Commissioner of Wealth Tax vs B. Viswanathiah

Sethuraman, J.—The Commissioner of income tax has applied u/s 27(3) of the W.T. Act, 1957, for a reference of the following question:

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the provisions of section 18(1)(a), as they stood before the amendment, should be the basis for the computation of penalty u/s 18(1)(a) notwithstanding the fact that the default continued even after April 1, 1969?

The question is common for four years, viz., 1964-65 to 1967-68. For these years, the assessee did not file the returns within the prescribed time. The WTO issued notices u/s 17(1)(a) of the Wealth-tax Act and in response the assessee filed the returns as follows:

Assessment year

Date of return

1964-65

15-1-1970

1965-66

16-2-1970

1966-67 & 1967-68

18-2-1970

While completing the assessment, the WTO initiated penalty proceedings u/s 18(1)(a) of the W.T. Act. The explanation of the assessee was that he had some doubts about the nature of the property held by him and that because of this, the returns could not be filed. The explanation was not accepted and the WTO levied penalties of Rs. 6,605, Rs. 7,308, Rs. 8,082 and Rs. 8,561 for the respective years. For calculating the amount of penalty, he took into account the provision as it was in force on the date he levied the penalty. The assessee appealed to the AAC, who confirmed the penalty so levied. Thereafter, the matter was taken on appeal before the Tribunal and, relying on a decision of this court in Commissioner of Gift-tax Vs. C. Muthukumaraswamy Mudaliar, , the assessee contended that the penalty provision, as it was in force at the time when the return was filed, should alone have been taken into account for determining the quantum of penalty. The Tribunal accepted this contention and held that the quantum of penalty for each of the assessment years was restricted to the maximum of 50 per cent, of the tax levied on the net wealth of the assessee in accordance with the law that prevailed at the time when the returns were due. The result was that the penalty for each year was reduced accordingly. It is now sought to be challenged by the Commissioner.

In Commissioner of Gift-tax Vs. C. Muthukumaraswamy Mudaliar, which was rendered under the G.T. Act as well as in COMMISSIONER OF WEALTH-TAX, MADRAS Vs. P. C. M. SUNDARAPANDIAN AND OTHERS., which was rendered under the W.T. Act, this court has taken the view that the quantum of penalty to be levied would have to be calculated with reference to the law that was in force at the time when the default was committed. The Supreme Court also, in a decision dated August 3, 1979, in Brij Mohan Vs. Commissioner of Income Tax , New Delhi, has gone into this question on the following facts: In that case, the assessee, a partner, filed a return of his total income for the assessment year 1964-65 on April 24, 1968. The assessment was completed on a different figure and the ITO initiated penalty proceedings u/s 271 of the income tax Act, 1961. The IAC, to whom the levy of penalty was referred, considered that the assessee had concealed Rs. 7,357 and he, therefore, imposed a like amount as penalty. The assessee appealed to the Appellate Tribunal and contended that the amended provision could not be invoked and that the law as was in force in the year 1964-65 alone could have been applied. The Tribunal rejected this contention, but reduced the penalty to Rs. 2,955 taking the view that the assessee was guilty of concealing the share income from the firm. The Tribunal, thereafter, made a direct reference to the Supreme Court as there was a conflict of opinion on the point in the decisions in HAJEE K. ASSAINAR Vs. COMMISSIONER OF Income Tax, KERALA., and in Saeed Ahmad Vs. Inspecting Assistant Commissioner of Income Tax, Range II, . The latter decision had also been followed by the Punjab and Haryana High Court in income tax Reference No. 45 of 1971- Commissioner of Income Tax Vs. Bhan Singh Boota Singh, . The Supreme Court observed (p. 4 of 120 ITR):

In the case of a penalty, however, we must remember that a penalty is imposed on account of the commission of a wrongful act, and plainly it is the law operating on the date on which the wrongful act is committed which determines the penalty. Where penalty is imposed for concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which is relevant. It is wholly immaterial that the income concealed was to be assessed in relation to an assessment year in the past.

The Supreme Court, therefore, was of the opinion that as the return was filed after 1st April, 1968, the law as amended by the Finance Act, 1968, would govern the levy of penalty. Thus, the view of the Supreme Court is that the penalty has to be levied with reference to the law in force on the date when the default occurred. In the present case, the default occurred immediately on the day following the day on which the return was due. Taking into account the date of default, the penalty as reduced by the Tribunal was proper and legal. Therefore, there is no referable question of law that can be said to arise out of the Tribunal''s order. The petitions are rejected with costs. Counsel''s fee Rs. 250 one set.