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IGNORANCE OF LAW – DEFENCE FOR THE TAXPAYERS

THE CONCEPT

“Ignorance of the law is not an excuse”, for which the legal maxim is stated as “Ignorantia Juris non-excusat” is termed to be an important legal principle holding that the ignorance of the law by any person is not acceptable under the law and that person has to be penalized for his/her act or omission concerning the law.[1] Though the maxim is strictly enforceable in many countries, it is not bluntly followed in some counties like India. It is dealt with with some exceptions and therefore its applicability might depend on a case-to-case basis. The Supreme Court of India, in many of its known judgments, has accepted it as a valid ground of defence with some reasonable justifications.

HISTORY

The concept first appeared in the Bible, where it was stated that “If a person sins and does what is forbidden in any of the Lord’s commands, even though he does not know it, he is guilty and will be held responsible.” Alternatively, one can find the source of this legal maxim from the philosophy of the Greeks and the Romans. Earlier a citizen used to be influenced by the customs and ethics of the society in which one took birth, and therefore it was believed that they have to know about the law since the law of that time was influenced by such societal factors. Though this concept is very limited and clearly will not hold with the modern approach of the legal principle of ignorance of the law.

IGNORANCE OF LAW IS NO EXCUSE

Ignorantia Juris non-excusat”, meaning the ignorance of the law is not acceptable; is indeed one of the main principles of the jurisprudent. The rationale behind this legal principle is that on breaking the law or acting against it; one simply cannot take undue advantage of lack of knowledge and claim that he/she is not guilty on the ground that he/she does not know such law or legal provision to exist. But Tax laws are so complicated that even sometimes they cannot be easily understood by our tax practitioners, therefore, not acknowledging its rigid structure can create a blunder in the court proceedings for punishing a person committing a bonafide mistake. As the concept of Ignorance of law evolved through various generalizations and interpretations done by the apex court, one can plead not guilty on account of this legal maxim as a valid and reasonable ground of defence irrespective of the provisions invoked against him/her.[2]

RECENT DEVELOPMENTS

The Hon’ble Supreme Court of India in the case of Commissioner of Income-tax v. P.S.S. Investments P. Ltd.[3] the Hon’ble court made these crucial observations – “The intelligence of even those with legal background gets staggered in this continuous process of carving exceptions to exceptions. It seems more like a conundrum, baffling the mind and requiring special acumen to unravel its mystique. One can only wonder how the ordinary tax-payers, mostly laymen, can keep abreast of such laws. Yet the maxim is that everyone is presumed to know the law.” Since the law in itself is a constant change, it may be observed from the above-quoted lines that a taxpayer can’t grasp all that the law states and act in a very precise manner towards being an abiding citizen of the law.

It is nowhere mentioned that everyone has to know the law precisely rather it is the maxim that states that everyone is presumed to know the law. So, if a person with reasonable intelligence and rationale behaviour immediately tries to correct what he/she did against the law, then, he/she may plead not guilty of doing the mistake/offence or going against the law with a motive or dishonest intention as stated in Deputy Commissioner of Income Tax v. Sms India Ltd.[4] that “What is important is the fact that the moment a person comes to know that he has committed a mistake and being a person of reasonable intelligence and ordinary prudence if he takes the corrective measures to rectify the same immediately, then it cannot be said that he acted deliberately with complete disregard to the law. There is also a considerable force in the contention of the assesses that non-recording of satisfaction by assessing officer in the order under Section 201(1) concerning the fact that case is fit for levy of penalty makes the levy of penalty void ab initio.”

The Tax Laws have various provisions which are beyond the level of general understanding and therefore it might come upon that some provisions were not known even to the intelligent ones of our society. Therefore, such provisions of the law allow for taking the defence of ignorance of the law as it is considered even by the judicial authorities that there is hardly any person knowing the law and its provisions thoroughly. It is pertinent to mention here that in a case where self-assessment has to be made or involves arithmetic error or inaccuracy while dealing which payment of taxes or applying for the refunds, a person with the honest intention of not hiding anything from the authorities; makes such mistakes by default; then that person may inform the authorities for rectifying the mistake made by him and can get relief by satisfying the concerned assessing authorities. Such an instance showcases that; an honest and rational person may plead for ignorance of law based on the fact that he/she has not intentionally tried to escape the provisions of escaping the law or doing some acts against it.

Income Tax Appellate Tribunal – Delhi in the case of Kaushal Diwan v. Income-Tax Officer[5] observed that “The Income-tax Act is a highly complicated enactment and there would hardly be a person in the country who would be knowing all the provisions of the Act. Even the Chairman of the Central Board of Direct Taxes had said, in the recent past, while appearing before a Commission of Enquiry, that he was not aware of the entire provisions contained in the Act. This was the position obtained in respect of the tax specialists. The assessee, however, could not be treated as a specialist. Even I, I must state, was not aware of the provision in question till this matter came before the Bench. The Courts have been now holding that ignorance of a particular law can be a reasonable excuse and it must be so held when it was a matter of tax law and its provisions were highly complicated.”

The Hon’ble Supreme Court in the case of Commissioner of Income-tax v. P.S.S. Investments P. Ltd.[6] made some significant remarks which entail special consideration. Such may be quoted as – “The intelligence of even those with legal background gets staggered in this continuous process of carving exceptions to exceptions.  It seems more like a conundrum, baffling the mind and requiring special acumen to unravel its mystique.  One can only wonder as to how the ordinary tax-payers, most of whom are laymen, can keep abreast of such laws.  Yet the maxim is that everyone is presumed to know the law.” These words by the Hon’ble Court speaks in themselves about the wide scope of the law, having limits beyond the reach of even the intelligent ones dealing with law and its provisions daily. Since, the law in itself deals with many sections, provisions, and exceptions, it is quite impossible to assume that a person knows all of it and therefore, the maxim only states that it is presumed to know the law.

INFERENCE: CONCLUDING REMARKS

Therefore, it might be concluded that ignorance of the law can be pleaded as a just and reasonable defence subject to the facts of the case. Its interpretation should be done following the exceptions cast by the various decisions of the apex court on a case-to-case basis and grounds for which should be rationale and justified to prevent the very purpose of law i.e., to penalize those who intentionally try to breach the provisions. It would be accurate to quote the case of Motilal Padampat Mills Ltd v. State of Uttar Pradesh[7] where it was observed by the Hon’ble Supreme Court that, “It must be remembered that there is no presumption that every person knows the law. It is often said that everyone is presumed to know the law, but that is not a correct statement: there is no such maxim known to the law.”

As an opinion, it is to mention here that the law and its provisions are a tool for curbing wrongful acts or omissions. All are equal before the law, and they are equally answerable for their acts or omissions committed against the provisions of the law. The undue benefit provided by this legal maxim should not be necessarily given to the tax evaders or criminal minds for the very purpose of maintaining a peaceful and respectable societal environment.

Author(s) Name: Vandana Sharma (CCSU, Meerut)

References:

[1] Sahajpreet Bhusari, ‘Ignorantia Juris Non-Excusat: Origin, Meaning and Case Laws’ (Legal Bites Law & Beyond, 12 October 2021) <https://www.legalbites.in/ignorantia-juris-non-excusat/#_ftn1> accessed 23 December 2021

[2] Mark D. Yochum, ‘Ignorance of the Law Is No Excuse Except for Tax Crimes’ (1989) 27 (3) Duquesne Law Review 230 <https://dsc.duq.edu/cgi/viewcontent.cgi?article=2656&context=dlr> accessed on 06 January 2022

[3] Commissioner of Income-tax v P.S.S. Investments P. Ltd. 1977, 79 ITR 456 Mad

[4] Deputy Commissioner of Income Tax v Sms India Ltd. 2005, 2006 7 SOT 424 Mum

[5] Kaushal Diwan v Income-Tax Officer 1982, 1983 3 ITD 432 Delhi

[6] Commissioner of Income-tax v P.S.S. Investments P. Ltd. 1977, 107 ITR 0001

[7] Motilal Padampat Mills Ltd. v State of Uttar Pradesh 1979, 118 ITR 326 (SC)