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2005 DIGILAW 224 (PNJ)

Commissioner Of Wealth Tax v. Anil Tayal

2005-02-08

G.S.SINGHVI, VINEY MITTAL

body2005
Judgment G.S.Singhvi, J. 1. The Income-tax Appellate Tribunal, Delhi Bench B, New Delhi (for short, the Tribunal), has, in compliance of order dt. 10th Nov., 1997 passed by this Court, referred the following question of law for its opinion : "Whether, on the facts and in the circumstances of the case, penalty for failure to furnish the WT return within time for the asst. yr. 1979-80, was imposable on the assessee under Section 18(1)(a) of the WT Act, 1957 ?" 2. For the asst. yr. 1979-80, the assessee was required to file WT return on or before 31st July, 1979, but he failed to do so despite notice dt. 14th Nov., 1981, issued under Section 17 of the WT Act, 1957 (for short, the Act) which provides for assessment of escaped wealth. He also did not respond to notices dt. 1st Sept., 1982 and 16th Dec., 1985, issued under Section 16(4) of the Act for production of records for the purpose of framing assessment. In the meanwhile, the WTO, vide his letter dt. 21st Jan., 1984, asked the DVO to value the assessees property under Section 16A(5) of the Act. The latter submitted report dt. 14th March, 1985, indicating therein that as on 31st March, 1979, the value of the assessees property was Rs. 15,62,000. 3. After more than one year of the submission of the valuation report, the assessee filed return dt. 7th March, 1986, declaring his net wealth at Rs. 2,26,000. The WTO, vide his order dt. 21st March, 1986, framed the assessment. He accepted the report of the registered valuer submitted by the assessee and determined the value of his property at Rs. 7,34,194. While doing so, he ignored valuation report dt. 14th March, 1985, submitted by the DVO. By taking note of this lapse, CWT, Rohtak (hereinafter described as the Commissioner), initiated proceedings under Section 25(2). He issued notice dt. 22nd Dec., 1987, to the assessee which was duly received by him. On 5th Jan., 1988, Shri Kanwal Nain Sharma appeared on behalf of the assessee and sought adjournment on the ground that the assessee had gone to Kanpur. On the next date of hearing, i.e., 19th Jan., 1988, no one appeared on behalf of the assessee. Therefore, the Commissioner proceeded ex parte and vide his order dt. 26th Feb., 1988, he enhanced the value of the assessees wealth by Rs. 8,24,806. On the next date of hearing, i.e., 19th Jan., 1988, no one appeared on behalf of the assessee. Therefore, the Commissioner proceeded ex parte and vide his order dt. 26th Feb., 1988, he enhanced the value of the assessees wealth by Rs. 8,24,806. The Tribunal allowed the appeal filed by the assessee and held that report dt. 14th March, 1985, could not be taken into consideration for the purpose of assessing wealth because till the filing of return, the WTO did not have the jurisdiction to make reference to the Valuation Officer under Section 16A of the Act. The Tribunal then referred to Section 17A(1)(b) of the Act and held that the WTO did not have the jurisdiction to frame assessment after expiry of 4 years from the date of filing of return or revised return. 4. During the pendency of proceedings initiated by the assessee (CWT) under Section 25(2) of the Act, the WTO issued notice dt. 1st Feb., 1988, to the assessee for levy of penalty under Section 18(1)(a) of the Act. After considering the reply of the assessee, he imposed penalty of Rs. 54,274 vide order dt. 25th March, 1988. Similar order was passed by the WTO in relation to the asst. yr. 1978-79. The AAC vide his order dt. 9th May, 1990, dismissed the appeal filed by the assessee in relation to the asst. yr. 1978-79 but granted relief of Rs. 37,570 for the asst. yr. 1979-80. The assessee challenged the appellate order insofar as the AAC upheld the penalty imposed under Section 18(1)(c) of the Act. The Revenue also filed appeal against reduction of penalty imposed under Section 18(1)(a) in relation to the asst. yr. 1979-80. By an order dt. 20th March, 1996, the Tribunal allowed the appeals filed by the assessee and dismissed the one filed by the Revenue by recording the following reasons : "We have given careful thought to the rival submissions of the parties. On similar facts, the Tribunal had already held return for asst. yr. 1979-80, filed on 7th March, 1986, to be out of time and invalid in the light of provisions of Section 17A(1)(b) of the WT Act. The decision is equally applicable to the return filed for the asst. yr. 1978-79. On similar facts, the Tribunal had already held return for asst. yr. 1979-80, filed on 7th March, 1986, to be out of time and invalid in the light of provisions of Section 17A(1)(b) of the WT Act. The decision is equally applicable to the return filed for the asst. yr. 1978-79. If returns were invalid and could not be acted upon, the assessments made are also invalid and under such assessment question of initiating of levying penalties under Section 18 would not arise. Therefore, all the three penalties under appeal are held to be without jurisdiction and are cancelled. We also find force in the alternative submission of Shri Sharma that in returning value of cinema building through the income capitalisation method, the assessee did not conceal any wealth or furnished inaccurate particulars of wealth within the meaning of Section 18(1)(c) of the WT Act. Accordingly, all the three penalties stand cancelled." 5. We have heard Shri Rajesh Bindal, learned counsel for the Revenue, and Shri Suvir Sehgal, learned counsel for the assessee. Sec. 18(1)(a) of the Act empowers the WTO, etc. to impose penalty if the assessee fails to file return in terms of Sections 14(1) and 14(2) or 17 without any reasonable cause. The facts of the present case show that the assessee was required to file return on 31st July, 1979, which he failed to do, Not only this, he did not respond to notice dt. 14th Nov., 1981, issued under s, 17(1) of the Act. He filed return on 7th March, 1986, i.e., after almost 5 years of the due date. In the meanwhile, the DVO, on being directed by the WTO to do so, determined the value of the assessees property at Rs. 15,62,000. However, without considering the report of the DVO by relying on the report of the registered valuer submitted by the assesses, the WTO determined the value of his property at Rs. 7,34,194. That order was revised by the Commissioner who enhanced the value of the assessees property by Rs. 8,24,806. The order of the Commissioner was set aside by the Tribunal. 6. By an order passed today in WT Ref. Nos. 7 and 8 of 1990, we have accepted the reference made at the instance of the Revenue and held that the Tribunal committed a serious error by cancelling the order of the Commissioner passed under Section 25(2) of the Act. 6. By an order passed today in WT Ref. Nos. 7 and 8 of 1990, we have accepted the reference made at the instance of the Revenue and held that the Tribunal committed a serious error by cancelling the order of the Commissioner passed under Section 25(2) of the Act. In view of that order, the conclusion recorded by the Tribunal on the issue of penalty imposed under Section 18(1)(a) of the Act is liable to be set aside. 7. We are further of the view that the Tribunal committed a serious illegality by upsetting the order of the AAC insofar as it related to penalty imposed under Section 18(1)(a) of the Act, ignoring the fact that the assesses had hot filed appeal against that part of the order. 8. Shri Suvir Sehgal argued that even though the reasons assigned by the Tribunal for excelling the penalty imposed under Section 18(1)(a) may not be legally sustainable, the levy of penalty should be declared illegal in view of Circular No. 281/8/1986-IT (Inv. III), dt. 14th Feb., 1986, issued by the CBDT. 9. In our opinion, there is no merit in the argument of the learned counsel. The circular, on which reliance has been placed by Shri Sehgal, reads as under : "In exercise of the powers conferred by Clause (a) of Sub-section (2) of Section 119 of the IT Act, 1961 (43 of 1961), the CBDT hereby directs that the ITO and the IAC shall not initiate any proceeding for imposition of a penalty on a person or impose penalty on him for an offence under Clause (a) or Clause (c) of Sub-section (1) of Section 271 or Section 273 in respect of any assessment year up to and including asst. yr 1985-86 in a case, if he is satisfied that such person : (a) has prior to the detection by the ITO, or, as the case may be, the IAC, of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith, made between the 15th day of November, 1985, and the 31st day of March, 1986, a full and true disclosure of such income : (b) has, on or before the 31st March, 1986, paid the tax on the income disclosed; and (c) has co-operated in any enquiry relating to the assessment of his income. 2. 2. This order shall come into force on the 17th day of February, 1986." A reading of the above reproduced circular makes it clear that immunity against the levy of penalty is available only if the assessee had voluntarily and in good faith made disclosure of net wealth between 15th Nov.. 1985 and 31st March, 1986. In the present case, notices had been issued under Sections 17(1) and 16(4) of the Act, much before the filing of return. Therefore, the assessee cannot claim immunity from levy of penalty by relying on circular dt. 14th Feb., 1986. In the result, the reference made by the Tribunal is answered in the affirmative, i.e., in favour of the Revenue and against the assessee.