COMMISSIONER OF WEALTH TAX Vs. KUMARI KAVITHA GOENKA

JUDGEMENT

(1.) THE revenue sought under Section 27(1) of the W.T. Act, 1957, a reference from the Income-tax Appellate Tribunal, Madras Bench ' A ', to refer certain questions of law said to arise out of the Tribunal's order dated October 31, 1972, in W.T.A. No. 194 (Mds) 1971-72 to this court for its opinion. As in the opinion of the Tribunal, certain questions of law did arise out of their order, they drew up a statement of case and referred the following four questions for our decision :

(2.) THE facts which led to the reference may briefly be stated. THE subject arose on a penalty of Rs. 18,945 being imposed by the WTO on the respondent under Section 18(1)(c) of the Act for submission of returns beyond the prescribed time and without sufficient cause therefor. THE details relating to the levy of penalty are as follows: <FRM>JUDGEMENT_974_ITR119_1979Html1.htm</FRM>

(3.) BUT, the substantial question argued before us by the counsel for the applicant is that the facts and circumstances of the case reveal that there was no reasonable cause for the period of default and that there are no valid materials to take a reasonable view that no penalty at all is leviable in the instant case. The challenge is against the cancellation of the penalty levied under Section 18(1)(a) of the W.T. Act, 1957. Penalty, not being an additional tax, but an addition to tax leviable under law under stated and prescribed circumstances, ought not to be levied as a matter of course and on pure speculation. Nor could it be said with any amount of reasonableness that the levy of penalty ought to be discouraged whatever may be the quality and the quantity of impunity of the assessee. A balance has to be struck and in order to invoke the penalty proceedings and ultimately levy penalty, the revenue should view the entire facts and circumstances with meticulous care and should impose such penalty on contumacious or fraudulent assessees. The discovery of fraud by itself will prompt a reasonable person to penalise the person, who commits fraud. BUT it is rather difficult to weigh with precision as to in what circumstances the conduct of an assessee would amount to contumacious conduct or a dishonest conduct. As exercise of such a power to impose penalty springs from a quasi-criminal jurisdiction vested in the revenue, a certain amount of deliberate-ness in the matter of the avoidance of the prescriptions both of the substantial and the procedural law prescribed ought to be noticed before a penalty is imposed. We have already referred that if the party is guilty of contumacious or dishonest conduct, it would be legitimate to invoke the penalty provision. If the totality of the facts and circumstances disclose sufficient cause or reflects a bona fide belief on the part of the offender in the matter of the commission of the breach of the provisions of the Act, then a liberal attitude towards the assessee is necessary. A mechanical imposition of the fine due to the passage of the calendar in the matter of the filing of the returns within time is not generally permissible. Ignorantia legis neminem excusat. BUT in a case where penalty is sought to be imposed, the statutory functionaries ought to be doubly careful in invoking their quasi-criminal jurisdiction for it is fundamental that a crime should be brought home fully to the concerned offender. If in a given set of circumstances, the statutory authorities are satisfied that there was reasonable cause for not filing the returns in time and that the offender is not guilty of a deliberate avoidance of law, nor could it be said that his conduct was contumacious, then the law has more or less become settled by now that penalty not being the product of guess work should be based on the substratum of reason and convincing material. With discerning eye, the conduct should be viewed and tested. If it is venial, then the authorities should be reasonably lenient. If it is deliberate obstinate disobedience of law and resistance to authority, then such conduct would cease to be a pardonable excuse.