhaiya Lal v. CIT [1985] 154 ITR 109, has held that even seizure of the books of account would not constitute reasonable cause where the assessee was constantly inspecting the seized books of account. What is a reasonable cause is a question of fact and the said reasonable cause has to be satisfied by the assessee before the taxing authorities by adducing evidence in support of it. Mere submission that the accounts were not completed by the accountant cannot be considered to be reasonable cause in not submitting the return. The assessee failed to make a submission even before the Tribunal as to why the accountant could not complete the accounts. If the law cast a duty on the assessee as in the present case for submission of the return, the assessee cannot escape the liability by merely saying that an employee of the assessee has not completed the accounts in time as it was for the assessee to manage his affairs in the manner he liked. Even after the service of notice, the returns were not submitted and, therefore, the Income-tax Appellate Tribunal was justified in coming to the conclusion that there is no reasonable cause for not submitting the return in time.
(3.) REGARDING question No. (2) in respect of mens rea and the proceedings under Section 271(1)(a) to be established by the Revenue, the matter was examined by the apex court in Gujarat Travancore Agency v. CIT [19891 177 ITR 455, wherein it was held that Section 271(1)(a) provides that " penalty may be imposed if the Income-tax Officer was satisfied that any person without reasonable cause failed to furnish the return of total income and such an obligation is a civil obligation. It was held 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 are significant. Unless there is something in the language of the statute indicating 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. Accordingly, it was held that there is nothing in Section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision. In this case, the apex court has placed reliance on the statement in Corpus Juris Secundum, Volume 85, page 580, paragraph 1023, where it was stated that : "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 these circumstances, it was held that mens rea is not required to be proved in the penalty proceedings. In CIT (Addl) v. I. M. Patel and Co. [1992] 196 ITR 297 (SC), it was held that there is a statutory obligation which has been imposed requiring the assessee to file the return within the due date, and it is for him to show a reasonble cause for filing a belated return. The burden is ultimately on the assessee to plead and prove the reasonable cause. Consequently, it was held no mens rea need be established by the Department. Reliance on the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC) is also of no help to the assessee because that was a matter where the assessee failed to obtain the registration under the provisions of the Sales Tax Act as a dealer and, in that context, the apex court has held that the liability to pay the penalty does not arise merely on 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 or 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. In this judgment, the apex court has held that the levy of penalty is not automatic but, even from a reading of this judgment it is evident that, if the assessee has acted in conscious disregard of its obligation, penalty could be levied. The assessee has not only, failed to submit the return in accordance with the provisions of Section 139(1) but even after a notice was issued under Section 139(2) the return was not submitted within 30 days from the date of service of the notice and, therefore, it was for the assessee to prove that he had any bona fide belief which has not been brought on record and, therefore, we are of the view that there was no necessity for the assessing authority to establish mens rea on the part of the assessee when no explanation or any evidence in support thereof was given. Section 271(1)(a) does not require mens rea to be established by the Department and the assessee has to adduce evidence with regard to the reasonable cause and if he fails to do so, penalty provisions would be attracted. In these circumstances, the reference is answered in favour of the Revenue and against the assessee. No order as to costs. ;