1981 (1) TMI 6 - HC - Wealth-tax

Court rules on penalty calculation based on date of default, not amended provisions.

Commissioner Of Wealth-Tax Versus Shrikant Ramnarayan Mor

Commissioner Of Wealth-Tax Versus Shrikant Ramnarayan Mor - [1984] 147 ITR 412, 23 CTR 111, 7 TAXMANN 117 Issues Involved:1. Determination of penalty under section 18(1)(a)(i) of the Wealth-tax Act.2. Applicability of the amended provisions of section 18(1)(a)(i) effective from April 1, 1969.3. Impact of notice under section 17 read with section 14(2) on the delay in filing the return.4. Immunity from penalty for the period exceeding 25 months from the date of default.5. Legality of the penalty order based on the terms of the show-cause notice.Issue-wise Detailed Analysis:1. Determination of Penalty under Section 18(1)(a)(i):The assessee failed to file the wealth-tax return by the due date of June 30, 1966, and continued to default despite extensions granted until August 31, 1966. A notice under section 17 read with section 14(2) was served on December 15, 1970, and the assessment order was made on December 27, 1971. The Wealth Tax Officer (WTO) imposed a penalty of Rs. 11,813, computed at 2% of the tax for the default period up to September 30, 1968, and at 0.5% of the net wealth for the period from April 1, 1969, onwards. The Appellate Assistant Commissioner (AAC) reduced the penalty to Rs. 263, holding that the maximum penalty at 50% of the tax had already been imposed for the delay, and it was not open to the WTO to impose further penalty by applying the amended provisions.2. Applicability of the Amended Provisions of Section 18(1)(a)(i):The Tribunal held that the penalty must be determined according to the law as it stood on the date the default occurred. Since the default occurred before April 1, 1969, the amended provisions were not applicable. The Tribunal found that the default was not a continuing one, and thus, the penalty should be computed based on the original provisions. The court supported this view, stating that the default for failing to file the return is not a continuing default but occurs once when the return is not filed by the due date.3. Impact of Notice under Section 17 Read with Section 14(2):The Tribunal declined to express an opinion on the contention that the notice under section 14(1)/14(2)/17 was ambiguous and did not clearly bring out the charge the assessee was facing, thereby not affording a reasonable opportunity of being heard before the penalty was imposed. The court did not address this issue further as it was not pressed by the assessee.4. Immunity from Penalty for the Period Exceeding 25 Months:The assessee did not press the question regarding immunity from penalty for the period exceeding 25 months from the date of default when the said period expired before the amendment of section 18(1)(a)(i) on April 1, 1969. Consequently, the court did not answer this question.5. Legality of the Penalty Order Based on the Show-Cause Notice:The question regarding the legality of the penalty order based on the terms of the show-cause notice issued by the WTO was not pressed by the assessee, and hence, it was not answered by the court.Conclusion:The court concluded that the penalty for the delay in filing the return should be determined based on the provisions of section 18(1)(a)(i) as they stood on the date the default occurred. The amended provisions effective from April 1, 1969, were not applicable to defaults that occurred prior to that date. The assessee was awarded the costs of the reference.- Question No. 1: Answered in the affirmative and against the Revenue.- Question No. 2: Answered in the negative and against the Revenue.- Question No. 3: Not necessary to be answered.- Question No. 4: Not pressed by the assessee and hence not answered.The court's decision aligns with the principle that penalty provisions in force at the time of the default should determine the quantum of penalty, and defaults in filing returns are not considered continuing defaults.