Kamla Vati v. Commissioner Of Income-Tax (Central), Patiala

Chinnappa Reddy, A.C.J:— On March 17, 1970, the assessee made a voluntary disclosure of income of Rs. 1,30,000 which was allowed to be spread over equally over the four assessment years 1961-62, 1962-63, 1963-64 and 1964-65. For the assessment year 1961-62, the assessee had not filed a return of income on the ground that she had no taxable income.

2. She had not filed any estimate of advance tax to be paid by her under section 18A(3). After the settlement pursuant to the voluntary disclosure, she filed a return on March 25, 1970, for the assessment year 1961-62, showing an income of Rs. 450 from house property and an income of Rs. 32,500 disclosed by her under the settlement. The Income-tax Officer levied a penalty of Rs. 3,608 under section 271(1)(a). For the assessment year 1964-65, the assessee had filed an estimate of advance tax showing an income of Rs. 36,800 and the tax payable by her as Rs. 10,700. Thereafter, she filed a return showing her income as Rs. 35,615. After the settlement, pursuant to the voluntary disclosure, the Income-tax Officer completed the assessment for the assessment year 1964-65 on a total income of Rs. 1,70,298. Penalty of Rs. 7,660 was levied on her under section 273(a) for the assessment year 1964-65. The Income-tax Appellate Tribunal has referred for our decision the following questions:

“1. Whether, on the facts and in the circumstances of the case, penalty of Rs. 3,608 has been validly levied on the assessee under section 271(1)(a) of the Income-tax Act, 1961, for the assessment year 1961-62?

2. Whether, on the facts and in the circumstances on the case, penalty of Rs. 7,660 has been validly levied for the assessment year 1964-65?”

3. On the first question, Shri Bhagirath Dass, learned counsel for the assessee, submitted that the revenue had failed to establish any mens rea on the part of the assessee and therefore, no penalty could be levied on her. There is no substance in the submission. On her own showing, the assessee had failed to furnish a return of her income for the assessment year 1961-62 without reasonable excuse. That was sufficient to attract section 271(1)(a). The doctrine of mens rea has no application to such situations under taxing statutes. The decision of the Andhra Pradesh High Court in Additional Commissioner of Income-tax v. Narayanadas Ram Kishan, [1975] 100 ITR 18 has since been overruled by a Full Bench. (See Addl. Commissioner of Income-tax v. Dargapandarinath Tuljayya & Co., [1977] 107 ITR 850 (AP) [FB]).

4. On the second question, Shri Bhagirath Dass argued that section 273(a) had no application since it was not in the course of any proceeding in connection with regular assessment for the assessment year 1964-65 that the Income-tax. Officer was satisfied that the assessee had furnished an estimate of the advance tax payable by her which she knew or had reason to believe to be untrue but in the course of proceedings for reassessment under section 147. Shri Bhagirath Dass argued that proceedings under section 147 could never be considered proceedings under sections 143 and 144 of the Income-tax Act and, therefore, could not be described as proceedings in connection with the regular assessment.

5. Section 273(a) enables an Income-tax Officer if, in the course of any proceedings in connection with the regular assessment for the assessment year commencing on April 1, 1970, or any subsequent assessment year; he is satisfied that any assessee has furnished under section 212 an estimate of advance tax payable by him which he knew or had reason to believe to be untrue, to direct such person to pay by way of penalty a sum prescribed by that provision. Regular assessment is defined in section 2(40) to mean the assessment made under section 143 or section 144. Sections 143 and 144 deal with assessment made in the ordinary course either on the filing of return by the assessee under section 139 or on the failure of the assessee to file a return after the issuance of notice under section 139(2), Prima facie, an assessment or reassessment made under section 147 of income which has escaped assessment cannot be considered to be an assessment under section 143 or section 144. Prima facie, therefore, an assessment or reassessment made under section 147 cannot be considered to be regular assessment within the meaning of section 2(40). If so, section 273(a) is not attracted. Shri D.N Awasthy, learned counsel for the revenue, however, urged that under section 148, before making the assessment or reassessment under section 147, the Income-tax Officer was bound to serve on the assessee a notice containing all or any of the requirements which may be included in a notice under section 139(2) and thereafter the provisions of the Act were to apply as if the notice were a notice issued under that sub-section and, therefore, an assessment or reassessment made under section 147 had to be considered to be an assessment under sections 143 and 144. He invited our attention to the fact that the expression “regular assessment”, though not defined in the 1922 Act, occurred in some of the provisions of that Act, viz., sections 18A(4), 18A(6), 18A(9) and the heading of section 23(b). He argued that under the 1922 Act, the expression “regular assessment” was construed to include assessments both under sections 23 and 34 of that Act as distinguished from provisional assessment under section 23B, self-assessment, etc., and that the definition of “regular assessment” under section 2(40) of the 1961 Act was not meant to depart from the meaning which the expression had already been given by judicial interpretations.

6. We find it difficult to accept the submission of Shri Awasthy in the face of the definition of the expression “regular assessment” in section 2(40) of the 1961 Act. It is true that in Deviprasad Kejriwal v. Commissioner Of Income-Tax (Central), Bombay., [1976] 102 ITR 180, the Bombay High Court considered the expression “regular assessment” occurring in sections 18A(5), 18A(6) and 18A(9) of the 1922 Act, to include assessment under section 34 of that Act but we notice from a perusal of the decision that there were two earlier decisions under the 1922 Act, one of the Bombay High Court in Sarangpur Cotton Manufacturing Co. v. Commissioner of Income-tax, [1957] 31 ITR 698 and the other of the Madras High Court in Natarajan Chettiar v. Income-tax Officer, [1961] 42 ITR 29, which appear to have interpreted the expression “regular assessment” in a different way. In Natarajan Chettiar's case, [1961] 42 ITR 29 (Mad) Rajamannar C.J, after referring to the decision of Chagla C.J in Sarangpur Cotton Manufacturing Co. v. Commissioner of Income-tax, [1957] 31 ITR 698 (Bom), proceeded to hold that an assessment made under section 34 was not a regular assessment. He observed (page 31):

“If a regular assessment means and signifies an assessment made in the regular course contemplated by the provisions of the Indian Income-tax Act, then surely an assessment under section 34 is not a regular assessment.”

7. The view expressed by Rajamannar C.J was reiterated by the Madras High Court in a liter case in Gopalaswami Mudaliar v. Fifth Additional Income-tax Officer, [1963] 49 ITR 322. Thus, the expression “regular assessment” had been understood by some learned judges, including so eminent a judge as Chief Justice Rajamannar, to mean an assessment made in the regular course under section 23 and not an assessment under section 34. It appears to us that it is that meaning that has been accepted by the legislature when it defined the expression “regular assessment” in section 2(40) to mean “assessment made under section 143 or section 144”. The Kerala High Court has taken the same view in Gates Foam and Rubber Co. v. Commissioner of Income-tax, [1973] 90 ITR 422. The learned judges referred to the two decisions of the Madras High Court in Natarajan Chettiar v. Income-tax Officer, [1961] 42 ITR 29 and Gopalaswami Mudaliar v. Fifth Additional Income-tax Officer, [1963] 49 ITR 322 and to the specific reference made in the 1961 Act to “assessment under section 147” and held that an assessment under section 147, that is assessment, reassessment or recomputation made after resort to section 147 would not be regular assessment. With respect, we agree with the view expressed by the learned judges of the Kerala. High Court.

8. We, therefore, answer the first question referred to us against the assessee and the second question in favour of the assessee. No costs.