Commissioner of Wealth-tax vs B.R. Venkatachalapathy

Venkataswami, J.—These three tax case reference are at the instance of the revenue.

The Income Tax Appellate Tribunal, in compliance with direction of this court given u/s 27(3) of the Wealth-tax Act and made in T.C. P. Nos.

142 to 144 of 1978, has drawn up a consolidated statement of the case relating to the assessment year 1965-67 to 1968-69.

The common question of law referred to this court for its opinion reads as follows :

Whether, on the facts and in the circumstance of the case, the Appellate Tribunal was correct in law holding that the provision of section 18(1)(a)

of the Wealth-tax Act as they stood before the amendment should be basis for the computing of penalty u/s 18(1)(a) notwithstanding the fact that

the default continued even after April 1, 1969 ?

The Wealth-tax officer levied penalties for the delay in filing the wealth-tax returns in the sums of Rs. 72,400, Rs. 81,600 and Rs. 1,05,900,

respectively, for the assessment year in question u/s 18(1)(a) of the wealth-tax Act as was in force on and from April 1, 1969.

The assessee (since deceased, aggrieved by the orders of the wealth-tax Officer, preferred appeals to the Appellate Assistant Commissioner.

The Appellate Assistant Commissioner was of the view that the levy of the penalty must be at the rates prevailing on the date when the default

occurred and not on the date when the wealth-tax Officer passed the order. On that view, the Appellate Assistant Commissioner remanded the

matter to the wealth-tax Officer to recompute the penalties with reference to the rates of penalty in force on the dates of default, namely. The dates

on which the wealth-tax returns were due, but failed to be filed

Against the order of the Appellate Assistant Commissioner, the Revenue preferred appeals to the Tribunal. The Tribunal, following a judgment of

this court in Commissioner of Gift-tax Vs. C. Muthukumaraswamy Mudaliar, , a case u/s 17(1)(a) of the gift-tax Act, took the view that the

Appellate Assistant Commissioner was right in holding that the rates of the penalty in force on the date of the default alone are applicable and,

therefore, there was no case for interference. Consequently, the appeals were dismissed. It may be mentioned that section 17(1)(a) of the gift-tax

Act and section 18(1)(a) of the wealth-tax Act are analogous.

Still aggrieved by the decision of the Tribunal, the Revenue succeeded in having the case referred to this court as mentioned above.

Mr. N. V. Balasubramaniam, learned counsel appearing for the revenue, placing reliance on the latest decision of the supreme court in Maya

Rani Punj Vs. Commissioner of Income Tax, Delhi, , submitted that the view taken by the Tribunal following the decision of the court in CGT v. C.

Muthukumaraswamy Mudaliar [1976] 98 ITR 540 can no longer hold the field. Learned counsel appearing for the assessee is not in position to

dispute this statement.

In Maya Rani Punj v. CIT [1985] 157 ITR 330, the Supreme Court, overruling its earlier decision in Commissioner of Wealth Tax, Amritsar

Vs. Suresh Seth, , has held that the default of non-filing of the returns within the time stipulated by law is a continuing offence. Further, the supreme

court, applying the principle laid down by that court in Jain Bros. and Others Vs. The Union of India (UOI) and Others, :

... Though Jain Brother''s case was reference to the Income Tax Act, 1961, the provision of the section 18(1)(a) of the wealth-tax Act, as

amended. Brought in a similar provision and sum equal to 2% of the Tax for every month during which the default continued with an optimum of

50% of the tax due become payable. As rightly pointed out in Jain Bros. and Others Vs. The Union of India (UOI) and Others, , the question of

imposition of penalty would arise only after assessment of tax is made and, therefore, in Commissioner of Wealth Tax, Amritsar Vs. Suresh Seth,

on the analogy provision would become applicable.

The Supreme Court further held (at p. 341 of 157 ITR) :

The imposition of the penalty not confined to the first default but with reference to the continued default is obviously on the footing that non-

compliance with the obligation of making a return is an infraction as long as the default continiued. Without sanction of law, no penalty is impossible

with reference to the defaulting conduct. The position that penalty is impossible not only for the first default but as long as the default continues and

such penalty is to be calculated at a prescribed rates on monthly basis is indicative of the legislative intention in unmistakable terms that as long as

the assessee dose not comply with the requirements of law, he continues to be guilty of the infraction and exposes himself to the penalty provided

by law.

In the light of the above principles laid down by the Supreme Court, we are of the view that the decision in Commissioner of Gift-tax Vs. C.

Muthukumaraswamy Mudaliar, . Referred to above, cannot be considered good law. Consequently, the decision of the Tribunal which applied the

principle laid down in Commissioner of Gift-tax Vs. C. Muthukumaraswamy Mudaliar, cannot be sustained.

In the result, we answer the question referred to us in the negative and against the assessee. The Revenue is entitled to costs, counsel''s fee Rs.

One set.