2012 (9) TMI 634 - AT - Wealth-tax

Tribunal upholds penalties for non-compliance up to 2004-05 but deletes for 2005-06 due to timely notice issuance.

Subhash Duggal & Others Versus Wealth Tax Officer, Ward VI(3)

Subhash Duggal & Others Versus Wealth Tax Officer, Ward VI(3) - TMI Issues Involved:1. Legality of the order passed by the CWT(A)-II under section 250(6) of the Income-tax Act, 1961.2. Justification for the imposition of penalty under section 18(1)(c) of the Wealth Tax (WT) Act.3. Alleged concealment of wealth by the appellant.4. Reasonable cause for the appellant's failure to file the wealth tax return within the prescribed time.Issue-wise Detailed Analysis:1. Legality of the Order Passed by the CWT(A)-II:The appellant argued that the order passed by the CWT(A)-II was illegal and defective. However, the tribunal did not find any substantial grounds to support this claim. The tribunal upheld the decision of the CWT(A)-II, confirming that the order was passed in accordance with the provisions of section 250(6) of the Income-tax Act, 1961.2. Justification for the Imposition of Penalty under Section 18(1)(c) of the WT Act:The primary issue was whether the penalty under section 18(1)(c) of the WT Act was justified. The facts revealed that the appellant had significant cash balances exceeding the minimum exempted amount of Rs. 15 lakhs, which necessitated the filing of wealth tax returns. The appellant failed to file these returns until after a notice under section 17(1) was issued. The tribunal noted that the appellant prepared a cash flow chart to explain undisclosed investments during income-tax proceedings, which indicated awareness of the taxable wealth. Despite this, the appellant delayed filing the returns even after the notice was served. The tribunal referenced Explanation 3 of section 18(1)(c), which deems the failure to file returns as concealment of wealth, justifying the imposition of penalties.3. Alleged Concealment of Wealth by the Appellant:The appellant contended that no wealth was concealed since the net wealth declared was accepted without any additions. However, the tribunal emphasized that the mere failure to file returns within the stipulated time, especially after being aware of the taxable wealth, constituted concealment under Explanation 3 of section 18(1)(c). The tribunal cited the case of Prempal Gandhi V. CIT, which reinforced that surrendering income after receiving a notice does not negate the concealment. Consequently, the penalties for the relevant assessment years were upheld.4. Reasonable Cause for Failure to File Wealth Tax Return:The appellant argued that the failure to file the wealth tax returns was due to the disruption caused by a search operation and poor advice from the counsel. The tribunal acknowledged that reasonable cause could exempt an assessee from penalties, as per the initial phrase in Explanation 3, 'where any person fails without reasonable cause.' However, it found that the appellant's reasons did not constitute reasonable cause. The tribunal noted that the appellant had ample time to file the returns after preparing the cash flow statements and receiving the notice. The tribunal also referenced various case laws, including CIT V. Sunil Kumar Goel, which indicated that ignorance of law and reliance on counsel's advice were insufficient excuses for non-compliance.Separate Judgments for Different Appellants:The tribunal applied the same rationale to other similar cases involving different appellants. For instance, penalties were confirmed for assessment years up to 2004-05, but for the assessment year 2005-06, penalties were deleted as the notice was issued within the limitation period for completing the assessment. This consistent approach was applied to the cases of Parmod Duggal and Jagdish Duggal, resulting in similar judgments.Conclusion:In summary, the tribunal upheld the imposition of penalties under section 18(1)(c) for the assessment years up to 2004-05, dismissing the appeals for those years. However, for the assessment year 2005-06, penalties were deleted due to the notice being issued within the permissible period for assessment completion. The tribunal's decision emphasized the importance of timely compliance with tax return filings and clarified the application of Explanation 3 to section 18(1)(c) of the WT Act.