2002 (10) TMI 23 - HC - Wealth-tax

High Court affirms Tribunal's cancellation of penalty under Wealth-tax Act. Assessee's disclosure and actions negate fraud intent.

The High Court upheld the Income-tax Appellate Tribunal's decision to cancel the penalty imposed under section 18(1)(c) of the Wealth-tax Act, 1957. The ... '1. Whether, Tribunal was correct in law in holding that there was no fraud or wilful neglect on the part of the assessee in spite of the fact that in his wealth-tax return filed on March 31, 1974, he had shown his total wealth of Rs. 1,88,775 under the head 'Movable property' and he had not disclosed the value of his immovable property? 2. Whether, Tribunal was correct in law in cancelling the penalty of Rs. 4,10,000 imposed under section 18(1)(c) of the Wealth-tax Act, 1957, which had been upheld by the Commissioner of Wealth-tax (Appeals)?' - we find that the findings recorded by the Tribunal, which are essentially findings of fact, cannot be said to be irrational or without any basis, as is sought to be contended by learned counsel for the Revenue. In our opinion, no question of law arises from the said order and the Tribunal was justified in rejecting the Revenue's request for reference to this court. Issues:1. Whether the Income-tax Appellate Tribunal was correct in holding that there was no fraud or wilful neglect on the part of the assessee in disclosing assets in the wealth-tax return.2. Whether the Income-tax Appellate Tribunal was correct in canceling the penalty imposed under section 18(1)(c) of the Wealth-tax Act, 1957.Analysis:Issue 1: The case involved a petition under section 27(3) of the Wealth-tax Act, 1957, where the Revenue sought direction to the Income-tax Appellate Tribunal to refer questions of law to the High Court. The Tribunal had deleted the penalty imposed under section 18(1)(c) of the Act, considering the behavior of the assessee in approaching the authorities and disclosing assets voluntarily. The Tribunal found no intention to conceal wealth based on the conduct of the assessee, who rectified the return himself, even after it was accepted. The Tribunal concluded that there was no gross or wilful neglect on the part of the assessee, discharging the onus under the Explanation to section 18(1)(c).Issue 2: The Tribunal, while canceling the penalty, considered the disclosure of assets by the assessee, which was initially shown under the wrong category in the return. The Tribunal observed that the assessee had disclosed the immovable property voluntarily during the rectification process, indicating no intention to defraud the Revenue. The Tribunal noted that if there was an intention to defraud, the assessee would not have taken corrective actions after the return was accepted. The Tribunal found that the conduct of the assessee did not indicate any fraudulent intent, leading to the cancellation of the penalty.The High Court dismissed the petition, stating that the findings of the Tribunal were based on cogent material and were not irrational. The Court held that no question of law arose from the Tribunal's order, justifying the rejection of the Revenue's request for reference. The Court found no grounds to support the Revenue's claim that the assessee's disclosure of assets was not voluntary, upholding the Tribunal's decision to cancel the penalty under section 18(1)(c) of the Wealth-tax Act, 1957.