Penalty computation under the Wealth-tax Act must exclude wealth already assessed in an earlier assessment when reassessment brings escaped wealth to tax.

While computing penalty under section 18(1)(a) of the Wealth-tax Act, 1957, wealth already assessed in an earlier assessment under section 16(3) had to be deducted from the wealth assessed on reassessment under section 17. The earlier assessment had not attracted any penalty proceedings, and the later reassessment under sections 16(5) read with 17 brought to tax only escaped wealth. Penalty was therefore confined to the additional wealth assessed in reassessment, so the assessee was not penalised again on wealth already assessed. The absence of any statutory or rules-based prohibition on such deduction supported that approach, and the question was answered in favour of the assessee.

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Issues: Whether, while computing penalty under section 18(1)(a) of the Wealth-tax Act, 1957, the wealth already assessed under an earlier assessment under section 16(3) should be deducted from the wealth assessed on reassessment under section 17.

Analysis: The earlier assessment had been completed under section 16(3) and no penalty proceedings had been initiated in respect of that assessment. The later proceedings under section 17 brought to tax escaped wealth, and the subsequent assessment under section 16(5) read with section 17 resulted in a higher net wealth. Penalty was therefore required to be confined to the additional wealth brought to tax in the reassessment, since otherwise the assessee would be penalised on wealth already assessed earlier and not subjected to any penalty proceedings. No provision in the Act or the Rules was shown to prohibit such deduction.

Conclusion: The penalty under section 18(1)(a) was required to be computed after deducting the wealth assessed in the earlier assessment under section 16(3); the question was answered in the affirmative, in favour of the assessee and against the Revenue.

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