JUDGMENT
P.G. Agarwal, J.
1. Heard. Dr. A. K. Saraf, learned senior counsel assisted by Mr. S. Chetia appearing on behalf of the appellant, and Mr. U. Bhuyan, learned standing counsel for the respondent.
2. This is an appeal under Section 260A of the Income-tax Act, 1961, for short, the Act, and it is directed against the judgment and order dated May 31, 2002, passed by the Income-tax Appellate Tribunal, Gauhati Bench, Guwahati, in I. T. A. No. 10(Gau) of 1997.
3. The petitioner was the income-tax assessee under the Act and for the assessment year 1987-88 the petitioner was required to file its return on or before July 31, 1987, under Section 139 of the Act. However, the return of income was filed on August 25, 1992, and thereafter the assessment was completed. For the delayed filing of the return, interest under Section 139(8) of the Act was levied and the petitioner filed an application for waiver of interest under the Act and the matter was taken in revision before the Commissioner of Income-tax and interest was waived by the Commissioner of Income-tax by observing as follows :
In this respect a detailed report was also called from the Deputy Commissioner of Income-tax (Asstt), Special Range-I, Guwahati. He has reported that there was sufficient cause for non-filing of the return of income in time and the case of the assessee is covered under sub-rules (iv) and (v) of Rule 117A and Rule 40(5) of the Income-tax Rules read with Sections 139(8) and 215 of the Income-tax Act, 1961, respectively.
On the basis of the detailed submissions made above and various judicial pronouncements I am of the opinion that considering the totality of the facts and circumstances of the case the assessee was prevented by sufficient cause from furnishing the return within time required under Section 139(1). I am of the opinion that this is a fit case for waiver of interest under Rule 117A of the Income-tax Rules, 1962. The Assessing Officer is therefore directed to waive the interest charged under Section 139(8) for the assessment year 1987-88.
4. A show-cause notice was issued to the petitioner under Section 274 read with Section 271(1)(a) of the Act for imposition of penalty and vide order dated March 31, 1994, penalty to the tune of Rs. 5,58,070 was imposed. The matter was taken in appeal before the Commissioner of Income-tax and vide order dated June 26, 1996, the appeal was allowed against the order of the imposition of penalty under Section 271(1)(a) of the Act. The matter was taken before the Tribunal by the Revenue and vide order dated May 31, 2002, the order of the Commissioner of Income-tax (Appeals) was set aside and that of the Assessing Officer was restored and hence the present appeal.
5. The broad facts of the present case as stated above are not in dispute. The proceedings under Sections 139(8)(a) and 271(1)(a) of the Act for imposition of interest and penalty were initiated against the petitioner for the delayed filing of the return.
6. The submission of Dr. A.K. Saraf is that once the Revenue held that there was sufficient cause oh the part of the petitioner for delayed filing of the return, the same authority cannot take a different view to hold that there was no reasonable cause for the delayed filing of the return. It is submitted that imposition of interest is compensatory in nature whereas imposition of penalty is quasi-criminal.
7. Mr. U. Bhuyan, learned Counsel for the Revenue, on the other hand, submits that both the proceedings are separate proceedings and one proceeding is not dependent on the other. It is settled law that the proceedings for imposition of interest and the proceedings for imposition of penalty are two separate proceedings provided under the law. If a proceeding under Section 139(8)(a) is dropped or dismissed, it does not mean that the other proceeding is liable to be dropped or dismissed or vice versa.
8. In this connection, we may recapitulate the following observations of the apex court in the case of Hindustan Steel Ltd. v. State of Orissa (headnote) :
An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.
9. Dr. Saraf has placed reliance on the observations of the hon’ble Patna High Court in the case of Smt. Shibani Dutta v. CIT (No. 1) wherein it was observed (page 100) :
Imposition of penalty as contemplated under Section 271(1)(a) of the Act is not compensatory but punitive and the proceeding to impose penalty is quasi-criminal. It is well-settled that the liability to pay penalty does not arise merely on proof of default in filing the return on time and the discretionary power of the authority to impose penalty for failure to file the return on time is to be exercised judicially and on a consideration of all the relevant circumstances. In the instant case, it is not the finding of the learned Appellate Tribunal that the explanation of the assessee for the delay in filing the return was fanciful. It is also not the finding of the learned Appellate Tribunal nor is there any material on record which discloses that the assessee acted in conscious disregard of her obligation to file the returns before December 1, 1973, and/or acted deliberately in defiance of law.
10. Dr. Saraf has drawn our attention to a decision of the Karnataka High Court in the case of S. Govindaraju v. CIT wherein the Karnataka High Court observed as follows (headnote) :
That if the Commissioner came to the conclusion that the asses-see had reasonable cause to show in respect of the proposed penalty under Section 271(1)(a), the reasoning that the Government was deprived of the use of the tax payable by the assessee for a given period should outweigh the reasonableness of it in extending that benefit to the levy of interest under Section 139(8)(a), was not logical. If it was reasonable for giving relief to the assessee under a penal provision, it should be held reasonable in other cases as well. In correctly understanding the two provisions, the waiver or reduction that might ultimately result under Section 139(8)(a) or Section 271(1)(a) was relatable to the delay and not to any other cause. Further, if the delay was explained reasonably, and that could be accepted in respect of one provision of the Act, the same explanations should hold good for proceedings under other sections as well. Therefore, the order of the Commissioner sustaining the levy of interest under Section 139(8)(a) was liable to be set aside.
11. The Karnataka High Court decision was relied upon by the Punjab and Haryana High Court in the case of Dalu Ram Chander v. CIT to hold that in such an eventuality a question of law arises and needs to be determined and the learned Tribunal was asked to refer the aforesaid question of law. The above decision is not known to Dr. Saraf and Dr. Saraf submits that in spite of efforts made by him, he could not locate the final decision.
12. The proviso to Section 139(8) of the Act provides that the Assessing Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this Sub-section.
13. Rule 117A(v) provides that the Income-tax Officer may reduce or waive the interest payable under Section 139 in the cases and in the circumstances mentioned below :
(v) any case in which the assessee produces evidence to the satisfaction of the Income-tax Officer that he was prevented by sufficient cause from furnishing the return within time.
14. Section 273B of the Act provides for waiver and penalty which reads as follows :
273B. Penalty not to be imposed in certain cases.–Notwithstanding anything contained in the provisions of Section 270, Clause (a) or Clause (b) of Sub-section (1) of Section 271, Section 271A, Section 271B, Sub-section (2) of Section 272A, Sub-section (1) of Section 272AA, Sub-section (1) of Section 272B or Sub-section (1) of Section 272BB or Clause (b) of Sub-section (1) or Clause (b) or Clause (c) of Sub-section (2) of Section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.
15. We, thus, find that in Rule 117A(v) the word used is sufficient cause or reason whereas under Section 273B the word used is reasonable cause.
16. In Black’s Law Dictionary, the words “sufficient cause” have been defined as follows :
Sufficient cause. With respect to right to remove officers does not mean any cause which removing officer may deem sufficient, but means legal cause, specifically relating to and affecting administration of office, of substantial nature directly affecting public’s rights and interests, touching officer’s qualifications or his performance of duties, and showing that he is not fit or proper to hold office.
17. In Black’s Law Dictionary, the words “reasonable cause” have been defined as follows :
Reasonable cause. As basis for arrest without warrant, is such state of facts as would lead man of ordinary care and prudence to believe and conscientiously entertain honest and strong suspicion that person sought to be arrested is guilty of crime.
18. The law makers have used two different words in two different provisions of law and in our opinion/view, the words “sufficient cause” are more strict in the sense than that of “reasonable cause” and if the facts are enough to satisfy the requirement of “sufficient cause”; they cannot be interpreted to hold that requirement of “reasonable cause” has not been made out.
19. Mr. U. Bhuyan, learned Counsel has referred to the Full Bench decision of the Kerala High Court in the case of CIT v. Gujarat Travancore Agency wherein it was held that mens rea applicable in criminal law cannot be incorporated in the matter of imposition of penalty under Section 271(1)(a) of the Act. We are in full agreement with the above proposition of the hon’ble Kerala High Court and hold that the Income-tax Act nowhere provides that for the imposition of penalty, the Revenue is required to establish “mens rea” on the part of the assessee.
20. Coming to the facts of the present case, we find that the Commissioner of Income-tax on the facts of the case, considered the explanations filed by the assessee and found that there was sufficient cause for delay in filing the return. Hence, on a consideration of the submissions, we hold that the Tribunal did not adopt the correct legal approach in rejecting the above grounds to hold that there was no reasonable cause for the delay in filing the return and as such the rejection of waiver of penalty and upholding the penalty was not proper.
21. In view of the above, we allow this appeal and set aside the impugned order of the Tribunal upholding the imposition of penalty.