Court rules penalty based on law at default, not assessment. Default is completed, not ongoing. Extension doesn't absolve.

The court ruled in favor of the assessee, holding that the penalty for late filing of wealth-tax returns should be calculated based on the law in force at the time of the default, not at the time of assessment. The court emphasized that the default in filing the return by the due date is a completed default and not a continuing one, rejecting the argument that an extension granted by the Wealth-tax Officer absolves the assessee from penalty liability. The court answered the issues affirmatively against the revenue, with costs awarded.

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Issues Involved:
1. Whether the quantum of penalty determined by the Tribunal was in accordance with law.
2. Whether penalty is leviable under section 18(1)(a) of the Wealth-tax Act for the assessment years 1964-65 to 1968-69 notwithstanding the fact that the Wealth-tax Officer granted time for filing the wealth-tax returns till March 20, 1970.

Issue-wise Detailed Analysis:

1. Quantum of Penalty Determined by the Tribunal:

In R.C. No. 51/74, the assessee filed the return late by about 60 months. The Wealth-tax Officer levied a penalty of Rs. 4,650 under section 18(1)(a) of the Act as it stood on April 1, 1965. The Appellate Assistant Commissioner, however, held that the penalty should be calculated based on the provisions as of July 1, 1961, when the default was committed, and reduced the penalty to Rs. 1,000. The Tribunal upheld this view, stating that the law applicable was the one in force at the time the default was committed, i.e., July 1, 1961.

In R.C. No. 14/75, the assessee filed returns late for five assessment years. The Wealth-tax Officer levied penalties based on the law as it stood on April 1, 1969. The Appellate Assistant Commissioner and the Tribunal, however, held that penalties should be based on the law as it stood on the date of the default.

The court concluded that the default was not a continuing one and that the penalty should be based on the law as it stood at the time of the default. The court rejected the revenue's contention that the date of completion of the assessment should be the relevant date for the levy of penalty. The court relied on its previous judgment in Addl. Commissioner of Income-tax v. Medisetty Ramarao, where it was held that the penalty applicable is the one in force at the time of the default, not at the time of assessment.

2. Penalty Leviable Under Section 18(1)(a) Despite Extension Granted:

In R.C. No. 14/75, the assessee argued that since the Wealth-tax Officer had granted an extension for filing the returns, no penalty should be levied. The Wealth-tax Officer had granted the extension, but the assessee still filed the returns one day late. The court held that the extension granted by the Wealth-tax Officer did not absolve the assessee from the liability of penalty for the delay in filing the returns.

The court also addressed the contention that the default was a continuing one. It held that the default in not filing the return by the due date was a completed default and not a continuing one. The court noted that section 18(1)(a) of the Act explicitly provides that the default is complete when the return is not filed by the due date, and the scale of penalty is provided for every month of delay, but this does not imply that the default is a continuing one.

Conclusion:

The court affirmed that the quantum of penalty should be based on the law as it stood at the time of the default and not at the time of assessment. It also held that the default in not filing the return by the due date is a completed default and not a continuing one. The court answered the questions in the affirmative and against the revenue, with costs. The second question in R.C. No. 14/75 was deemed unnecessary to address.

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