Continuing default in return filing requires penalty to be computed under the law in force during the default period, not just year start law.

Continuing default in filing a wealth-tax return attracts penalty under the law in force during the period of default, not only the law prevailing on the first day of the assessment year. Applying the settled principle from the analogous income-tax provision, the Court held that liability accrues month by month until compliance, so the penalty must be split between the pre-amendment and post-amendment periods where the default straddles a statutory change. The earlier view that the entire penalty had to be computed only under the law existing on the first day of the assessment year was rejected, and the matter was restored for quantification accordingly.

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Issues: Whether, for delay in filing a wealth-tax return, penalty under section 18(1)(a) of the Wealth-tax Act, 1957 had to be computed only on the law prevailing on the first day of the assessment year or had to be split between the pre-amendment and post-amendment periods when the default continued.

Analysis: The applicable principle had already been settled by the Court while construing the analogous provision in section 271(1)(a) of the Income-tax Act, 1961. On that construction, failure to file the return is a continuing default, and the liability to penalty is not confined to the first day of default. The penalty therefore accrues month by month until compliance, with the computation governed by the law in force during the relevant period of default. The earlier view that the entire penalty must be calculated only on the basis of the law prevailing on the first day of the assessment year could not be sustained.

Conclusion: The High Court's view was set aside, and penalty was held to be computable partly under the unamended provision up to 31 March 1969 and thereafter under the amended provision.

Final Conclusion: The appeal succeeded in substance, and the matter stood restored for quantification of penalty in accordance with the governing law on continuing default.

Ratio Decidendi: In cases of continuing default in filing a return, penalty is to be computed with reference to the law applicable during the period of continuance of the default, and not solely by reference to the law in force on the first day of the assessment year.

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