Commissioner Of Income Tax v. S. Qudira Anwar — 1996 DIGILAW 300 (PAT)

Judgment Sachchidanand Jha, J. 1. These references under Sec. 27(1) of the Wealth-tax Act, 1957, at the instance of the Revenue with respect to the same assessee involving the same question of law have been heard together. The material facts are as follows : The assessee, since represented by his legal representative upon his death, filed returns of his net wealth for the assessment years 1968-G9 and 1969-70 on June 29, 1973, and for the assessment years 1970-71 to 1973-74 on July 25, 1973. The Wealth-tax Officer initiated penalty proceedings. The assessee pleaded reasonable cause which was not accepted. The Wealth-tax Officer imposed penalties under Sec. 18(1)(a) of the Wealth-tax Act, 1957 (for short, "the Act"), at half per cent. of the wealth-tax assessed by him for each default. The assessee moved the Commissioner of Wealth-tax under Section 18(2A) of the Act which was rejected on December 21/24, 1974. The assessee thereafter on June 9, 1978, preferred appeals against the imposition of penalty before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, by his order dated October 29, 1979, rejected the appeals as not maintainable. The second appeal was preferred before the Income-tax Appellate Tribunal. By order dated January 20, 1981, the Tribunal following the decision of the Karnataka High Court in CWT V/s. B. Kempanna [1980] 126 ITR 825 held that the appeals were maintainable before the Appellate Assistant Commissioner. Since there had been no decision on the merits by the appellate authority, the appeals were remanded to the Appellate Assistant Commissioner. Later, on the application by the Department, the Tribunal referred the following question of law for opinion of this court ; "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal misdirected itself in holding that even after the rejection of the assessees petition under Sec. 18(2A) by the Commissioner of Wealth-tax the appeals filed by the assessee before the Appellate Assistant Commissioner are maintainable ?" 2. A period of fifteen years having gone by counsel for the Department agreed that in the absence of the stay order the appeals must have been disposed of on the merits by the appellate authority in the meantime. And, therefore, these references so far as the assessee is concerned must have become infructuous. It appears further that substantial amendments were incorporated in Sub-sec. (1) of Sec. 18 and Sub-sec. And, therefore, these references so far as the assessee is concerned must have become infructuous. It appears further that substantial amendments were incorporated in Sub-sec. (1) of Sec. 18 and Sub-sec. (2A) has been omitted and replaced by a new Sec. 18B by the Taxation Laws (Amendment) Act, 1975. The question perhaps, therefore, has only academic importance. We have, however, heard counsel and considered the matter on the merits as we are given to understand that some more matters involving the same question relating to the period prior to April, 1976, when the aforesaid amendments came into force, might be pending. 3. Sub-sec. (2A), so far as relevant, and Sub-sec. (2B) of Sec. 18 of the Act may be noticed at this stage : "(2A) Notwithstanding anything contained in Clause (i) or Clause (hi) of Sub-sec. (1), the Commissioner may, in his discretion,-- (i) reduce or waive the amount of minimum penalty imposable on a person under Clause (i) of Sub-sec. (1) for failure, without reasonable cause, to furnish the return of net wealth which such person was required to furnish under Sub-sec. (1) of Sec. 14, or (ii) reduce or waive the amount of minimum penalty imposable on a person under Clause (iii) of Sub-sec. (1), if he is satisfied that such person-- (2B) An order under Sub-sec. (2A) shall be final and shall not be called in question before any court of law or any other authority." 4. It will appear from the appellate order of the Appellate Assistant Commissioner that it took the view that Sec. 18(2A) of the Act overrides Sec. 18(1A) and there is nothing in the Act to suggest that the Legislature intended to keep the right of the assessee to contest the order of imposition of penalty on the merits intact after going in for waiver/reduction of the amount of penalty. As stated above, the Tribunal did not agree with the Appellate Assistant Commissioner and held that the right of appeal under Sec. 25(1)(d) of the Act is not lost merely because the assessee has invoked the provision of Sec. 18(2A) by filing an application for waiver/reduction of the amount of penalty before the Commissioner. 5. Counsel for the Department, Mr. S.K. Sharan, relied on Smt. Ichhabai Panchal v. CWT [1982] 137 ITR 232 (Cal) in support of the stand about non-maintainability of appeal. 5. Counsel for the Department, Mr. S.K. Sharan, relied on Smt. Ichhabai Panchal v. CWT [1982] 137 ITR 232 (Cal) in support of the stand about non-maintainability of appeal. The Andhra Pradesh High Court, apart from the Karnataka High Court in B. Kempannas case [1980] 126 ITR 825 referred to above, has taken the contrary view in CWT V/s. Lt. Col. Mirza Mahmood Ali Baig [1985] 152 ITR 740. We have examined the aforesaid decisions and we are inclined to agree with the view taken by the Karnataka Highs Court and the Andhra Pradesh High Court in the aforesaid cases. 6. It would be appropriate at this stage to notice the scheme of the Act so far as relevant for the purpose of this case. Sec. 14 provides for filing of returns. Sec. 16 provides for assessment. Sec. 18 provides for imposition of penalty for failure to furnish returns or to comply with notice (asking the assessee to file returns) and concealment of assets. Subsection (1) of this section as it stood during the relevant period up to March, 1976, was in these terms : "(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-sec. (1) of Sec. 14 or by notice given under Sub-sec. (2) of Sec. 14 or Sec. 17, or has without reasonable cause, failed to furnish within the time allowed and in the manner required by Sub-sec. (1) of Sec. 14 or by such notice, as the case may be ; or (b) has without reasonable cause failed to comply with a notice under Sub-sec. (2) or Sub-sec. (4) of Sec. 16 ; or (c) has concealed the particulars of any assets or furnished inaccurate particulars of any assets or debts ; he or it may, by order in writing, direct that such person shall pay by way of penalty--" 7 Sub-sections (2A) and (2B) as they stood prior to the amendment have already been quoted above. Sec. 23 contains a provision regarding appeal. It confers a right upon any person to prefer appeal against the assessment order, inter alia, "objecting to any penalty imposed by the Wealth-tax Officer under Section 15B or Sec. 18", vide Sec. 23(1)(d). Sec. 23 contains a provision regarding appeal. It confers a right upon any person to prefer appeal against the assessment order, inter alia, "objecting to any penalty imposed by the Wealth-tax Officer under Section 15B or Sec. 18", vide Sec. 23(1)(d). Sec. 24 entitles an assessee objecting to any order passed by the Appellate Assistant Commissioner under Sec. 18 or Sec. 23 or Sec. 37(2), etc., to prefer second appeal to the Appellate Tribunal. Sec. 25(1) confers power upon the Commissioner of Wealth-tax to revise orders of subordinate authorities. It lays down, inter alia, that the Commissioner may, either of his own motion or an application made by an assessee, call for the record of any proceeding under the Act in which an order has been passed by the authority subordinate to him, and may pass such orders thereon after enquiries as he thinks fit. The power is circumscribed by certain conditions as mentioned in the proviso with which we are not concerned in this case. The Commissioner can also under Sec. 25(2) without prejudice to the provisions of Sec. 25(1) pass appropriate orders as the circumstances of the case may justify, including an order enhancing or modifying the assessment or cancelling it and directing a fresh assessment, if he considers that any order passed by the Wealth-tax Officer is erroneous and prejudicial to the interests of the Revenue. Exercise of the power by the Commissioner under Sec. 25(2) of the Act is subject to appeal before the Appellate Tribunal, Sec. 27 provides for reference to the High Court on a question of law. 8. The argument that the appeal against the order of imposition of penalty after rejection of the application under Sec. 18(2A) of the Act is not maintainable, rests on the provision as contained in Sec. 18(2B). But as is apparent from a plain reading of the provision, it only provides that the order of the Commissioner under Sec. 18(2A) shall be final and shall not be called in question before any court of law or any other authority. In the appeals which the assessee preferred in the instant case against the imposition of penalty under Sec. 18(1), the order of the Commissioner was not under challenge. In the appeals which the assessee preferred in the instant case against the imposition of penalty under Sec. 18(1), the order of the Commissioner was not under challenge. And it could not be, as is clear from a bare reading of Sec. 18(2A), the Commissioner can merely reduce or waive the amount of minimum penalty imposable on a person subject to fulfilment of the conditions specified in that Sub-section. Whereas the power of the appellate authorities to confirm or reduce the penalty levied under Sec. 18(1) is unconnected with the said requirement or conditions as specified under Sec. 18(2A). Sec. 23(1)(d) confers a statutory right upon an assessee to prefer appeal before the Appellate Assistant Commissioner objecting to any penalty as may be imposed by the Wealth-tax Officer under Sec. 18. This right is an independent right which has not been taken away either expressly or by necessary implication. The powers of the Commissioner to reduce or waive the amount of minimum penalty under Section 18(2A) and the appellate power of the Appellate Assistant Commissioner under Sec. 23(1)(d) operate in different fields and directions. 9. Sec. 18 contemplates imposition of minimum penalty. The Commissioner under Sec. 18(2A) is empowered to reduce or waive the amount of minimum penalty imposed on a person under Clause (i) or Clause (iii) of Sub-sec. (1) of Sec. 18. This power can be exercised by the Commissioner notwithstanding the default and even where no reasonable cause for the failure to file returns within the stipulated time has been shown. The fact that the aforesaid power is an independent power is clear from the non obstante clause with which Sub-section (2A) begins implying that notwithstanding anything contained in Clause (i) or Clause (iii) of Sub-sec. (1) and notwithstanding any other provision in the Act, the Commissioner can reduce or waive the amount of minimum imposable penalty. The exercise of that power cannot take away the right of the assessee to challenge the order of the Wealth-tax Officer imposing penalty upon him as per the usual channel of challenge provided by Secs. 23, 24, 25 and, of course, Sec. 27. 10. While exercising the power under Sec. 23(1)(d) of the Act, the appellate authority is not circumscribed by any such consideration as envisaged under Sec. 18(2A). No doubt, he also may reduce the quantum of penalty. 23, 24, 25 and, of course, Sec. 27. 10. While exercising the power under Sec. 23(1)(d) of the Act, the appellate authority is not circumscribed by any such consideration as envisaged under Sec. 18(2A). No doubt, he also may reduce the quantum of penalty. In an appropriate case he may set aside the order itself, a power which cannot be exercised by the Commissioner under Sec. 18(2A). It would appear that the Act provides for imposition of minimum penalty in certain situations. If a reasonable cause is shown the appellate authority under Sec. 23(1)(d) may set aside the whole order ; where such reasonable cause is not shown he may still reduce the quantum of penalty. But he cannot reduce it below the minimum penalty imposable on the person. This can be done by the Commissioner under Section 18(2A). No doubt, a prudent assessee should first try to exhaust the remedies available to him by way of two appeals under Secs. 23 and 24 arid revision under Sec. 25 and reference under Sec. 27 and only thereafter take resort to the powers of the Commissioner under Sec. 18(2A). But it does not mean that where an impatient assessee instead of going in for usual remedies of appeal, etc., straightaway moves the Commissioner under Sec. 18(2A), his statutory rights are lost. There may be various reasons and considerations weighing with the assessee for making application under Sec. 18(2A). He may not like to go in for the time consuming process which the appeals, etc., are bound to take and, therefore, to buy peace of mind and for expeditious disposal of the matter, he may like to go in for waiver/reduction. The analogy of a plaintiff/defendant of a civil suit going in for a compromise, agreeing to forgo some of his rights and claims may clarify the point. It is well-settled that merely because the plaintiff/defendant of any civil suit agrees to forgo his rights and claim in the suit that does not stand against him where the compromise is not ultimately accepted and he is compelled to contest the suit. He forgoes part of his claim in consideration of getting something in lieu thereof, After the compromise fails for any reason he is not debarred from contesting the suit. He forgoes part of his claim in consideration of getting something in lieu thereof, After the compromise fails for any reason he is not debarred from contesting the suit. I am, therefore, of the opinion that merely because the assessee chooses to move the Commissioner under Sec. 18(2A) of the Act, his statutory right of appeal under Sec. 23(1)(d) is not lost. 11. I would, however, like to make it clear that the exercise of the power of the Commissioner under Sec. 25 is distinct from the exercise of the power under Sec. 18(2A) of the Act. In other words, where an assessee has moved the Commissioner under Sec. 25(1) or the Commissioner has passed orders suo motu under Sec. 25(1) or Sec. 25(2), the appeal under Sec. 23 cannot be said to be maintainable against the same orders of the Wealth-tax Officer thereafter. The reason being that the Commissioner while exercising the power under Section 25 acts in the same hierarchy of powers, which is not the case when he exercises the power under Sec. 18(2A). 12. The Calcutta High Court in Smt. Ichhabai Pnchals case [1982] 137 ITR 232 no doubt took the view which the Appellate Assistant Commissioner in the present case precisely had taken, namely, that where the assessee chooses to go to the Commissioner for reduction or waiver of penalty, he admits the position that penalty was imposable and, therefore, once any order on that basis is passed, he cannot feel aggrieved by such an order and cannot contend that the order imposing penalty itself was unjustified and illegal. For the reasons stated above, I have not been able to persuade myself to accept these views of the Calcutta High Court to be correct. As indicated above, we are inclined to endorse the view expressed by the Karnataka High Court and the Andhra Pradesh High Court referred to above. Accordingly, I do not find any error in the order of the Tribunal. 13. I would thus answer the question in the affirmative, that is, in favour of the assessee and against the Revenue. Since the assessee was not represented at the hearing of these cases, 1 would make no order as to costs. Aftab Alam, J. 14 I agree.