Andhra HC (Pre-Telangana)
Income-Tax Officer vs Autofil And Ors. on 24 April, 1990
Equivalent citations: [1990]184ITR47(AP)
JUDGMENT Bhasker Rao, J.
1. These three appeals are directed against the order of acquittal of respondents Nos. 1 to 5. The income-tax Department prosecuted the respondents for an offence under section 139 (1) read with section 276CC of the Income-tax Act on the ground that there was wildful failure in the submission of return by the due date. Since the said default was alleged to be for three different years, there were three different cases filed against them. The delay was 27 months, 16 months and 5 months in these three cases.
2. There is no controversy on the point that there was delay in the submission of the returns of the first respondent-firm by its partners, R-2 to R-5. It is not simple failure in the submission of the returns by the due date that amounts to an offence under section 276CC but that the failure should be "willful" so as to call for a conviction.
3. The term "willful failure" is the subject-matter of consideration in Addl. CIT v. Dargapandarinath Tuljayya and Co. [1977] 107 ITR 850 (AP) [FB]. The full Bench of the court held that "willful failure" certainly brings in the element of a guilty main and that in the absence of a guilty mind, even in regard to late filling of returns there cannot be any conviction. The Supreme Court of the United States and also occassion to consider the meaning and scope of "willful" while dealing with sections 7201 and 7203 of the Internal Revenue Code, 1954, which are similar to section 276CC of the Income-tax Act in United States v. Harry Murdock [1933] 290 U.S. 389-398. It held that the word "willful" generally means an act done with a bad purpose and that an evil motive is a constituent element of the crime. In other case, Murray R. Spies v. United States [1943] 317 US 492-500, the Supreme Court of the United States of America held.
"... It (wilful) may well mean something more as applied to non payment of tax than when APPLICANTlied to make a return...in view of the traditional aversion to imprisonment for debt we would not without the clearest manifestation of congressional intent assume that mere knowledge and intentional default in payment of tax. Where there had been no wildful failure to disclose the liability is intended to constitute a criminal offence of any degree. We would expect willfulness in such a case to include some element of evil motive and want to justification in view of all the financial circumstance of the taxpayer."
4. Therefore, wilfulness contemplates some element of evil motive and want to justification. In CIT v. Patram Dass Raja Ram Beri [1981] 132 ITR 671, a Full Bench of the Punjab and Haryana High Court, considering the term "wilful failure" occurring in section 276CC of the Income-tax Act, held that "willfulness certainly brings in the element of guilt" and thus the requirement of mens are. Our Supreme Court in Gujarat Travancore Agency v. CIT , has observed that 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 must be imposed to discourage the repetition of the offence. It also observed that. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent.
5. It is thus in rare and exceptional cases where penalty under section 271(1)(a) of the Income-tax Act is found to be not sufficiently deterrent and that mens rea was present that conviction under section 276CC is called for and not otherwise. In the instant case. The respondents filed an explanation stating that their clerk, one Hanumanth Rao, was not well and, therefore, the day-to-day accounts could not be finalised and the profit and loss account could not be drawn up so as to file the return in time. They have also stated that they were not conversant with the preparation of the profit and loss account and the balance-sheet and thus the delay was neither willful nor wanton. No doubt, this explanation was not accepted by the court below, but the question that still remains is, whether there is mens rea present to warrant a conviction for the offence for which the respondents were prosecuted. In the present case, there is no dispute that advance tax was paid and thus there was no evasion in payment of tax. Further, they have paid penalty for delayed filing of return apart from penal interest on the differential amount between the tax assessed and the tax paid. Conviction under section 276CC is an extreme and exceptional resort and gets warranted only when wilfulness in failure to submit the return in time is established beyond all reasonable doubt and there should be the presence of mens rea, a bad motive and a guilty mind. In the absence of this, no conviction shall follow the prosecution under section 276CC of the Income-tax Act, there is a clear explanation given by A-3 that he was not conversant with the preparation of the profit and loss account and the balance-sheet. Equally so is his colleague. Satyanarayana. Their clerk happened to fall ill. Even if, for any reason, the explanation does not receive acceptance, still the conduct of the respondents in paying the advance tax. The penal interest and penalty and want of mens rea absolve them from criminal liability. I, accordingly, find no merit in these appeals. The appeals are, therefore, dismissed.