The Hindu Business Line : A climax of ignorance

T. C. A. Ramanujam discusses a case where the Bombay High Court observed that though there may be a rule that ignorance of law is no excuse, there is no presumption that everyone knows the law

CELEBRATED legal maxims can play spoilsport with justice. It is axiomatic that ignorance of law does not excuse conduct that is not in keeping with the law.

Even Black's Law Dictionary argues that every man must be taken to be cognisant of the law, else there is no saying to what extent the excuse of ignorance may not be carried.

But, then, fiscal laws keep changing and artificial rules are built into the tax code from time to time, with threats of fine and penalty for technical violations. Is every citizen expected to keep himself abreast of the ever-changing laws, rules and notifications?

Fortunately for taxpayers, High Courts and even the Supreme Court have come to their rescue in matters concerning technical violations.

For instance, Section 285 B of the Income-Tax Act 1961 requires every film producer to file a statement in Form No. 52 A giving details of the film within 30 days from the expiry of the financial year. Failure to file such a statement leads to imposition of penalty under Section 272A(2) of the Act.

Consider the following case (CIT vs Schell International — 278 ITR 630): Schell International produced a film, "Siyasat," but failed to submit the statement.

As no reasons were specified for not filing the statement, another notice dated March 9, 1993, was issued. In response to the said notice, the producer explained that it was his first and last venture, which had flopped, and it was because of ignorance of legal formalities that he had not filed the statements.

After the hearing, the assessment officer (AO) imposed a consolidated penalty of Rs 1,40,000. The Commissioner of Income-tax (Appeals) upheld the order.

The producer appealed to the Tribunal, which set aside the AO's order, holding that the producer had failed to submit the statements owing to ignorance of the law and as soon as he came to know about the requirement he had submitted the same. Therefore, non-submission of the statements was not intentional, deliberate or due to negligence.

The Revenue took up the matter in appeal to the High Court. Dismissing the appeal, the court pointed out that the explanation given by the producer for not filing the statement showed that it was his first venture in film production and it had also flopped. And, therefore, he did not continue in the business.

He was not aware that he was required to submit the statements within 30 days of the expiry of the relevant assessment year. As soon as he got the show-cause notice, he submitted the statements. In fact, no tax was due from him. The court held that explanation to be reasonable.

Countering the Revenue's argument that ignorance of law is no excuse, the Bombay High Court referred to several authorities to show that there is no presumption that every person knows the law.

The Supreme Court itself had said that it would not be correct to declare that everyone is presumed to know the law. There is no such maxim known to the law (Motilal Padampet Sugar Mills Co. Ltd vs State of UP 118 ITR 326 SC).

The court quoted with approval several pronouncements on this branch of the law from English cases. One of them being:

"It is impossible to know all the statutory law, and not very possible to know all the common law."

But it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans vs Bartlam (1937 AC 473 HL): "... The fact is that there is not and never has been a presumption that every one knows the law. There is the rule that ignorance of the law does not excuse, a maxim of very different scope and application... "

The Bombay High Court observed that though there may be a rule that ignorance of law is no excuse, at the same time, there is no presumption that everyone knows the law (CIT vs Schell International — 278 ITR 630).

It also quoted the well-known observation of the Supreme Court in the Hindustan Steel Ltd (83 ITR 26) case. The apex court held that liability to pay penalty does not arise merely upon proof of default and penalty can lie only if the party acted deliberately in defiance of law or in conscious disregard of statutory obligations. Bona fide belief that the party is not liable to act in the manner prescribed by the statute can very well be a defence.

In the UK, the Statutory Instruments Act, 1946 modifies the rule about ignorance of law not being an excuse and requires that widespread publicity be given to statutory instruments. Non-publication can be a defence in proceedings for contravening statutory instruments. Parliamentary control is also exercised with regard to delegated legislation.

The Joint Committee on Statutory Instruments draws parliamentary attention to any failure in this regard.

(The author is a former Chief Commissioner of Income-Tax.)

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