(a) Income Tax Ordinance (XXXI of 1979)---

----S. 143---S. R. O. 156(1)/80, dated 10-2-1980---S. R. O. 657(1)/86, dated 1-7-1986---Statement regarding contracts---Word "or" used in S.143 Income Tax Ordinance, 1979---Connotation---Contractor---Authority of Income Tax Officer to assess a contractor---Nature.

The I.T.O. having jurisdiction to assess the contractor is the primary authority, who has been assigned the job of receiving, information-statement prescribed under the section. And this appears quite natural as he is the most relevant authority to evaluate the statement and information of the business activities of the assessee to be assessed in his circle. This precisely appears to be intention of legislature in, providing for filing of these statements with him. However, in addition to the concerned assessing officer law has provided for conferring the authority in this regard on any other officer of the Revenue as considered suitable by the Central Board of Revenue. The plain words of the statute clearly indicate that any other officer of the Revenue to be authorised by the C.B.R. in this regard is in addition to the I.T.O having jurisdiction to assess a contractor and not in substitution thereof.

Though ordinarily word "or" is used in disconjective sense, intention of the legislature may be to read "or" and "and" one for the other. The provision when seen in the background of the need and purpose of the statement required to be filed, persuades to irresistible conclusion that use of word "or" in section 143 is not disconjective but has been used to mean "and" and thereby allowing the C.B.R. to assign the job to another functionary as well. It may be noted that the S.R.O. No.156 (1)/80, dated

10-2-1980 was issued under section 5 of the Income Tax Ordinance which relates to general jurisdiction of Income Tax Authorities. On the other hand, the I.T.O. has specifically been mentioned in section 143 to have jurisdiction of receiving such a statement and therefore, he could not possibly be ousted by way of a S.R.O. issued by the C.B.R. Also Schedule Second of S.R.O. No.657 (1)/86, dated July 1, 1986 elaborating functions of Directors of Survey, Vigilance, Inspection and Audit contains a similar assignment of functions to these authorities. This earlier S.R.O. refers to the other functions of these authorities of which those stated at serial Nos.l, 2, 3 and 6, para. A titled "survey" provide the rationale behind assignment of various functions including receipt of statements under section .143.

The I.T.O. having jurisdiction to assess a contractor is the primary authority authorised to receive statements provided under section 143 of the Ordinance and any other officer authorised in this behalf by the C.B.R. would be in addition to and not in substitution of the concerned I.T.O. to receive the stipulated statements. For, issuance of S.R.Os by C.B.R. is at best a subordinate legislation and therefore these can never change, amend or substitute an express provision of the statute nor can these be allowed to render any provision of the supreme legislation to be redundant or ineffective.

Salehon and others v. The State PLD 1969 SC 267 ref.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss.143 & 108---Assessee even after being served to furnish statement showing particulars of contracts and providing informations as prescribed under R.202, Income Tax Rules, 1982 failed to do so---Imposition of penalty by I.T.O. under S.108, Income Tax Ordinance---Validity---Penalty in question having been imposed under S.108 of the Ordinance, which was a penal provision and which expressly authorised the concerned I.T.O. to impose penalty upon a person who failed to furnish, inter alia, statements as prescribed under S.143, was justified.

(c) Income Tax Ordinance (XXXI of 1979)---

----S.5---Notification by Central Board of Revenue---Nature---Issuance of S.R.Os by C.B.R. is at best a subordinate legislation and therefore these can never change, amend or substitute an express provision of the statute nor can these be allowed to render any provision of the supreme legislation to be redundant or ineffective.

(d) Income Tax Ordinance (XXXI of 1979)--

----S.143---Filing of statement by assessee---Assessee contended that the department having never insisted on compliance of the provision of S.143, Income Tax Ordinance he was justified in not filing the statement ---Held, provision available in the statute would not become redundant only for the reason that either the assessee failed to comply with it or the department did not insist on its compliance by imposing penalty---Assertion that long-standing practice could provide the assessee with a justification to wriggle out of mischief of a duty cast upon him by the statute was impertinent---Alleged practice, negative or positive, however long, could not be raised as a defence against express dictates of law to do or refrain from doing an act.

(e) Income Tax Ordinance (XXXI of 1979)---

----Ss.108 & 143---Penalty under S.108, Income Tax Ordinance, 1979---Preconditions---Held, in case of penalties provided for under S.108, Income Tax Ordinance, 1979, the assessee will have to establish existence of a reasonable cause in order to succeed in avoiding imposition of penalty--?Revenue is under no legal compulsion to establish mens rea or guilty mind on the part of the assessee before holding him liable for default and imposing a penalty.

Additional Commissioner of Income Tax v. Nairan Das Ram Krishan 1994 PTD 199 and Additional Commissioner of Income Tax v. I.M. Patil & Company 1994 PTD 210 distinguished.

Commissioner of Income Tax v. Gokuldas Hari Vallabhdas (1958) 34 ITR 98; In re:-Commissioner of Income Tax v. Anwar Ali (1970) 76 ITR 696; Commissioner of Income Tax v. I.M. Patil & Company 196 ITR 297 = 1993 PTD 162; Gujarat Travancore Agency v. CIT (1989) 177 ITR 455(SC) and CIT v. Kalyan Das Rastogi (1992) 193 ITR 713 ref.

(f) Income Tax Ordinance (XXXI of 1979)--

----Ss. 108 & 117---Penalty for non-filing of a return and prosecution initiated for the same default--Distinction.

The distinction drawn between the penalty for non-filing of a return and prosecutions initiated for the same default is a nice one and requires special attention of the Revenue Collectors as also other authorities in the hierarchy. In the Income Tax Ordinance, 1979, penalty for non-filing of a return or other statements, accounts, certificates etc. has been provided for in section 108 of the Ordinance. It provides for levy of an imposition of a sum not exceeding Rs.100 for every day during which the default continues. The penalty provided for under section 108 of the Ordinance is predominantly a "failure" of an assessee to do an act required by legislature to be done in a prescribed time. The failure to abide by the directions and filing of required statement within the prescribed time entails penalty that has nexus with the period or periods of default after expiry of the prescribed time. On the other hand, the prosecution provided for in section 117 of the Ordinance for the same default or failure to file a return renders the failure to be a criminal offence punishable with imprisonment for term which may extend to one year or with fine or with both. In such case, namely prosecution under section 117 for failure to file return, there is not an iota of doubt that the Revenue will have to establish existence of mens rea against the assessee in order to bring home the guilt.

Muhammad Zia Ullah, D.R. for Appellant.

?Ali Bin Abdul Qadir for Respondent.

Date of hearing: 12th October, 1993.

ORDER

NASIM SIKANDAR (JUDICIAL MEMBER).--These three departmental appeals impugned a consolidated order of AA.C., Lahore, dated 17-6-1986 whereby the penalties imposed under section 108 of the Ordinance at a sum of Rs.50,000-each in all the three years involved viz. 1983?84 to 1985-86 were held to be not exigible.

2. The facts of the case are that the assessee-respondent is a registered firm and is engaged in execution of construction contracts. For the assessment years under review it was found to have violated the provisions of section 143 of the Income Tax Ordinance which obliged it to furnish to the ITO concerned a statement showing particulars and providing information as prescribed under Rule 202 of the Income Tax Rules, 1982. The assessee-respondent even after being served in this regard by way of a notice under section 116 of the Ordinance failed to come up with any justification for the default made in filing the said statement. The ITO having jurisdiction to assess the assessee respondent, therefore, proceeded to impose upon it a penalty of Rs.50,000 each in all the three years on account of failure in filing of the said information by 712, 949 and 616 days respectively. Before the first appellate authority the jurisdiction of the assessing officer to impose the penalties was assailed on the ground that the authority and functions provided for in section 143 of the Income Tax Ordinance were assigned to Commissioner of Income Tax (Survey and Collection) and authorities subordinate to him by way of SRO 156(1) 80, dated 12-10-1986, therefore, the assessing officer could net take any punitive action for the alleged default. Learned appellate authority, however, held the penalties to be not maintainable for the reason that the provisions of section 143 were applicable only to contractors executing private projects as allegedly explained by C.B.R through Circular No. 4 of 1979 dated 23-8-1979.

The appellate authority observed that the assessee being a contractor executing construction contracts for official agencies was not liable to file the statement contemplated under section 143 of the Ordinance. The department feels aggrieved of these findings as also the resultant deletion of the penalties in all the three years.

3. At the outset of the proceedings learned counsel for the assessee? respondent has agreed that Circular No.4 of 1979, dated 23-8-1979 referred to by the first appellate authority while allowing relief is not attracted to the facts and circumstances of this case nor it provided any guidance that the provisions of section 143 of the Ordinance were applicable only in respect of contractors executing contracts for private parties. Therefore, he agrees that the impugned order to that extent is totally irrelevant. However, he submits that in fact the learned appellate authority accepted his contentions which he put forth before him as regards lack of jurisdiction of the ITO to impose the aforesaid penalties and, therefore, allowed the relief being agitated against.

4. Learned D.R. contends that express provisions of section 143 of the Ordinance leave no room for any guess or conjecture that these were either applicable to private contractors only or that otherwise the assessing officer concerned had no power to impose a penalty provided for in case of default committed by the contractors. Learned D.R. has taken us to the language of section 143 to stress that the ITO having jurisdiction to assess the contractor having been specifically mentioned in the section, the contention raised against his authority to impose penalty has absolutely no legs to stand upon. Further submits that conferring of jurisdiction to receive the statement prescribed under this section on Commissioner of Income Tax Survey and Collection and authorities subordinate to him by way of the aforesaid SRO were meant only in addition to the concerned ITO and not in substitution.

5. Learned counsel for the respondent elaborating his point submits that in view of the said SRO the ITO having jurisdiction to assess the contractor had completely been substituted by the Commissioner of Income Tax (Survey and Collection) and authorities subordinate to him for the purpose of receiving/entertaining statements prescribed under this section. He contends that use of the word `or' in section 143 has been used with the intention of dis-conjecting the later part of the provision and bringing into being another authority for receiving the said statement; that use of word "or" means one authority to the exclusion of the other and that though primarily the authority to receive the statements rests with the concerned ITO but C.B.R. has been authorised to substitute the ITO with another authority for this purpose which was actually done by C.B.R. by appointing C.I.T. (Survey and Collection) and functionaries subordinate to him through the said circular. Therefore, contends that the C.B.R. having authorised C.I.T. (Survey and Collection) and authorities subordinate to him to receive the said information, the I.T.O. having jurisdiction to assess the contractors was completely ousted. By way of an alternate submission the learned counsel contends that the Revenue insisted on filing of returns/statements provided for under section 143 of the Ordinance for the first time in the assessment year 19g3-84 and that neither before that assessment year nor after assessment year 1985-86 (all of three are in appeal before us) it ever enforced the provisions of the section. From this he derives his argument that passiveness or inaction on the part of the Revenue authorities to enforce this provision in earlier and subsequent years was a sufficient cause to excuse the non-filing of such statements on account of their being not in vogue; that the provisions having become redundant in spite of their presence in the Ordinance absolved the assessee from filing of such statement. Lastly, that no penalty in this case could be imposed as no mens rea was established to have existed on the part of the assessee in not filing the required statement.

6. As far the contention of the appellant regarding lack of jurisdiction of the assessing officer (the ITO having jurisdiction to assess the assessee? respondent) to impose penalty, it would be convenient to have a glance at the language of section 143 of the Ordinance:---

Section 143. Statement regarding certain contracts:

"Where any person (hereinafter referred to as the `contractor') enters into a contract for the construction of a building for, or the supply of goods or services in connection therewith to, any other person, the value of which is not less than (one hundred thousand) rupees, he shall, within one month of making of the contract, furnish to the income Tax Officer having jurisdiction to assess the contractor or any other officer authorised in this behalf by the Central Board of Revenue statement showing such particulars relating to the contract and in such form and verified in such manner, as may be prescribed."

7. To crystallise the preposition, the SRO referred to by the respondent ?assessee also needs to be reproduced: ---

SRO 156(1)80, dated 10-2-1980:

"In exercise of the powers conferred by subsection (2) of section 5 of the income Tax Ordinance, 1979 (XXXI of 1979), the Central Board of Revenue is pleased to direct that the commissioner of Income Tax (Survey and Collection) and any authority subordinate to him shall perform the functions falling under sections 85 to 98, 100, 103, 104, 108 to 120, 123, 124, 126, 134(2), 134(3), 136(1), 136(2), 137(1), 138 to 149, 156, 161, 162 of the said Ordinance."

8. A bare reading of section 143 makes it abundantly clear that contention raised by the learned counsel for the respondent is totally misplaced and has absolutely no logical basis to stand upon. The I.T.O. having jurisdiction to assess the contractor is the primary authority, who has been assigned the job of receiving, information-statement prescribed under the section. And this appears quite natural as he is the most relevant authority to evaluate the statement and information of the business activities of the assessee to be assessed in his circle. This precisely appears to be the intention of legislature in providing for filing of these statements with him. However, in addition to the concerned assessing officer law has provided for conferring the authorisation in this regard on any other officer of the Revenue as considered suitable by the Central Board of Revenue. The plain words of the statute clearly indicate that any other officer of the Revenue to be authorised by the C.B.R. in this regard is in addition to the I.T.O. having jurisdiction to assess a contractor and not in substitution thereof. The Supreme Court of Pakistan in a case reported as PLD 1969 SC 267 re: Salehon and others v. The State held that though ordinarily word "or" is used in disconjuctive sense, intention of the legislature may be to read "or" and "and" one for the other. The provision when seen in the background of the need and purpose of the statement required to be filed persuades us to the irresistible conclusion that use of word "or" in section 143 is not disconjuctive but has been used to mean "and" and thereby allowing the C.B.R. to assign the job to another functionary as well. It may be noted that aforesaid S.R.O. was issued under section 5 of the Income Tax Ordinance which relates to general jurisdiction of Income Tax Authorities. On the other 1 hand, the I.T.O. has specifically been mentioned in section 143 to have jurisdiction of receiving such a statement and therefore, he could not possibly be ousted by way of a S.R.O. issued by the C.B.R. Also Schedule 2nd of S.R.O. No.657(1)/86, dated July 1, 1986 elaborating functions of Directors of Survey, Vigilance, Inspection and Audit contains a similar assignment of functions to these authorities. This earlier S.R.O. refers to the other functions of these authorities of which those stated as serial Nos.l, 2, 3 and 6, para. A titled "survey" provide the rationale behind assignment of various functions including receipt of statements under section 143. These are reproduced for facility of reference: ---

(1) Functions as specified in sections 85 to 98, 100, 103, 104 to 120, 123, 124, 126, 134(2), 134(3), 136(1), 136(2), 137(1), 138 to 149, 156, 161, 162 of the Income Tax Ordinance, 1979 (XXXI of 1979).

(2) Internal survey for collecting information under sections 139 to 144 of the Income Tax Ordinance, 1979 from various Departments/Organizations.

(3) Preparation of Communication Slips (I.T. 93) based on information collected as per 2 above and their dissemination to concerned Zonal Assessing Officers.

(4) Matching important information with taxpayers declared version for detection of mis-declaration, if any, and to issue verification notes for Zonal Assessing Officers".

The contention of the respondent when seen from another angle would again appear improper inasmuch as the penalty in question was imposed under section 108 of the Ordinance which is a penal provision and which expressly authorises the concerned ITO to impose a penalty upon a person who fails to furnish, inter alia, statements as prescribed under section 143.

9. As observed earlier after going through the provisions of the Ordinance and both the said SROs we are absolutely clear in our mind that the contentions made in this regard are totally baseless. The I.T.O. having jurisdiction to assess a contractor is the primary authority authorised to receive statements provided under section 143 of the Ordinance and any other officer authorised in this behalf by the C.B.R. would be in addition to and not in substitution of the concerned I.T.O. to receive the stipulated statements. For, issuance of S.R.Os. by C.B.R. is at best a subordinate legislation and therefore these can never change, amend or substitute an express provision of the statute nor can these be allowed to render any provision of the supreme legislation to be redundant or ineffective.

10. As to the second contention that the department having never insisted on compliance of the provisions of section 143 the assessee was justified in not filing the return is again devoid of any force. In the first instance we agree with the learned D.R. that the submission of the respondent-assessee that the department never insisted on furnishing of such statements before the assessment year 1983-84 is factually incorrect. Even if for arguments sake it is conceded for a while, still the provisions available in the statute would not become redundant only for the reason that either the assessees failed to comply with it or the department did not insist on its compliance by imposing penalties. The assertion that long standing practice can provide the assessee with a justification to wriggle out of the mischief of a duty cast upon by the statute is impertinent. An alleged practice, negative or positive, however tong cannot be raised as a defence against express dictates of law to do or refrain from doing an act. In the case of Central Insurance Co. v. C.B.R. reported as 1993 PTD 766 = 1993 SCMR 1232 at p.1252 their Lordships of the Supreme Court rejected a similar contention qua alleged long practice of the Income Tax Department in treating income from certain Government securities as tax free for the purposes of income tax. Their Lordships concluded: ---

"We may observe that Mr. Fazale Ghani has also pressed into service the Income Tax Department's practice obtaining during the last more than four decades, during which period the amounts of interest earned by the Insurance Companies on Khas Deposit Certificates/Defence Saving Certificates, were treated as tax free for the purposes of income-tax. Reliance was placed by him on the case of Nazir Ahmad v. Pakistan and 11 others PLD 1970 SC 453 and the case of Asian Food Industries Ltd. and others v. Pakistan and others 1985 SCMR 1753. Suffice it to observe that any alleged practice cannot negate the provisions of the Ordinance.

11. The next contention of the learned counsel for the appellant is two pronged: firstly that provisions of section 108 make it incumbent upon the Revenue to establish that the assessee failed "without reasonable cause" to file the required return and secondly that an element of mens rea or guilty mind was behind his failure to abide by the directions as contained in section 143 of the Ordinance. For this he seeks strength from two reported cases from Indian Jurisdiction. The first one is cited as 1994 PTD 199 re: Additional Commissioner of Income Tax v. Nairan Das Ram Krishan and the second one is cited as 1994 PTD 210 re: Additional Commissioner of Income Tax v. I.M. Patil and Company.

12. Both the said contentions in our view are also not well based. Section 108 under which the penalty in this case was imposed provides as under: ---

108. Penalty for failure to furnish return of total income and certain statements:

"Where any person has, without reasonable cause, failed to furnish, within the time allowed for the purpose--

(a) any return of total income under section 55 or 56, subsection (1) of section 65, subsection (3) of section 72 or subsection (3) of section 81; or

(b) any certificate, statement, accounts or information under sections. 51, 139, 140, 141, 142, 143 (143-A) (143-B) or 144,

the Income Tax Officer may impose upon such person a penalty not exceeding one hundred rupees for every day during which the default continues."

14. This section as reproduced above certainly makes an assessee liable if it fails "without reasonable cause" to furnish the required return. And, besides the words "without reasonable cause" another pre-conditions mentioned refers to "within the time allowed". Since for the penalty prescribed under this section in all the cases provided for in subsections (a) and (b) a reference has to be made to time prescribed for the doing of the act, the failure of the assessee would also have to be explained in the context of that prescribed time. And in case of lapse of the prescribed time each and every day subsequent to the default because the penalty under this section has a nexus with "every day during which the default continues". The contention that the words "without reasonable cause" as used in section 108 of the Ordinance are exactly identical to those used in section 271(1)(a) of the Indian Income Tax Act, 1961 and, therefore, both of the above said reported cases apply on all fours to the facts of the case does-bear some weight. However, for reasons that will be stated later in this order we will not accept the proposition on its face? value.

15. Of the above-referred cases the first one viz. 1994 PTD 199 India (Supra) a Division Bench of the Andhra Pardesh High Court considered the provisions of section 271 of the Indian Income Tax Act, 1961 in the context of` their being penal or criminal in nature. The assessee in that case voluntarily filed a return on March 18, 1970 which in fact was due on June 30, 1966. The assessing officer imposed a penalty of Rs.724 under section 271(1)(a) of the Act as the assessee failed to give any explanation for the delay. The penalty thus imposed was confirmed by the first appellate authority but the ITAT on second appeal set aside the order of the assessing officer on the ground that no material was let in by the department to show that the assessee will fully defaulted in filing the return. Reference application filed by the department was rejected by the Tribunal and in the application for reference filed before the High Court it was contended that the burden of showing reasonable cause for late filing of return was on the assessee and all the more so when he voluntarily filed the same. It was further contended that the principles of mens rea had no relevance and therefore, the requirements as contained in the provisions of section 271(1)(a) of the Act were absolute. The Division Bench comprising of the Chief Justice repelled the contention put forth by the department and held that establishment of mens rea was an essential in gradient of criminal offence and that though a statue may exclude the establishment of mens rea by a specific provision but good rule of construction being that the provisions which create an offence should be construed in conformity with common law provisions rather than against it. Their Lordships further held that mens rea by necessary implication could also be excluded where the provisions of the Act would be defeated by such insistence to prove it. Referring to penalty proceedings provided for under the section their Lordships held that these proceedings being criminal or quasi-criminal in nature the establishment of mens rea was an essential, ingredient and, therefore, a statutory obligation laid upon the Revenue to prove that the assessee had deliberately acted in offence of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of obligation. The second case relied upon by the appellant is 1994 PTD 210 (supra). In this case, on account of difference of opinion among a Division Bench of the Gujarat High Court, the following question was referred to the Full Bench of the Court:

"When by a taxation statute, sanction of penalty is provided in order to enforce compliance with a particular provision of the Act and the section providing for penalty requires that the non-performance of obligation without reasonable cause shall attract that particular penalty (i) is absence of reasonable cause an ingredient of the offence for which the penalty is provided; and (ii) has the taxing authority to prove absence of reasonable cause or has the party in default to prove the presence of reasonable cause."

16. The Full Bench of the Gujarat High Court headed by its Chief justice held that proceedings contemplated under a aforesaid section 271(1)(a) of the Indian Income Tax Act, 1961 were quasi-criminal proceedings and the section was penal in the sense that its consequences were intended to be an effective deterrent. Their Lordships opined that in penalty proceedings under section 271(1)(a) of the Act the assessee upon whom a penalty is sought to be imposed is in the position of an accused in a criminal trial and, therefore, all the ingredients of the offence for which the penalty can be imposed must be established by the Revenue. Their Lordships went on to observe that on the principles underlining section 106 of the Evidence Act since the facts which constitute a reasonable cause are specifically within the knowledge of the assessee it will be for him to establish those facts, but the department must first lead evidence which would go to show, prima facie, that the assessee had no reasonable cause in failing to file the returns within the time speed. Once this initial burden, which may be slight, has been discharged by the department it is for the assessee to show, as in a civil case, on balance of probabilities, that he had reasonable cause for failing to file the return within the time prescribed. Mere failure to file the return within the time or falsity of the explanation on the part of the assessee without anything more will not expose him to penalty. Their Lordships relying upon a decision of the Bombay High Court in re: Commissioner of Income Tax v. Gokuldas Hari Vallabhdas (1958) 34 ITR 98 and of the Supreme Court of India in re: Commissioner of Income Tax v. Anwar Ali (1970) 76 ITR 696 concluded that burden of proving all the ingredients of the offence is upon the department and if the department would fail to lead any evidence on the point besides merely pointing out that there was a failure to furnish the return within time, the department would fail as far penalty proceedings under section 271(1)(a) are concerned.

17. There is no doubt that the phraseology of section 271(1)(a) of the Income Tax Act, 1961 and that of section 108 of the Income Tax Ordinance do stand in close proximity, more particularly the words "without reasonable cause, failed to furnish" appear in both of the provisions. However, the contentions as put forth by the learned counsel for the appellant and based upon the ratio of the abovesaid cases cannot be accepted. In the first case re: Additional Commissioner of Income Tax v. Narayandas Ramkishan (supra) what their Lordships ultimately held partly supports the submissions of Revenue in this case as failure of the assessee to explain the default certainly leads to the inference that he acted in conscious disregard of his obligation by not filing the required statements. Learned counsel for the appellant has placed a lot of stress on the ratio of the other case re: Additional Commissioner of Income Tax v. I.M. Patil and Company. However, here again we do not find ourselves in agreement with the findings as discussed above. The disagreement, however, is based upon the fact that the ratio as also the judgment was set aside by their Lordships of the Indian Supreme Court when the matter finally reached them. The decision so rendered is cited as 196 ITR 297 = 1993 PTD 162 re: Commissioner of Income Tax v. I.M. Patil and Company. The factual background of the case and its travel through the echelons of judicial hierarchy can be described thus. The assessee having filed the returns for three assessment years on March 24, 1967 which were required to be filed respectively on July 31, 1964, July 31, 1965 and July 31, 1966 was burdened with various sums of penalties on account of late filing. The Tribunal decided the matter in favour of the assessee but nevertheless referred the question of law framed by the Department for the opinion of their Lordships of the Gujarat High Court. The question in the reference was if the Tribunal was justified in law in cancelling the penalty levied on the assessee under section 271(1)(a) for the three assessment years 1964-65 to 1966-67. The reference originally came up before a Division Bench of the Gujarat High Court but subsequently was referred to the Full Bench because the Division Bench found itself unable to agree with the view taken by an earlier Division Bench of that Court. Hence the framing of the question as reproduced earlier and its disposal by the Full Bench as discussed above. Before the Supreme Court the Revenue contended that there was a fundamental distinction between levy of penalty under section 271(1)(a) as opposed to section 271(1)(c) of the Act. For, it was said that the former related to the obligation of the assessee to file a return within due date while the latter dealt with concealment. Learned counsel for the Revenue, placing reliance upon another case decided by the Supreme Court cited as (1989) 177 ITR 455 (SC) re: Gujarat Travancore Agency v. CIT submitted that where a statutory obligation is imposed requiring the assessee to file the return within the due date, it is for him to show should he file a belated return "a reasonable cause". The burden being ultimately on the assessee to plead and prove the "reasonable cause" no question of mens rea could raise at all. In contradiction to this where there is a case of concealment of income under section 272(1)(c) of the Act then the question of mens rea may come in. For the Revenue it was further submitted that their Lordships of the Gujarat High Court did not bear this distinction in mind while deciding the matter and answering the aforesaid question. Their Lordships of the Supreme Court straightaway proceeded to allow the aforesaid arguments by reaffirming their view expressed in (1989) 177 ITR 455 (SC) (supra) in the following words: ---

It is sufficient for us to refer to section 271(1)(a) which provides that 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 276-C which provides that if a person wilfully fails to furnish in due time the return of income required under section 139(1), 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 provisions of section 276-C 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 creation of an offence by statute proceeds on the assumption that society suffers injury by the act or omission of the defaulters and that a deterrent sentence must be imposed to discourage the repetition of the offence. In the case of a proceeding under section 271(1)(a), however it seems that the intention of the Legislature is to emphasis 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 established the element of mens rea, it is generally sufficient to prove that default in complying with the Statute???????? has occurred. In our opinion, there is nothing in section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision."

While holding the Revenue to be entitled to succeed their Lordships also referred to another decision of the Supreme Court cited as (1992) 193 ITR 713 re: C.I.T. v. Kalyan Das Rastogi to conclude that it is no longer open to argument whether any mens rea is required to be established under section 271(1)(a).

18. From the above discussion it clear that the view expressed by both the Benches of Gujarat and Andhra Pradesh High Courts and similar other views of various High Courts of India stand repelled by the Supreme Court of India. The distinction drawn between the penalty for non-filing of a return and prosecutions initiated for the same default is a nice one and requires special attention of the Revenue Collectors as also other authorities in the hierarchy. In the Income Tax Ordinance, 1979, penalty for non-filing of a return or other statements, accounts, certificates etc. has been provided for to section 108 of the Ordinance. It provides for levy of an imposition of a sum not exceeding Rs.100 for every day during which the default continues. The penalty provided for under section 108 of the Ordinance is predominantly a "failure" of an assessee to do an act required by legislature to be done in a prescribed time, Here again we will reiterate that the failure to abide by the directions and filing of required statement within the prescribed time entails penalty that has nexus with the period or periods of default after expiry of the prescribed time. On the other hand, the prosecution provided for in section 117 of the Ordinance for the same default or failure to file a return renders the failure to be a criminal offence punishable with imprisonment for a term which may extend to one year or with fine or with both. In such case, namely prosecution under section 117 for failure to file return, there is not an iota of doubt that the Revenue will have to establish existence of mens rea against the assessee in order to bring home the guilt.

19. From what has been discussed above we can safely say that the case of penalties provided for under section 108 of the Ordinance, the assessee will have to establish existence of a reasonable cause in order to succeed in avoiding imposition of penalty. And, that the Revenue is under no legal compulsion to establish mens rea or guilty mind on the part of the assessee before holding him liable for default and imposing a penalty.

20. All said and done, we have noticed that the assessee in this case faded even to reply to the notice issued asking for his explanation and all kinds of defences it is now adopting are fallacious and set up only in order to wriggle out of the default it admittedly committed. Since the alleged "reasonable cause" as offered by the assessee has not impressed us and since the relief allowed to it is admittedly on the basis of a Circular which was not relevant in this case, we will set aside the order deleting penalty. Resultantly the penalty imposed at a sum of Rs.50,000 each in the three years viz. 1983-84, 1984-85 and 1985-86 shall stand restored.

M.BA./31/T.T?

Order accordingly.