Smt. Ramalaxmi Jivraj vs Commissioner of Wealth Tax

Mankad J.

The WTO issued a notice u/s 14(2) of the W.T. Act, 1957 (hereinafter referred to as ""the Act""), calling upon the assessee to furnish return of

wealth for each of the assessment years 1973-74 and 1974-75. The assessee, however, failed to furnish the return. The WTO proce0eded u/s

16(5) of the Act and determined the assessee''s net wealth at Rs. 1,70,000 in each of the assessment years 1973-74 and 1974-75 and initiated

penalty proceedings u/s 18(1)(a) of the Act. The assessee did not submit any explanation or reply to the show-cause notice issued to her by the

WTO. The WTO levied penalty of Rs. 15,400 and Rs. 11,200 for the assessment years 1973-74 and 1974-75, respectively, u/s 18(1)(a) of the

Act. In the appeals preferred by the assessee, the AAC set aside the orders levying penalty on the ground that the assessee''s wealth was not

taxable in each of the years under reference. Revenue went up in appeal before the income tax Appellate Tribunal (hereinafter referred to as ""the

Tribunal"") and challenged the orders of the AAC. The Tribunal did not go into the question whether or not the assessee had without any

reasonable cause failed to furnish a return of her wealth in each of the said years in response to the notice u/s 14(2) of the Act. According to the

Tribunal, a failure to furnish the returns in response to the notice u/s 14(2), by itself, attracted penalty. In the result, it set aside the orders passed by

the AAC and restored the orders of the WTO levying penalty as stated above. It is in the background of the above facts that at the instance of the

assessee the following questions have been referred to us for our opinion u/s 27(1) of the Act:

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee was bound to file the

return of wealth in response to the notice u/s 14(1) of the Act even though she had no taxable wealth ?

In our opinion, the question framed by the Tribunal does not bring out the real controversy involved in the case. It is not disputed that the

assessee was bound to file a return of wealth in response to the notice u/s 14(2) of the Act. However, the question before the Tribunal was

whether the levy of penalty u/s 18(1)(a) was justified. We, therefore, reframe the question as follows :

Whether; on the facts and in the circumstances of the case, the Tribunal was justified in law in setting aside the order of the Appellate Assistant

Commissioner and restoring the orders of the Wealth-tax Officer levying penalty u/s 18(1)(a) of the Act in each of the assessment years 1973-74

and 1974-75 ?

The question whether or not the assessee''s net wealth in each of the assessment years under reference was taxable has an important bearing on the

question of levy of penalty. Penalty u/s 18(1)(a) of the Act is leviable provided and only provided it is established that the assessee has, without

reasonable cause, failed to furnish the return which he or she was required to furnish in response to a notice given under sub-section (2) of section

If the assessee''s net wealth was not taxable, it would be open to the assessee to contend that the failure to furnish a return could not be said to

be without reasonable cause. The Tribunal, however, has not addressed itself to the correct question. The AAC found, as a matter of fact, that the

assessee''s net wealth for each of the assessment years under reference was not taxable and it was, therefore, that he set aside the orders levying

penalty passed by the WTO. It would, therefore, appear that, though not expressed in so many words, the AAC came to the conclusion that

failure to furnish return of wealth by the assessee was not without reasonable cause. In view of this finding recorded by the AAC, the Tribunal

ought to have examined whether or not the assessee''s net wealth was taxable in the light of the provisions contained in section 5(1)(xxxii). If there

was not enough material to come to the conclusion whether the provisions of section 5(1)(xxxii) were attracted, the Tribunal could have remanded

the matter either to the AAC or to the WTO to ascertain and verify the relevant facts. In a penalty proceeding, it is open to the assessee to

contend that his net wealth was not within the taxable limits and consequently the failure on his part to file a return in response to a notice u/s 14(2)

could not be said to be without reasonable cause. In our opinion, therefore, the Tribunal ought to have examined the plea of the assessee on merits.

We, therefore, decline to answer the question as reframed by us and remand the matter to the Tribunal for deciding it afresh in accordance with

law and in the light of the observations made above. It would be open to the Tribunal to remand the matter either to the AAC or to the WTO to

make further investigation into the facts. Both the sides will be at liberty to place such evidence and material on record as they may think proper.

Reference disposed of accordingly with no order as to costs.