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1984 DIGILAW 104 (RAJ)

Prithvi Singh v. Commissioner of Wealth Tax

1984-02-22

DWARKA PRASAD, K.S.LODHA

body1984
DWARKA PRASAD, J. - The IT Appellate Tribunal, Jaipur Bench, Jai-pur(hereinafter referred as the Appellate Tribunal") has referred the following two questions to this Court for its opinion, as arising out of its order dated 19-11-1973. "1. Whether on the facts and in the circumstances of the case, the penalty imposable for not filing the returns under the Wealth Tax Act in respect of assessment years prior to 1-4-1969 will be governed by Section 18 of the Wealth-tax Act as it stood prior to 1-4-1969 or both by the section as well as by section as amended with effect from 1-4-1969 where the defaults continued even after 1-4-1969? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in holding that penalty is leviable on the assessee even though returns of wealth have not been filed by him?" Prithvi Singh of Bisalpur (hereinafter called the assessee) failed to file returns of his net wealth u/s 14 (1) of the Wealth Tax Act, 1957 (hereinafter called the Act) for the asst. yrs. 1965-66, 1967-68 and 1968-69 on the due dates. The WTO A Ward, Pali issued notice to the assessee u/s 14 (2) of the Act but in spite of service of the notices, the assessee failed to file the returns. The WTO thereupon completed the assessments in respect of the aforesaid assessment years on 29-11-1969. 2. During the course of assessment proceedings the WTO issued notice to the assessee u/s 18 (2) of the Act to show cause why penalty for his failure to furnish returns of wealth within the prescribed time be not imposed upon him. In response to the show cause notice, the only explanation furnished by the assesses before the WTO was that since no return of wealth was at all submitted by him, penalty u/s 18 (1) could not be levied. The WTO disagreed with the contention put forward on behalf of the assessee and he proceeded to impose penalty in the sum of Rs. 5,625, 5,535 and Rs. 5,325 respectively upon the assessee in respect of the asst. yrs. 1965-66, 1967-68 and 1968-69, by three penalty orders passed on 25-3-1972. 3. The assessee filed appeal in respect of each one of three years before the AAC of IT, Jodhpur Range, Jodhpur, who dismissed all the three appeals. 5,625, 5,535 and Rs. 5,325 respectively upon the assessee in respect of the asst. yrs. 1965-66, 1967-68 and 1968-69, by three penalty orders passed on 25-3-1972. 3. The assessee filed appeal in respect of each one of three years before the AAC of IT, Jodhpur Range, Jodhpur, who dismissed all the three appeals. One more ground was taken before the AAC on behalf of the assessee that the provisions of s. 18 of the Act were amended w.e.f. 1-4-1969 and as the aforesaid defaults were alleged to have been committed by the assessee prior to the amendment of s. 18 of the Act, penalty should be limited to the period upto 31-3-1969 and no penalty could be imposed upon the assessee under the amended provisions of s. 18 (1). 4. The assessee thereafter preferred further appeals before the Appellate Tribunal. The Appellate Tribunal by its order dt. 19-11-1973 also rejected the two contentions advanced on behalf of the assessee; namely that no penalty should be imposed upon the assessee because he did not file any return at all and there was no question of delay in filing the returns. The Tribunal also rejected the contention raised on behalf of the assessee that the law applicable for the purpose of levy of penalty was the law in force at the time when the respective returns became due u/s 14 (1) and the penalty should be calculated on the basis of the law in force prior to 1-4-1969 and that the amended provisions of s. 18(1), which came into force w.e.f. 1-4-1969, could not be made applicable for the determination of the quantum of penalty imposable upon the petitioner. In substance the argument advanced on behalf of the assessee was that under the law as it stood prior to 1-4-19 \9, the maximum penalty leviable was equal to 50% of the tax and further penalty could not be imposed upon the assessee under the amended provisions of s. 18 (1), on the basis of the continued default. 5. The assessee filed three applications u/s 27 (1) of the Act before the Appellate Tribunal in respect of the asst. yrs. 1965-66, 1967-68 and 1968-69, requiring the Appellate Tribunal to refer the questions of law arising out of its order dt. 19-11-1973 to this Court. The Appellate Tribunal by its order dt. 5. The assessee filed three applications u/s 27 (1) of the Act before the Appellate Tribunal in respect of the asst. yrs. 1965-66, 1967-68 and 1968-69, requiring the Appellate Tribunal to refer the questions of law arising out of its order dt. 19-11-1973 to this Court. The Appellate Tribunal by its order dt. 31-7-1974 has made a consolidated reference to this Court in respect of the aforesaid three years and the two questions reproduced above have been referred by it to this Court for its opinion. 6. As regards the first question, it is not in dispute that the assessee did not file any return of his wealth in respect of the three assessment years, namely, 1965-66, 1967-68, 1968-69, not only on the due date but at any time. According to sub-s. (1) of s. 14 of the Act, every person, whose net wealth is assessable under the Act and was liable to payment of wealth tax on the valuation date, was required to furnish to the WTO the return of his net wealth before 30th day of June of the corresponding assessment year. Thus, the return of wealth in respect of the three asst. yrs. 1965-66, 1967-68 and 1968-69 were due to be filed on 30-6-1965, 30-6 196/ and 30-9-1968 respectively. Prior to its amendment by the Finance Act of 1969, the relevant provisions of s. 18 (1) of the Act read as under: "18(1). If the Wealth Tax Officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under Act is satisfied that any person— (a) has without reasonable cause failed to furnish the return of his net wealth which he is required to furnish under sub-section (a) of section 14 or by notice given under sub-section (2) of section 14 or section 17 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 14 or by such notice, as the case may be; or (b) and(c)............ he or it may, by order in writing, direct that such person shall pay by way of penalty— (i) in the cases referred to in cl. he or it may, by order in writing, direct that such person shall pay by way of penalty— (i) in the cases referred to in cl. (a) in addition to the amount of wealth tax, if any, payable to him, a sum equal to two per cent of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent of the tax........" Sec. 18 (1) was amended by the Finance Act, 1969 w.e.f. 1-4-1969, and the amended provisions read as under: "18(1) If the Wealth Tax Officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal, in the course of any proceedings under this Act is satisfied that any person— (a) has without reasonable cause failed to furnish the return which he is required to furnish under sub-section (1) of s. 14 or by notice given under sub-section (2) of s. 14 or section 17, or has without reasonable cause failed to furnish within the time allowed and in the manner required by sub-section (1) of section 14 or by such notice, as the case may be; or (b) and (c)......... he or it may, by order in writing, direct that such person shall pay by way of penalty— (i) in the cases referred to in cl. he or it may, by order in writing, direct that such person shall pay by way of penalty— (i) in the cases referred to in cl. (a) in addition to the amount of wealth tax if any, payable by him, a sum, for every month during which the default continued, equal to one half per cent of— (A) the net wealth assessed under section 16, as reduced by the amount of net wealth on which in accordance with the rates of wealth tax specified in paragraph A of Part of the Schedule or Part II of the Schedule, the wealth tax chargeable is nil; or (B) the net wealth assessed under section 17 where assessment has been made under that section, as reduced by— (1) the net wealth, if any assessed previously under section 16 or section 17, or (2) the amount of net wealth on which in accordance with the rates of wealth tax specified in paragraph A or Part I of the Schedule or Part II of the Schedule, the wealth-tax chargeable is nil, whichever is greater, but not exceeding, in the aggregate, an amount equal to the net wealth assessed under section 16, or as the case may be, the net wealth assessed under section 17, as reduced in either case in the manner aforesaid........." 7. It is not in dispute that the default or failure to furnish returns in respect of each of the three corresponding assessment years was committed by the assessee prior to 1.4.1969, which exposed him to imposition of penalty u/s 18(1) of the Act. The Appellate Tribunal came to the conclusion that the default in not furnishing the return was a continuing wrong and even though the default occurred earlier, the same continued even after 1.1.1969, and so the Tribunal held that the quantum of penalty to be imposed upon the assessee was to be calculated @ 2% of the wealth tax payable prior to 1 4.1969 and at 1/2% of the net wealth for the period after 1.4.1969 upto the date when the assessment was completed. Thus the Appellate Tribunal rejected the assessees contention that the law applicable for the purpose of levy of penalty was the law which was in force at the time when the default occurred by not furnishing the return on the due date. There was difference of opinion between the various High Courts on this question. Thus the Appellate Tribunal rejected the assessees contention that the law applicable for the purpose of levy of penalty was the law which was in force at the time when the default occurred by not furnishing the return on the due date. There was difference of opinion between the various High Courts on this question. However the controversy in this respect has now been set at rest by their Lordships of the Supreme Court in CWT Amritsar vs. Suresh Seth (1) and it was held in that case that the offence relating to omission to file wealth tax return was not a continuing offence and penalty was leviable for the failure of an assessee to furnish the return of wealth tax in accordance with the law in force at the time when the return ought to have been filed. 8. Where the wrong complained of is the omission by a person to perform a positive duty requiring him to do a certain act, the test to determine whether such a wrong is a continuing one or not is whether the duty in question is one which requires him to continue to do that act. It is necessary to draw a distinction between the injury caused by a wrongful act and what may be described as the effect of the said wrongful act. In the case where the wrongful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from such an act may continue. But if the wrongful act is of such a nature that injury caused by it in itself continues, then the act constitutes a continuing wrong and the very essence of such an act is that it creates a continuous source of injury and renders the doer of the act liable for the continuance of the said injury. The offence caused on account of the failure to furnish a return becomes complete if no return is filed by the assessee on the due date and as such the offence u/s 18 (1) (a) cannot be considered to be a continuing wrong. The offence caused on account of the failure to furnish a return becomes complete if no return is filed by the assessee on the due date and as such the offence u/s 18 (1) (a) cannot be considered to be a continuing wrong. Their Lordships of the Supreme Court observed as under in this context in the aforesaid case (1): "Section 18 of the Act with which we are concerned in this case, however, does not require the assessee to file a return during every month after the last day to file it is over. Non-performance of any of the acts mentioned in section 18(lj(a) of the Act gives rise to a single default and to a single penalty, the measure of which, however, is geared upto the time lag between the last date on which the return has to be filed and the date on which it is filed. The default, if any committed is committed on the last date allowed to file the return. The default cannot be one committed every month thereafter. The words for every month during which the default continued indicate only the multiplier to be adopted in determining the quantum of penalty arid do not have the effect of making the default in question a continuing one. Nor do they make the amended provisions modifying the penalty applicable to earlier defaults in the absence of necessary provisions in the amending Acts. The principle underlying section 6 of the General Clauses Act is clearly applicable to these cases. It may be stated here that the majority of the High Courts in India have also taken the same view." 9. Thus, when the default complained of falls u/s 18 (1) (a) of the Act, penalty has to be computed in accordance with the law in force on the last date on which the return relating to the assessment year in question could have been filed The subsequent amendment would not affect the quantum of penalty which could be imposed u/s 18(1) (a). We, therefore, hold that penalty imposable upon the assessee for not filing the return under the Wealth Tax Act, in respect of the assessment years prior to 1.4.1969, would be governed by section 18 (1) of the Wealth Tax Act as it stood prior to 1.4.1969, and the amended s. 18 (1) would not affect the quantum of penalty imposable upon the assessee for such default, as the default could not be said to have continued after the amendment of s. 18 w.e.f 1.4.1969. As a matter of fact, in accordance with decision of their Lordships of the Supreme Court in Suresh Seths case (supra) it is perfectly clear that the law in force on the due date, when the return ought to have been filed in accordance with the provisions of sec. 14 (1) of the Act, would govern the determination of the quantum of penalty imposable upon the assessee for that assessment year. 10. As regards the second question, not much argument is necessary to show that if the assessee fails to file the return of his net wealth on the due date, he exposes himself to imposition of penalty u/s 18 (1) (a) and in case the return is not filed at all, the default would still be held to have been committed by the assessee. In our view if the assessee does not file the return of his net wealth at all, the default or failure to file a return cannot be wiped out. As held by their Lordships of the Supreme Court in Suresh Seths case (supra), the default u/s 18 ()) (a) is committed as soon as the assessee fails to file a return of his net wealth on the last day specified u/s 14(1) of the Act, namely, 30th day of June of the relevant assessment year. If the return is filed subsequently at some later point of time or if no return is filed at all it would not affect the commission of the default by the assessee and the penalty is to be computed in accordance with law which was in force on the due date, upto which the return of net wealth ought to have been filed by the assessee. The Appellate Tribunal was right; in holding that the provisions of s. 18 (1) (a) can not be rendered nugatory by not filing the return at all. The Appellate Tribunal was right; in holding that the provisions of s. 18 (1) (a) can not be rendered nugatory by not filing the return at all. We may observe that a person who does not file a return at all cannot be placed in a better position than a person who files the return, though after the due date. The late filing of the return or not filing the return at all do not affect the imposition of penalty, in as much as the liability for levy of penalty is incurred by the assessee on his failure to furnish the return on the due date. The default becomes complete on account of his not filing the return on the last date on which it was due u/s 14 (1). We, therefore, express our agrement with the view taken by the Appellate Tribunal in respect of the second question and answer the second question in the affirmative and against the assessee. 11. The parties are left to bear their own costs.