1982 (12) TMI 78 - AT - Wealth-tax

Appellate decision on resident status and penalty cancellation for omitted foreign bank deposit

The appellate authority upheld the Wealth-tax Officer's determination of the assessee's resident status for the assessment year 1973-74. The reassessment ... Bona Fide, Income Tax Issues Involved:1. Residential status of the assessee for the assessment year 1973-74.2. Inclusion of foreign bank deposits in the net wealth.3. Imposition of penalty under section 18(1)(c) of the Wealth-tax Act, 1957 for concealment of assets.4. Jurisdiction of the Wealth-tax Officer (WTO) to impose penalty.Issue-wise Detailed Analysis:1. Residential Status of the Assessee for the Assessment Year 1973-74:The assessee filed the return of net wealth for the assessment year 1973-74, claiming non-resident status. The Wealth-tax Officer (WTO) completed the assessment treating the assessee as a resident, relying on the findings in the income-tax assessment for the same year. The appellate authority (AAC) upheld the WTO's determination of the assessee's status as a resident, rejecting the assessee's claim of non-resident status.2. Inclusion of Foreign Bank Deposits in the Net Wealth:The assessee had two deposits in London banks as of the valuation date, 31-3-1973, but only disclosed one deposit of pound 1088.32 in the Standard Bank Ltd., London, while omitting the other deposit of pound 4040.24 in the National City Bank, London. The WTO included the disclosed deposit in the net wealth assessment but did not initially detect the second deposit. The assessee later filed a revised return on 6-11-1975, disclosing the second deposit, which led to a reassessment including the previously omitted amount.3. Imposition of Penalty under Section 18(1)(c) of the Wealth-tax Act, 1957 for Concealment of Assets:The WTO initiated penalty proceedings for concealment of assets after the reassessment. The Commissioner (Appeals) canceled the penalty, reasoning that the assessee's omission was based on an honest belief of non-resident status and that the revised return was filed voluntarily before any detection by the WTO. The Tribunal was divided on this issue, with one member supporting the imposition of penalty, viewing the assessee's initial nondisclosure as concealment, while another member found no concealment, emphasizing the voluntary disclosure by the assessee.4. Jurisdiction of the Wealth-tax Officer (WTO) to Impose Penalty:The Tribunal examined whether the WTO had jurisdiction to impose the penalty or if it required the IAC's direct imposition. The law effective from 1-4-1976 allowed the WTO to impose penalties with the IAC's approval if the concealed amount exceeded Rs. 25,000. The Tribunal concluded that the WTO was competent to levy the penalty with the IAC's approval, reversing the Commissioner's finding on jurisdiction.Separate Judgments:- Judicial Member: Concluded that the assessee was guilty of concealment and upheld the penalty, emphasizing that the assessee's disclosure of only one deposit suggested an intent to hide the second deposit.- Accountant Member: Disagreed, finding no concealment, highlighting the assessee's voluntary disclosure and the lack of evidence that the WTO had detected the second deposit before the revised return was filed.Third Member's Decision:The Third Member sided with the Accountant Member, concluding that no penalty was exigible. The Third Member emphasized the absence of detection by the WTO before the revised return and the assessee's bona fide belief in non-resident status when filing the original return.Final Outcome:The case was referred back to the Delhi Bench 'B' for passing an order according to the majority opinion, which favored the assessee and canceled the penalty.