TaxTMI 
TaxTMI 
2003 (2) TMI 47
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the changed proposition of law now prevailing and accepted by the Supreme Court and various other High Courts. He relied on the decisions in CIT v. ASK Enterprises [1998] 230 ITR 48 (Bom); CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC); Calcom Electronics Ltd. v. Sales Tax Officer [2001] 121 STC 600 (Delhi); Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775 (SC); Rupa Ashok Hurra v. Ashok Hurra [2002] 4 SCC 388 at page 413, para. 41; CIT v. Jai Durga Construction Co. [2000] 245 ITR 857 (All) and Cemento Corporation Ltd. v. CCE [2002] 8 SCC 139 at page 145, para 17. Relying on these decisions, he contended that the expression "may" employed in section 271B is not mandatory but discretionary. It is not an absolute proposition that rejection of reasonable cause would definitely result in the imposition of penalty, According to him, by reason of section 273B, the Legislature had intended that the imposition of penalty would not be an absolute proposition. Mr. Dipak Deb, learned counsel appearing on behalf of the Department, on the other hand, contends that the statute has to be interpreted in the manner it has expressed its intention, Neither the Tribunal nor the court can i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned therein. By the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, the phrase "without reasonable cause" was omitted with effect from September 10, 1986. By the said 1986 Act, section 273B was introduced in the Act. This section provides that no penalty shall be imposed under section 271B if the assessee is able to prove that there was reasonable cause for the said failure. Section 271B, inserted through the 1984 Finance Act, appears to be a little different when amended through the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986. The Legislature had an intention for the omission of the phrase "without reasonable cause" qualifying the failure to get the accounts audited. The substantive provision providing for penalty omitted to qualify the failure inviting the penalty. Thus, the substantive law creating liability, attracting penalty was made unqualified. Whereas through the 1986 amendment Act, section 273B was inserted. A plain reading of the text of section 273B makes it clear that the same is a procedural law with regard to the question of imposition of penalty under different sections including section 271B. Section 271B mandates impositio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a), it was held that the wrong for which the penalty was to be visited, commenced from the date of default and continued month after month until compliance and the default came to an end. The rule of de die in them was applicable not on daily but on monthly basis. That imposition of penalty is not confined to the first default but with reference to the continued default was obviously on the footing that non-compliance with the obligation of making a return was an infraction as long as the default continued. If a duty continued from day-to-day, the non-performance of that duty from day-to-day is a continuing wrong. The legislative scheme under section 271(1)(a) of the 1961 Act in making provision for a penalty conterminous with a default provided for a situation of continuing wrong. This principle fits in with the construction of section 271B read with section 273B. It is only when reasonable cause is shown, there is no scope for imposing the penalty, as was held in CIT v. Ramkrishna Stores [2002] 253 ITR 175 (Cal). In Income-tax Law by Chaturvedi and Pithisaria, fifth edition, page 8663, the situation was dealt with where it was observed that the onus of proving the existence of re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in character is not always correct. The concept, that all penalties in civil matters assume the character of quasi-criminal one, has of late undergone a change. In fact, the question is dependent on the characteristic of the proceedings. A distinction has to be drawn between the two kinds of proceedings in order to ascertain whether the proceeding is a quasi-criminal one or simply a coercive method to secure compliance of a particular provision. A penalty provided, if appears to be a provision for securing compliance by introducing coercive process it is something implicating a penal interest. If instead of penalty interest was payable, in that event, it would not assume the characteristic of quasi-criminal proceedings. Therefore, the nature of the proceeding has to be examined having regard to the context under which the liability is created. If the liability reveals a civil liability only to ensure compliance through a coercive manner, then it is definitely a civil liability without any criminal implication. But as soon as a criminal liability is imposed by reason of default in compliance of a particular provision and there is some element of criminality involved in the default,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....[1998] 230 ITR 48 (Bom), proceeded on the footing that the penalty was a result of deliberate action, which made the proceedings quasi-criminal. Mr. Deb's reliance on Kil Kotagiri Tea and Coffee Estates Ltd.'s case [1989] 177 ITR 458 (Ker), however, in our view, has no manner of application in the present facts and circumstances of the case. At the same time, we cannot be oblivious of the fact that a penalty imposable, as law declared by the apex court today, is different from a penalty imposable for an act or omission involving an element of criminality. The default involves civil consequences in the form of penalty. Section 271B is inserted for effective compliance. The text of section 271B does not admit of any concept of element of criminality in the default. Ordinarily, the court is concerned with the interpretation, but the changing concept adapting itself with the development in the society, as recognised by the apex court in Rupa Ashok Hurra's case [2002] 4 SCC 388, makes us aware of the role of the judiciary. It is no more confined merely to interpret or declare law, a concept of bygone age. In order to adapt and adjust the requirements of law with the changing condi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ngs so as to enable the authority to impose the penalty. In Calcom Electronics Ltd. v. Sales Tax Officer [2001] 121 STC 600 (Delhi) followed in Pawan Kumar Agarwal's case--W.P.T.T. No. 19 of 2000 disposed of on November 15, 2002, a Division Bench of this court had also followed the same principle, which, in our view, is distinguishable in view of the liability created under section 68 of the West Bengal Sales Tax Act having an element of quasi criminal implication. But then each case has to be examined on the facts and circumstances and the materials on record as presented before the court. If two interpretations of a particular provision are possible, then the one favourable to the assessee is to be accepted. In Cemento Corporation Ltd. v. Collector, Central Excise [2002] 8 SCC 139, at page 145, in paragraph 17, the apex court had held that "... when two constructions can be equally drawn, the one favourable to the taxpayer should be adopted..." The same principle was enunciated in Mysore Minerals Ltd.'s case [1999] 239 ITR 775 (SC). In CIT v. Vegetable Products Ltd. [1973] 88 ITR 192, the apex court had held that where the language of a taxing provision is ambiguous or capable....