Maya Rani Punj Vs. Commissioner of
Income Tax, Delhi [1985] INSC 248 (11 December 1985)
MUKHARJI, SABYASACHI (J) MUKHARJI, SABYASACHI
(J) TULZAPURKAR, V.D.
MISRA RANGNATH
CITATION: 1986 AIR 293 1985 SCR Supl. (3) 827
1986 SCC (1) 444 1985 SCALE (2)1267
ACT:
Income Tax Act 1922 : Section 28, Income Tax
Act 1961:
Sections 271 (1)(a), 297(1) and 297(2)(j).
Delay in filing return for assessment year
under 1922 Act - Penalty - Quantum of - Determination - 1961 Act coming into
effect - Discretion to reduce penalty fixed under new Act - Provision of new
Act - Availability of.
Imposition of penalty - Assessment year or
date of filing return - Not material - Satisfaction of assessing authority that
default occurred - Importance of.
Return - Non-filing of - Whether a continuing
default.
HEADNOTE:
The appellant is the assessee. The year of
assessment was 1961-62. The return was due by September 28, 1961 but the same
was neither filed within that time, nor was any extension asked for. The
assessee filed the return on May 3, 1962 beyond more than seven months of the
due date. With effect from April 1, 1962 the Income Tax Act of 1961 had come
into force. The Income Tax Officer finding that the assessee had not been
prevented by any reasonable cause for not complying with the statutory
obligation to make the return, took proceedings under section 271(1)(a) of the
1961 Act and imposed a penalty of Rs.4,060 for failure to furnish the return
within time.
The assessee challenged the imposition of
penalty by preferring an appeal to the Appellate Assistant Commissioner who
refused to interfere and dismissed the appeal.
On further appeal the Appellate Tribunal held
that penalty was leviable under the 1961 Act, but the amount of penalty had to
be quantified according to the provisions of section 28 of the Income Tax Act,
1922 and applying the provisions of the said Act reduced the penalty to Rs.
400.
The question whether 'the Tribunal was in law
competent to reduce the penalty levied under section 271(1)(a) to a figure 828
lower than the sum equal to 2% of the tax for every month during which the
default continued', was referred at the instance of the Revenue to the High
Court which answered the reference in favour of the Revenue and against the
assessee by relying upon section 297(2)(j) of the 1961 Act and holding that
section 271(1) of the Act was applicable to the levy of penalty for defaults
committed under the 1922 Act, and that the word 'may' used in section 297(1) of
the 1961 Act vested in the Income Tax Officer discretion either to levy or not
to levy a penalty but if he did decide to levy one, he had no option but to
levy the penalty at the prescribed rate.
Dismissing the appeal of the assessee, this
Court, ^
HELD: 1. The assessment was made on June 30,
1964 and proceedings for imposition of penalty were directed to be initiated
that day. Provisions of section 271(1)(a) of the 1961 Act were fully applicable
and the demand of penalty was thus justified being within the limits of law.
[842 C]
2. Under the 1922 Income Tax Act liability to
make a return was contingent upon service of notice under section 22, while
under the 1961 Income Tax Act every person having a taxable income has under
section 139 the liability to make a return within the time provided by the Act.
[833 D] In the instant case, clause (f) of section 297(2) of the 1961 Act is
not attracted because the return was filed on May 3, 1962 and assessment was
made subsequent to April 1, 1962. [833 D]
3. For the imposition of penalty it was not
the assessment year or the date of the filing of the return that was important
but it was the satisfaction of the income tax authorities that a default had
been committed by the assessee which attracted the provisions relating to
penalty.
Whatever be the stage at which the
satisfaction was reached, the scheme of section 274(1) and 275 of the Act of
1961 was that the order imposing penalty must be made after the completion of
the assessment. The crucial date, therefore, for the purpose of penalty is the
date of such completion, and the satisfaction of the authority that proceedings
for levy of penalty be initiated. [834 F-G] In the instant case, though the
default occurred in September 1961 the date relevant for the purpose of
initiating proceedings for imposition of penalty is when, following the 829
assessment made, the Income Tax Officer decided to initiate the penalty
proceedings. The proper provision to apply for dealing with the situation
relating to penalty is as provided in section 271(1)(a) of the 1961 Act. [837 A-B]
Jain Brothers & Ors. v. U.O.I. & Ors., 77 I.T.R. 107;
Third Income Tax Officer, Mangalore v. M.
Damodar Bhat, 71 I.T.R. 806 - [1969] 2 S.C.R. 29, referred to.
4. Under section 28 of the 1922 Act the upper
limit of penalty only was provided and there was no prescription of any
particular rate as found in section 271(1)(a) of 1961 Act. Penalty contemplated
under the respective sections of the two Acts is quasi-criminal in
character.[834 H - 835A]
5. Accrual of penalty depends upon the terms
of the statute imposing it and in view of the language used in section
271(1)(a) of the 1961 Act, the position is beyond dispute that the Legislature
intended to deem the non-filing of the return to be a continuing default the
wrong for which penalty is to be visited, commences from the date of default
and continues month after month until compliance is made and the default comes
to an end. The rule of de die in diem is applicable not on daily but on monthly
basis. [840 H] Corpus Juris Secundum, Vol 85, p. 1027, referred to.
6. The imposition of penalty not confined to
the first default but with reference to the continued default is obviously on
the footing that noncompliance with the obligation of making a return is an
infraction as long as the default continued. Without sanction of law no penalty
is impossible with reference to the defaulting conduct. The position that
penalty is impossible not only for the first default but as long as the default
continues and such penalty is to be calculated at a prescribed rate on monthly
basis is indicative of the legislative intention in unmistakable terms that as
long as the assessee does not comply with the requirements of law he continues
to be guilty of the infraction and exposes himself to the penalty provided by
law. [841 D-E] Third Income Tax Officer, Mangalore v. M.Damodar Bhat, [1969] 2
S.C.R. 29, referred to and Commissioner of Wealth Tax, Amritsar v. Suresh Seth,
[1981] 3 S.C.R. 419, explained and over-ruled.
830
7. If a duty continues 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 the default to be raised provides for a
situation of continuing wrong. [842 B] Ajit Kumar Sarkar v. Assistant Registrar
of Companies, West Bengal, [1979] Tax Law Reports 2001; United Savings and
Finance Co. Pvt. Ltd. & Anr. v. The Deputy Chief Officer, Reserve Bank of
India, [1980] Crl. L.J. 607; Oriental Bank of Commerce & Anr. v. Delhi Development
Authority & Ors., [1982] Crl. L.J. 2230; G.D. Bhattar & Ors. v. The
State, A.I.R. 1957 Cal. 483, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
1943 of 1974.
From the Judgment and Order dated 21.12.1972
of the Delhi High Court in Income Tax Reference No. 50 of 1968 S.K. Dholakia,
R.C. Bhatia and P.C. Kapoor for the Appellant.
S.C. Manchanda, M.N. Tandon and Miss A.
Subhashini for the Respondent.
The Judgment of the Court was delivered by
SABYASACHI MUKHARJI, J. The assessee is in appeal by special leave challenging
the decision of the Delhi High Court reported in 92 I.T.R. 394.
The year of assessment is 1961-62. The return
was due by September 28, 1961, but the same was neither filed within that time,
nor was any extension asked for. The assessee filed the return on May 3, 1962
beyond more than seven months of the due date. With effect from April 1, 1962,
the Income Tax Act of 1961 ('1961 Act' for short) had come into force. The
Income Tax Officer took proceedings under section 271(1)(a) of the 1961 Act and
imposed a penalty of Rs. 4,060 for failure to furnish the return within the
time on a finding that the assessee had not been prevented by any reasonable
cause for not complying with the statutory obligation to make the return. The
assessee challenged the imposition of penalty by preferring an appeal to the
Appellate Assistant Commissioner who refused to interfere and dismissed the
appeal. On further appeal the Appellate Tribunal 831 held that penalty was
leviable under the 1961 Act but the amount of penalty had to be quantified
according to the provisions of section 28 of the Income Tax Act, 1922 ('1922
Act' for short). Applying the provisions of the 1922 Act, the Tribunal reduced
the penalty to Rs.400. At the instance of the Revenue the following question
was referred to the High Court under section 256(1) of the 1961 Act:
"Whether, on the facts and in the
circumstances of the case, the Tribunal was in law competent to reduce the
penalty levied under section 271(1)(a) to a figure lower than the sum equal to
2% of the tax for every month during which the default continued but not
exceeding the aggregate 50% of the tax?" The High Court answered the
reference in favour of the revenue and against the assessee.
Though the quantum of penalty is small, the
question of law is of substantial importance, and covers on aspect which often
arises for determination before the tax authorities and the High Courts.
Provisions of three sections, one of the 1922
Act and two of the 1961 Act, are relevant for the decision of the point at
issue. Section 28 of the 1922 Act, as far as relevant, provided :
"Penalty for concealment of income or
improper distribution of profits:- (1) If the Income Tax Officer, or the
Appellate Assistant Commissioner or the Appellate Tribunal, in the course of
any proceedings under this Act, is satisfied that any person - (a) has without
reasonable cause failed to furnish the return of his total income which he was
required to furnish, by notice given under sub- section (1) or sub-section (2)
of section 22 or section 34, or has without reasonable cause failed to furnish
it within the time allowed and in the manner required by such notice, or (b) x
x x x 832 (c) x x x x he or it may direct that such person shall pay by way of
penalty in the case referred to in clause (a) in addition to the amount of the
income tax and super tax, if any, payable by him, a sum not exceeding one and a
half times that amount..... " The two sections relevant to the point of
the 1961 Act are sections 271 and 297. Section 271 is the corresponding
provision of section 28. Sub-section (1)(a) thereof is the relevant provision.
It provides :
"If the Income Tax Officer ... is
satisfied that any person :
(a) has without reasonable cause failed to
furnish the return of total income which he was required to furnish under
sub-section (1) of section 139 or by notice given under sub-section (2) of
section 139 or section 148 or has without reasonable cause failed to furnish it
within the time allowed and in the manner required by sub-section (1) of
section 139 or by such notice, as the case may be, or (b) x x x x x (c) x x x x
x he may direct that such person shall pay by way of penalty :
(a) x x x x x (b) in any other case, in
addition to the amount of the tax, if any, payable by him, a sum equal to 2% of
the assessed tax for every month during which the default continued."
Section 297(1) repealed the 1922 Act. Sub-section (2), as far as relevant,
provided :
"Notwithstanding the repeal of the
Indian Income Tax Act, 1922 (hereinafter referred to as the repealed Act),- 833
(a) to (e) x x x (f) any proceeding for the imposition of a penalty in respect
of any assessment completed before the first day of April, 1962 may be
initiated and any such penalty may be imposed as if this Act had not been
passed ;
(g) any proceeding for the imposition of a
penalty in respect of any assessment for the year ending on March 31, 1962, or
any earlier year which is completed on or after first day of April, 1962 may be
initiated and any such penalty may be imposed under this Act ..." It is
sufficient to take note of the position that under the 1922 Act liability to
make a return was contingent upon service of notice under section 22 while
under the 1961 Act every person having a taxable income has under section 139
the liability to make a return within the time provided by the Act. On the
facts of the case before us, clause (f) of section 297(2) of the 1961 Act is
not attracted because the return was filed on May 3, 1962, and assessment was
made subsequent to April 1, 1962.
The Income Tax Officer found that there was
default for a little more than seven months. He imposed penalty at the rate of
2% as provided in section 271(1)(a) of the 1961 Act and raised a demand of Rs.
4,060. That demand has been upheld in appeal. The Tribunal did not refer to the
provisions of section 271 (1)(a) while reducing the penalty to Rs. 400 but the
reduction was directed on the basis that the assessee was ill and had been
absent from headquarters on that account. Before the High Court the Revenue had
taken the stand that there was statutory prescription in the matter of
imposition of penalty and the Act having provided that the penalty shall be a
sum equal to 2% of the assessed tax for every month during which the default
continued, a sum equal to the prescribed rate had to be imposed and could not
be reduced. The High Court accepted the stand of the Revenue and found support
for its conclusion by relying upon section 297(2)(j) of the 1961 Act and
holding that section 271(1) of that Act was applicable to the levy of penalty
for defaults committed under the 1922 Act. According to the High Court the
words "such penalty" occurring in clause (g) of section 297(2) of the
1961 Act related to penalty which was referred to in the earlier part of that
clause, namely, penalty impossible under section 271 of the 1961 Act and had no
reference to penalty under section 28 of the 1922 Act. It was of the further
view that the 834 word 'may' under section 297(1) of the 1961 Act vested in the
Income Tax Officer discretion either to levy or not to levy a penalty but if he
did decide to levy one, he had no option but to levy penalty at the prescribed
rate. In the instant case, the Income Tax Officer was, therefore, obliged to
levy penalty at the rate of 2% per month subject to a maximum of 50% of the
demanded tax. Exercising the same powers as the Income Tax Officer did, the
Appellate Tribunal had no jurisdiction to reduce the penalty to a sum lesser
than the prescribed rate. Support for the conclusion of the High Court was
drawn from a Constitution Bench decision of this court in Jain Brother &
Ors. v. Union of India & Ors., 77 I.T.R. 107.
In Jain Brothers' Case this Court mainly
examined and decided about the vires of section 297(1)(g) as also the
justification of fixing the commencement of the Act of 1961 with effect from
April 1, 1962. Challenge was on the basis of Article 14 of the Constitution.
This Court took the view that it was for the Legislature to fix the date when a
particular statute would come into force and with the repealing of the 1922 Act
Parliament was fully competent and it was within its legislative jurisdiction
to fix April 1, 1962, as the date of commencement of the 1961 Act. The validity
of section 297 (2) and in particular clauses (f) and (g) thereof was upheld.
The Court held that penalty proceedings were not necessarily a continuation of
the assessment proceedings. It was well settled that in fiscal enactments the
legislature has a larger discretion in the matter of classification so long as
there was no departure from the rule that persons included in a class are not
singled out for special treatment. It was not possible to say that while
applying the penalty provisions contained in the Act of 1961 to cases of
persons whose assessments were not completed after April 1, 1962, any class has
been singled out for special treatment. It was obvious that for the imposition
of penalty it was not the assessment year or the date of the filing of the
return that was important but it was the satisfaction of the income tax
authorities that a default had been committed by the assessee which attracted
the provisions relating to penalty. Whatever the stage at which the
satisfaction was reached the scheme of sections 274(1) and 275 of the Act of
1961 was that the order imposing penalty must be made after the completion of
the assessment. The crucial date, therefore, for the purpose of penalty is the
date of such completion, and the satisfaction of the authority that proceedings
for levy of penalty be initiated.
Under section 28 of the 1922 Act the upper
limit of penalty only was provided and there was no prescription of any
particular rate as found in section 271(1)(a) of 1961 Act. That penalty 835
contemplated under the respective sections of the two Acts is quasi-criminal in
character is not disputed. Mr. Dholakia for the appellant canvassed before us
that in Jain Brothers' case the challenge raised by the assessee was not
examined with reference to the provisions of Art. 20(1) of the Constitution.
Under sub-art. (1) of Art. 20 no person is to be subjected to a penalty greater
than that which might have been inflicted under the law in force at the time of
the commission of the offence. According to counsel, when there was default in
furnishing the return within September 28, 1961, the breach had occurred and
the assessee had exposed himself to be visited with penalty. That was a time
when the Act of 1922 was in force. Therefore, for levying penalty on the
assessee resort should have been made to the provisions of section 28 of the
1922 Act and not to section 271(1)(a) of the 1961 Act. If the 1922 Act applied,
in the absence of a prescription of any particular rate or the minimum, it was
open to the Tribunal to reduce the penalty in the manner it has done and no
objection could be raised to the reduction of the quantum of penalty. In Jain
Brothers' case the conclusions of a three Judge Bench in Third Income Tax
Officer, Mangalore v. M. Damodar Bhat, 71 I.T.R. 806 - [1969] 2 S.C.R. 29, were
quoted with approval. In Damaodar Bhat's case this Court had said :
"In other words, the procedure of the
new Act will apply to the cases contemplated by section 297(2)(j) of the new
Act mutatis mutandis." In Jain Brothers' case the Court held that
"similarly the provisions of section 271 of the Act of 1961 will apply
mutatis mutandis to proceedings relating to penalty initiated in accordance
with section 297(2)(g) of that Act." Learned counsel for the appellant has
taken the stand that the observations in Damodar Bhat's case which were
approved by the five Judge Bench in Jain Brother's case related only to the
procedural part of it and this Court did not decide the question of quantum.
The contention of Mr. Dholakia that in
providing a prescribed rate of penalty for imposition under section 271(1)(a)
of the 1961 Act there has been breach of Article 20(1) of the Constitution
cannot be accepted. A five Judge Bench of this Court in K. Satwant Singh v. The
State of Punjab, [1960] 2 S.C.R. 89, examined a similar submission at great
length keeping Article 20 of the Constitution in view.
In the matter before the Constitution Bench
this question arose for consideration in view 836 of the fact that no minimum
sentence of fine had been provided under section 420 of the Indian Penal Code
which was the law in force at the time of the occurrence but the provisions of
Ordinance No. 29 of 1943 made imposition of a minimum fine compulsory. Imam, J.
who spoke for the Constitution Bench, at page 113 of the report stated :
"In the present case even if it be
assumed that section 10 of the Ordinance was an ex post facto law in that in
the matter of penalty a minimum sentence of fine was directed to be imposed by
a court whereas at the time that the appellant committed the offence, section
420 contained no such provision, what is prohibited under Article 20 of the
Constitution is the imposition of a penalty greater than that which might have
been inflicted under the law in force at the time of the commission of the offence.
The total sentence of fine - 'ordinary' and 'compulsory' - in the present case
cannot be said to be greater than that which might have been imposed upon the
appellant under the law in force at the time of the commission of the offence,
because the fine which could have been imposed upon him under section 420 was
unlimited. A law which provides for a minimum sentence of fine on conviction
cannot be read as one which imposes a greater penalty than that which might
have been inflicted under the law at the time of the commission of the offence
where for such an offence there was no limit as to the extent of fine which
might be imposed.
Mr. Dholakia candidly accepts that his
submission is contrary to the ratio of the decision. It is conceded that under
section 28 of the 1922 Act in the facts of the case a fine of more than Rs.
4,060 (being within the limit of 1/2 times of the tax amount) could have been
levied. While conceding to that extent, Mr. Dholakia submits that the decision
of the Constitution Bench of this Court in Satwant Singh's case requires
reconsideration as it has not taken into account the ratio of an important
decision of the United States Supreme Court in the case of Elbert B. Lindsay v.
State of Washington, (1937) 81 L. Ed. 1182. We are bound by the decision of the
Constitution Bench. It has held the field for a quarter of a century without
challenge and non- consideration of an American decision which apparently was
not then cited before this Court does not at all justify the 837 submission at
the Bar for a reconsideration of the decision of this Court in Satwant Singh's
case. On the ratio of Jain Brothers' case, the following conclusions are
reached :
(a) Though the default occurred in September,
1961 the date relevant for the purpose of initiating proceedings for imposition
of penalty is when, following the assessment made, the Income Tax Officer
decided to initiate penalty proceedings;
(b) The proper provision to apply for dealing
with the situation relating to penalty is as provided in section 271(1)(a) of
the 1961 Act.
The question that remains for consideration
now is as to whether the default of non-filing of the return within the time
stipulated by law is not a continuing offence. This aspect is relevant in the
matter of imposition of penalty and its quantification. In the decision of this
Court in Commissioner of Wealth Tax, Amritsar v. Suresh Seth, 129 I.T.R. 328 =
[1981] 3 S.C.R. 419, the default related to non-filing of the return under
section 18(1)(a) of the Wealth Tax Act. The law relating to penalty under that
Act was amended in 1964 and again in 1969. These amendments were not
retrospective. With reference to the application of these amendments the
question as to whether the default was a single one or a continuing one fell for
consideration. The amended Wealth Tax provided for imposition of penalty with
reference to every month during which the default continued.
This Court took the view that such a
provision indicated the legislative intention that a multiplier had to be adopted
for determining the quantum of penalty and did not have the effect of making
the default a continuing one. The default having already occurred prior to the
enforcement of the amendments, the amending provisions had no application.
Dealing with the point this Court observed :
"A liability in law ordinarily arises
out of an act of commission or an act of omission. When a person does an act
which law prohibits him from doing it and attaches a penalty for doing it, he
is stated to have committed an act of commission which amounts to a wrong in
the eye of law.
Similarly, when a person omits to do an act
which is required by law to be performed by him and attaches a penalty for such
omission, he is said to have committed an act of omission which is also a wrong
in the eye of law.
838 Ordinarily a wrongful act or failure to
perform an act required by law to be done becomes a completed act of commission
or omission, as the case may be, as soon as the wrongful act is committed in
the former case and when the time prescribed by law to perform an act expires
in the latter case and the liability arising therefrom gets fastened as soon as
the act of commission or of omission is completed. The extent of that liability
is ordinarily measured according to the law in force at the time of such
completion. In the case of acts amounting to crimes the punishment to be
imposed cannot be enhanced at all under our Constitution by any subsequent
legislation by reason of Article 20(1) of the Constitution which declares that
no person shall be subjected to a penalty greater than that which might have
been inflicted under the law in force at the time of the commission of the
offence." There can be no dispute to what has been stated above. In Suresh
Seth's case this Court proceeded to say :
"In other cases, however, even though
the liability may be enhanced it can only be done by a subsequent law (of
course subject to the Constitution) which either by express words or by
necessary implication provides for such enhancement. In the instant case the
contention is that the wrong or the default in question has been altered into a
continuing wrong or default giving rise to a liability de die in diem, that is,
from day to day. The distinctive nature of a continuing wrong is that the law that
is violated makes the wrong doer continuously liable for penalty. A wrong or
default which is complete but whose effect may continue to be felt even after
its completion is, however, not a continuing wrong or default. It is reasonable
to take the view that the court should not be eager to hold that an act or
omission is continuing wrong or default unless there are words in the statute
concerned which make out that such was the intention of the legislature. In the
instant case whenever the question of levying penalty arises what has to be
first considered is whether the assessee has failed without reasonable cause to
file the return as required by law and if it is held that the he has failed to
do so then penalty has to be levied in 839 accordance with the measure provided
in the Act.
When the default is the filing of a delayed
return the penalty may be correlated to the time lag between the last day for
filing it without penalty and the day on which it is filed and the quantum of
tax or wealth involved in the case for purposes of determining the quantum of
penalty but the default however is only one which takes place on the expiry of
the last day for filing the return without penalty and not a continuing one.
The default in question does not, however, give rise to a fresh cause of action
every day.
This conclusion has been seriously disputed
by learned counsel for the Revenue and according to him the amended Wealth Tax
Act and section 271(1)(a) of the 1961 Act provides for a continuing default. A
Bench of this Court in State of Bihar v. Deokaran Nenshi, [1973] 1 S.C.R. 1004,
while examining the provisions of section 66 of the Mines Act, very
appropriately drew the distinction between continuing offence and offences
which take place when an act or omission is committed once and for all. Shelat,
J.
speaking for the Court stated :
"A continuing offence is one which is
susceptible of continuance and is distinguishable from the one which is
committed once and for all. It is one of those offences which arises out of a
failure to obey or comply with a rule or its requirement and which involves a
penalty, the liability for which continues until the rule or its requirement is
obeyed or complied with. On every occasion that such disobedience or
non-compliance occurs and recurs there is the offence committed. The
distinction between the two kinds of offences is between an act or omission
which constitutes an offence once and for all and an act or omission which
continues and therefore, constitutes a fresh offence every time or occasion on
which it continues. In the case of a continuing offence, there is thus the
ingredient of continuance of the offence which is absent in the case of an
offence which takes place when an act or omission is committed once and for
all." Under Regulation 3 read with section 66 of the Mines Act failure to
file the annual return by the appropriate date becomes an offence. There was no
scope for applying the rule or de die in diem.
840 VENKATARAMIAH, J. in Suresh Seth's case
quoted Lord Lindley in Hole v. Chard Union, [1894]1 Ch. D. 293, where the
following observation had been made :
"What is a continuing cause of action?
Speaking accurately, there is no such thing; but what is called a continuing
cause of action is a cause of action which arises from the repetition of acts
or omissions of the same kind as that for which the action was brought."
Some decisions of different High Courts were also quoted with approval by
Venkataramiah, J. in support of the conclusion that the default had been committed
on the last day allowed to file the return and there was no case of a
continuing default. We are inclined to agree with counsel for the Revenue that
the conclusion reached in Suresh Seth's case is contrary to law. Jain Brother's
case was not referred to all in Suresh Seth's case. On the facts found in
Suresh Seth's case where the returns for the assessment years 1964-65 and
1965-66 had been filed on March, 18, 1971, and for which assessment was made on
March 22, 1971, the ratio of Jain Brothers' case would have been fully
applicable. Though Jain Brothers' case was with reference to the Income Tax
Act, 1961, the provisions of section 18(1)(a) of the Wealth Tax Act, as
amended, brought in a similar provision and a sum equal to 2% of the tax for
every month during which the default continued with an optimum of 50% of the
tax due become payable. As rightly pointed out in Jain Brothers' case, the
question of imposition of penalty would arise only after assessment of tax is
made and, therefore, in Suresh Seth's case on the analogy of the ratio accepted
by this Court in Jain Brothers' case the amended provisions would become
applicable.
In 'Words & Phrases', Permanent Edition,
under the head 'Continuing Offence', instances have been given which indicate
that as long as the default continues the offence is deemed to repeat and,
therefore, it is taken as a continuing offence. As has been appropriately
indicated in Corpus Juris Secundum, Vol. 85, p. 1027, accrual of penalty
depends upon the terms of the statute imposing it and in view of the language
used in section 271(1)(a) of the 1961 Act, the position is beyond dispute that
the Legislature intended to deem the non-filing of the return to be a
continuing default - the wrong for which penalty is to be visited, commences
from the date of default and continues month after month until compliance is
made and the default comes to an end. The rule of de die in diem is applicable
not on daily but on monthly basis.
841 In State v. A.H. Bhiwandiwalla, A.I.R.
1955 Bombay 161, (a decision referred to in Suresh Seth's case),
Gajendragadkar, J. (as he then was), after quoting the observations of
Beaumount, C.J. in an earlier Full Bench decision of that Court observed:
Even so, this expression has acquired a well-
recognised meaning in criminal law. If an act committed by an accused person
constitutes an offence and if that act continues from day to day, then from day
to day a fresh offence is committed by the accused so long as the act
continues.
Normally and in the ordinary course an
offence is committed only once. But we may have offences which can be committed
from day to day and it is offences falling in this latter category that are
described as continuing offences." The imposition of penalty not confined
to the first default but with reference to the continued default is obviously
on the footing that non-compliance with the obligation of making a return is an
infraction as long as the default continued. Without sanction of law no penalty
is imposable with reference to the defaulting conduct. The position that
penalty is imposable not only for the first default but as long as the default
continues and such penalty is to be calculated as a prescribed rate on monthly
basis is indicative of the legislative intention in unmistakable terms that as
long as the assessee does not comply with the requirements of law he continues
to be guilty of the infraction and exposes himself to the penalty provided by
law.
There are several statutory provisions where
such default is stipulated to be visited with daily penalty. For instance, see
Ajit Kumar Sarkar, v. Assistant Registrar of Companies, West Bengal 1979 Tax
Law Reports 2001, where the Calcutta High Court dealing with the provisions of
section 159 and 162 of the Companies Act of 1956, held the liability to be a
continuous one; United Savings and Finance Co. Pvt.
Ltd. & Anr. v. The Deputy Chief Officer,
Reserve Bank of India, 1980 Crl.L.J. 607, where referring to section 58B(2) of
the Reserve Bank of India Act it was held that refusal to comply with the terms
of the said section created an offence and continued to be an offence so long
as such failure or refusal persisted; Oriental Bank of Commerce Anr. v. Delhi
Development Authority & Ors., 1982 Crl.L.J. 2230, where referring to the
provisions of the Delhi Development Act of 1957, the Court held that the
offence was a continuous one.
In G.D. Bhattar & Ors. v. The State,
A.I.R. 1957 Cal. 483, it was 842 pointed out that a continuing offence or a
continuing wrong is after all a continuing breach of the duty which itself is
continuing. If a duty continues from day to day, the non- performance of that
duty from day to day is a continuing wrong. We are of the view that the
legislative scheme under section 271(1)(a) of the 1961 Act in making provision
for a penalty conterminus with the default to be raised provides for situation
of continuing wrong.
In the instant case assessment was made on
June 30, 1964, and proceedings for imposition of penalty were directed to be
initiated that day. Provisions of section 271(1)(a) of the 1961 Act were fully
applicable and the demand of penalty was thus justified being within the limits
of law. In our opinion the High Court had taken the right view and the appeal
has, therefore, to be dismissed. In the facts of the case we direct parties to
bear their own costs.
N.V.K. Appeal dismissed.
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