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Issues: (i) Whether penalty under section 15-B of the Wealth-tax Act, 1957 could be imposed on a legal heir for default committed by the deceased assessee; (ii) whether the quantum of penalty was to be governed by the law in force on the date of default or the amended law in force on the date of assessment.
Issue (i): Whether penalty under section 15-B of the Wealth-tax Act, 1957 could be imposed on a legal heir for default committed by the deceased assessee.
Analysis: Section 19(3) of the Wealth-tax Act, 1957 applies sections 14, 15 and 17 to an executor, administrator or other legal representative, but does not extend that treatment to section 15-B. The obligation to explain the default and the penal liability attach to the person who committed the infringement. A legal representative cannot be called upon to answer a default committed by the deceased, and the penalty provisions were held inapplicable to such representative.
Conclusion: Penalty under section 15-B could not be imposed on the legal heir, and this issue was decided in favour of the assessee.
Issue (ii): Whether the quantum of penalty was to be governed by the law in force on the date of default or the amended law in force on the date of assessment.
Analysis: The applicable principle was that penalty proceedings initiated after assessment are ordinarily governed by the law on the date of assessment, but an amendment enhancing the penalty cannot be applied to defaults committed before the amendment. Since the amendment increased the penal incidence, the enhanced rate could not govern the earlier defaults. The maximum penalty at the earlier rate was therefore held applicable.
Conclusion: The enhanced amended rate was inapplicable, and the penalty could be imposed only up to the earlier maximum of 50% of the tax; this issue was decided in favour of the assessee.
Final Conclusion: The department's appeals failed and the assessee succeeded on the cross objections, with the penalties confined to the pre-amendment ceiling and the liability itself negatived against the legal heir.
Ratio Decidendi: A legal representative is not liable for penalty under a provision not extended to that representative by the statute, and an amendment enhancing penalty cannot be applied retrospectively to completed past defaults.
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