Commissioner of Wealth Tax vs Maharaja Daljit Singhji

D.A. Mehta, J.—The Tribunal, Ahmedabad Bench ''B'' has referred the following question of law u/s 27(2) of the WT Act, 1957 (the Act), at the instance of the CWT, Gujarat-II, Ahmedabad :

"Whether the Tribunal is right in law and on fact in holding that no penalty u/s 18(1)(a) of the WT Act for delay in submission of the WT return can be levied for the period till the date of furnishing of IT return by the assessee ?"

Heard Mr. M.R. Bhatt, learned senior standing counsel appearing on behalf of the applicant-Revenue. Though served, there is no appearance on behalf of the respondent-assessee.

The assessment years under consideration are 1978-79 and 1979-80 and the relevant valuation dates are 31st March, 1978 and 31st March, 1979. For asst. yr. 1978-79, the return of wealth which was due on 31st July, 1978 was filed on 8th March, 1983. The WTO held that the explanation offered by the assessee was not acceptable and thus levied penalty at Rs. 26,606 u/s 18(1)(a) of the Act holding that the assessee did not have any reasonable cause for delay of 53 months in furnishing return of wealth.

For asst. yr. 1979-80, the return which was due on 31st July, 1979 was filed on 9th Aug., 1983. The WTO levied the penalty of Rs. 19,008 u/s 18(1)(a) of the Act considering the period of default of 44 months.

The assessee carried the matter in appeal before the AAC who passed two separate orders and reduced the penalty by directing the WTO to recompute the penalty for the period 13th March, 1981 to 8th March, 1983 for asst. yr. 1978-79 and for the period 1st April, 1982 to 9th Aug., 1983 for asst. yr. 1979-80. The Revenue challenged the orders of AAC before the Tribunal, who, for the reasons stated in its order dt. 1st Dec, 1989, upheld the orders of the AAC.

Mr. M.R. Bhatt, learned senior standing counsel urged on behalf of the applicant that the AAC and the Tribunal had incorrectly given the relief to the assessee upto the dates of filing of IT returns for two assessment years under consideration. He submitted that the Tribunal had merely relied on decision in the case of Additional Commissioner of Wealth Tax, Madras II, Madras Vs. Babulal K. Shah and Another, for the purpose of upholding the orders of the AAC without assigning any independent reasons. That merely because the IT returns for the assessment years under consideration were delayed, that by itself was not a reasonable cause for submitting WT returns belatedly. He urged that the orders imposing penalty made by the WTO be restored by answering question referred for the opinion of this Court in favour of the Revenue.

u/s 3 of the Act, charge of wealth-tax is levied for every assessment year in respect of the net wealth of a person specified in the section on the corresponding valuation date. Section. 2(q) of the Act defines, "valuation date" to mean the last day of the previous year as defined in Section 3 of the IT Act. The definition of "net wealth" as appearing in Section 2(m) of the Act means the amount by which the aggregate value of all the assets belonging to assessee on the valuation date exceeds the aggregate value of all the debts owed by the assessee on the valuation date. In the circumstances, on a plain reading of the provisions of the Act it is apparent that the filing of the WT return is dependent on filing of the IT return, or at least the provisions of the IT Act have some bearing. It is settled legal position that liability to pay tax under the IT Act is a permissible deduction while computing net wealth of an assessee on the valuation date, and such liability is ascertainable only on the date when the IT return is finalised.

In the light of the aforesaid scheme of the Act, there is no infirmity, in the order made by the Tribunal upholding order of the AAC whereunder penalty came to be reduced upto the date of filing of Income Tax returns for both the assessment years under consideration.

In the result, the question referred to the Court is answered in the affirmative, i.e., in favour of the assessee and against the Revenue. The reference stands disposed of accordingly. There shall be no order as to costs.