1989 (5) TMI 1

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....t the assessee : "Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in cancelling the penalties levied under section 271 (1)(a) of the Income-tax Act, 1961, for the assessment years 1965-66 and 1966-67 ?" The assessee is a registered firm trading in hill produce. 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 June 30, 1965, and instead applied for time to file the return. Time was granted up to August 31, 1966. Yet no return was filed. It was only after notice under section 139(2) of the Act was served on the assessee on September 22, 1967, that it filed a return on the next day. S....

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....led. 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 entertaining 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 271 (1) (a) 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 e....

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....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 defaulter and that a deterrent sentence must be imposed to discourage the repetition of the offence. In the case of proceeding under section 271(1)(a), 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 wh....