1981 (4) TMI 4 - SC - Wealth-tax

Wealth-tax return failure penalty based on law in force when due; retrospective amendments not applicable.

The Supreme Court upheld the High Court's decision that the failure to file wealth-tax returns is not a continuing offense. Penalties must be calculated ... Continuing default / continuing offence - failure to file wealthtax return - measure of penalty for late filing governed by law in force on date of completion of default - retrospective operation of amending penalty provisionsContinuing default / continuing offence - failure to file wealthtax return - Default for nonsubmission of wealthtax return under the statute is not a continuing offence - HELD THAT: - The Court held that the omission to furnish a return under the statutory deadline is a single default which becomes complete on the expiry of the last day allowed for filing; it is not a continuing wrong that gives rise to a fresh cause of action de die in diem. A continuing wrong exists only where the statutory duty requires continuous performance so that the wrongful act repeats from day to day; the statutory scheme for filing returns under the Wealthtax Act does not impose such a continuing monthly duty. The phrase 'for every month during which the default continued' in the penalty provision is a multiplier for quantifying penalty and does not, by itself, convert a completed default into a continuing offence. The Court declined to import a continuingoffence character into s. 18(1)(a) in the absence of clear legislative words to that effect.The omission to file the wealthtax return is not a continuing offence; it is a single default completed on the last date for filing.Measure of penalty for late filing governed by law in force on date of completion of default - retrospective operation of amending penalty provisions - Penalty for late filing must be computed according to the penalty provision in force on the last date for filing; amendments do not operate retrospectively to alter liability unless expressly provided - HELD THAT: - The Court analysed the temporal operation of successive amendments to the penalty clause and concluded that, because the default is a single completed act occurring on the last date allowed for filing, the quantum of penalty is to be determined by the law prevailing on that date. Neither the 1964 amendment nor the 1969 Finance Act amendment was found to have retrospective effect so as to attach a different measure of penalty to defaults already completed before the amendments came into force. The Court emphasised the general presumption against construing penal amendments to operate retrospectively and applied the principle that the measure of liability ordinarily is governed by the law in force at the time the liability crystallises.Penalties must be computed in accordance with the statutory provision in force on the last day the return was required to be filed; the later amendments do not apply retrospectively to earlier completed defaults.Final Conclusion: Appeals dismissed; the High Court's answers in favour of the assessee were upheld: the omission to file returns was not a continuing offence and the penalty is to be computed by reference to the law in force on the last date for filing the return, not by subsequent amendments. Issues Involved:1. Whether the failure to file wealth-tax returns constitutes a continuing offence.2. Whether the penalties levied under section 18(1)(a) of the Wealth-tax Act, 1957, for the assessment years 1964-65 and 1965-66 were justified.Detailed Analysis:Issue 1: Continuing OffenceThe primary issue was whether the omission to file wealth-tax returns is a 'continuing offence.' The High Court had rejected the department's contention that the default was a continuing offence, which would necessitate calculating penalties for different periods based on amendments to the Wealth-tax Act.The Supreme Court analyzed the provisions of the Wealth-tax Act, particularly sections 14, 15, and 18, as they stood during the relevant periods. Section 14 imposes a duty on the assessee to file returns by a specified date, while section 15 allows for filing returns before the assessment is made, even after the due date.The court emphasized that a liability in law arises from an act of commission or omission. Once the prescribed time to perform an act expires, the liability is fixed according to the law in force at that time. The court noted that neither the Wealth-tax (Amendment) Act, 1964, nor the Finance Act, 1969, explicitly stated that the amended penalty provisions would apply to ongoing defaults from preceding years.The court concluded that the default in filing returns is not a continuing wrong but a single default that occurs on the last day allowed for filing the return. The phrase 'for every month during which the default continued' in section 18 merely indicates the multiplier for determining the penalty and does not convert the default into a continuing one. The court held that the penalty must be computed according to the law in force on the last day the return was due, not based on subsequent amendments.Issue 2: Justification of PenaltiesThe second issue was whether the penalties levied for the assessment years 1964-65 and 1965-66 were justified. The Wealth-tax Officer had levied penalties for late submission of returns, which were upheld by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal.For the assessment year 1964-65, the penalty was divided into two periods:- From July 1, 1964, to March 31, 1969: Penalty at 2% per month, subject to a maximum of 50% of the wealth-tax payable.- From April 1, 1969, to March 18, 1971: Penalty at 0.5% of the net wealth for each month of default.For the assessment year 1965-66, the penalty was similarly divided:- From July 1, 1965, to March 31, 1969: Penalty at 2% per month, subject to a maximum of 50% of the wealth-tax payable.- From April 1, 1969, to March 18, 1971: Penalty at 0.5% of the net wealth for each month of default.The court reiterated that the penalty should be computed according to the law in force on the last day the return was due. Therefore, the penalties for the assessment years 1964-65 and 1965-66 should be calculated based on the provisions of section 18 as they stood before the amendments made by the Finance Act, 1969.Conclusion:The Supreme Court upheld the High Court's decision that the failure to file wealth-tax returns is not a continuing offence. The penalties must be computed according to the law in force on the last day the return was due, and neither the 1964 nor the 1969 amendments have retrospective effect. The appeals were dismissed with costs, affirming the High Court's ruling in favor of the assessee.