Commissioner of Wealth-tax vs Maharaja Amarinder Singh

N.K. Sud J.—This order will dispose of two appeals, viz., W. T. A. Nos. 10 and 11 of 2001, directed against the common order of the

Income Tax Appellate Tribunal, Chandigarh Bench (B), Chandigarh (for short ""the Tribunal""), dated July 5, 2001, relating to the assessment years

1982-83 and 1983-84, respectively.

The return of net wealth for the assessment years 1982-83 and 1983-84 were due to be filed by the assessee u/s 14(1) of the Wealth-tax Act,

1957, (for short ""the Act""), on or before June 30, 1982, and June 30, 1983, respectively. The return for the assessment year 1982-83 declaring a

net wealth of Rs. 7,60,400 was filed on March 13, 1987, i.e., after a delay of 56 months whereas the return for the assessment year 1983-84

declaring net wealth of Rs. 7,77,900 was filed on November 30, 1983, involving a delay of four completed months. While completing the

assessments, penalty proceedings u/s 18(1)(a) of the Act were initiated for levy of penalty for the delay in filing the returns. The assessee, in

response to the show-cause notices, contended that substantial wealth had been assessed in his hands on protective basis but for which he was not

required to file any return u/s 14(1) of the Act. It was further pleaded that there was a delay in filing the Income Tax returns for the two years in

question as well and thus, the delay up to the date of filing of those returns should be considered as a reasonable cause for delay in filing the

wealth-tax returns, which could not have been filed without the determination of tax liability under the Income Tax Act. The Assessing Officer

rejected the explanation and levied the penalty at the rate of 2 per cent, per month for the delay involved in the two years.

The assessee preferred appeals before the Commissioner of Wealth-tax (Appeals) and it was submitted that since the assessments had been

framed on protective basis, no penalty was leviable u/s 18(1)(a) of the Act in view of the judgment of this court in Commissioner of Income Tax

Vs. Behari Lal Pyare Lal, . This contention was accepted by the Commissioner of Wealth-tax (Appeals) who allowed the appeals and cancelled

the penalties.

Aggrieved by the order of the Commissioner of Wealth-tax (Appeals), the Revenue filed appeals before the Tribunal, which have been disposed

of vide the impugned order dated July 5, 2001. The Tribunal has rejected the first plea of the assessee that no penalty was leviable as the

assessment had been made on protective basis. It was observed that the net wealth of the assessee for the two assessment years under

consideration, even without the items assessed on protective basis is his hands, was above the taxable limit as prescribed under the Act. The

assessee, was therefore, statutorily required to file the returns of net wealth within the time prescribed u/s 14(1) of the Act.

However, the Tribunal accepted the second contention of the assessee that the delay up to the date of filing of the Income Tax returns should be

considered as attributable to a reasonable cause as wealth tax returns could not have been filed without the determination of the Income Tax

liability. Since, the Income Tax return for the assessment year 1982-83 had been filed on August 29, 1985, the Tribunal held that the delay for levy

of penalty u/s 18(1)(a) should be computed from that date. Since the delay thereafter was for a period of 18 months, it was held that penalty be

levied for that period only. As far as the assessment year 1983-84 is concerned, it was found that the Income Tax return had also been filed on

November 30, 1983, i.e., the date on which the wealth-tax return had been filed. Since, both the returns had been filed on the same day, the

Tribunal held that no penalty was leviable u/s 18(1)(a) of the Act.

We have heard counsel for the appellant and are of the view that the order of the Tribunal cannot be sustained.

The Tribunal appears to have accepted the plea that delay in filing the Income Tax return automatically constitutes a reasonable cause for the

delay in filing the wealth-tax return and has applied it as a general rule. This, in our view, is a totally erroneous approach. Without examining the

reasons for delay in filing of the Income Tax returns, such a finding cannot be recorded. Under the Income Tax Act, taxes are substantially paid in

advance and in many cases, no tax is due on the basis of the returned income. On the other hand, under the Wealth-tax Act, there is no provision

for advance payment of tax and, therefore, the tax has to be deposited with the filing of the return. In a given case, there may not be any tax

payable on the returned income and, thus, even if such a return is filed late, no penalty for late filing of the return u/s 271(1)(a) of the Income Tax

Act, 1961, would be leviable nor would it attract the levy of any penal interest. Thus, an assessee can easily manipulate and delay his liability to

pay wealth-tax by not filing the return of income in time. According to us, mere non-availability of a possible Income Tax liability by itself cannot

constitute a reasonable cause for not filing the wealth-tax return in time.

In the present case, there is no material on record to show as to why the Income Tax returns had been delayed or as to why the wealth-tax

return could not be prepared without the finalization of the Income Tax return. There is no information even in respect of the tax liability as per the

Income Tax returns. The Tribunal has, without examining these aspects, accepted the plea of the assessee that the delay in filing the Income Tax

returns by itself constituted a sufficient cause for the delay in filing the returns of income. This finding, in our view, is totally erroneous being open to

abuse, although in a given case, delay in filing the Income Tax return can constitute a reasonable cause but the matter needs to be examined in the

light of the peculiar facts and circumstances of each case. As already observed, delay in filing of wealth-tax return cannot be justified merely

because there may be some liability towards Income Tax which may get quantified at the time of filing of the Income Tax return.

Accordingly, we allow these appeals and hold that in the absence of any material on record justifying the delay in filing the returns, the assessee

was liable to penalty for the entire period of delay of 56 months in the assessment year 1982-83 and four months in the assessment year 1983-84.

No costs.