Penalty cancellation under the Wealth-tax Act fails where the Commissioner has already rejected waiver under the relevant provision.

Where the Commissioner had already rejected waiver under Section 18(2A) of the Wealth-tax Act, the Appellate Assistant Commissioner was not justified in cancelling the penalty levied under Section 18(1)(a). The Tribunal followed its earlier view and a Special Bench decision to hold that the appellate authority could not override the Commissioner's prior order on waiver. The cancellation of penalty was therefore unsustainable, and the original penalty order passed by the Wealth-tax Officer was restored.

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Issues: (i) Whether the Appellate Assistant Commissioner could cancel a penalty levied under Section 18(1)(a) of the Wealth-tax Act when the Commissioner had already passed an order under Section 18(2A) rejecting waiver of the penalty; (ii) whether the cancellation of penalty by the Appellate Assistant Commissioner was sustainable.

Issue (i): Whether the Appellate Assistant Commissioner could cancel a penalty levied under Section 18(1)(a) of the Wealth-tax Act when the Commissioner had already passed an order under Section 18(2A) rejecting waiver of the penalty.

Analysis: The Commissioner's order under Section 18(2A) was already in existence before the appellate decision. The Tribunal followed its earlier view and the Special Bench decision that, once the Commissioner had dealt with the waiver application, the Appellate Assistant Commissioner was not justified in cancelling the penalty on appeal.

Conclusion: The Appellate Assistant Commissioner lacked justification to cancel the penalty in the face of the Commissioner's order under Section 18(2A).

Issue (ii): Whether the cancellation of penalty by the Appellate Assistant Commissioner was sustainable.

Analysis: In view of the Commissioner's rejection of the waiver application and the Tribunal's consistent earlier view, the appellate order cancelling the penalty could not stand.

Conclusion: The cancellation of penalty was unsustainable and the penalty imposed by the Wealth-tax Officer was restored.

Final Conclusion: The Revenue succeeded, the appellate order was annulled, and the original penalty order was reinstated.

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