1978 (4) TMI 125 - AT - Wealth-tax

Tribunal upholds penalties under s. 18(1)(c) for income concealment, dismissing Reference Applications.

The Tribunal ruled that penalties imposed by the Wealth-tax Officer under s. 18(1)(c) were justified based on concealment of income, not merely to give ... Penalty under s. 18(1)(c) of the Wealthtax Act, 1957 - power of the Commissioner under s. 18(2A) to reduce or waive penalty - appeal lie to the Appellate Assistant Commissioner - basis for penalty: satisfaction formed in assessment proceedings - finding of fact on leviability of penaltyPenalty under s. 18(1)(c) of the Wealthtax Act, 1957 - power of the Commissioner under s. 18(2A) to reduce or waive penalty - Whether the impugned penalty orders passed by the Wealthtax Officer were orders under s. 18(1)(c) or were merely to give effect to the Commissioner's orders under s. 18(2A). - HELD THAT: - The Tribunal held that the Wealthtax Officer initiated penalty proceedings contemporaneously with completion of reassessment and issued showcause notices under s. 18(1)(c); the penalties were imposed after no replies were received and the Officer expressly recorded that penalty was leviable under s. 18(1)(c), subject only to reduction effected by the Commissioner. The Tribunal relied on the principle that the satisfaction formed by the assessing officer in the course of assessment proceedings constitutes the foundation for levy of penalty, as reflected in decisions in D.M. Manasvi vs. Commissioner of Incometax and Jain Brothers and Others vs. Union of India & Others, and concluded that the orders on their face are orders under s. 18(1)(c) and not merely mechanistic giveeffect orders to s. 18(2A) reductions. [Paras 11, 12, 13]The impugned orders were orders under s. 18(1)(c) of the Wealthtax Act, 1957 and not merely orders giving effect to the Commissioner's s. 18(2A) orders.Appeal lie to the Appellate Assistant Commissioner - Whether an appeal would lie to the Appellate Assistant Commissioner against the penalty orders passed by the Wealthtax Officer. - HELD THAT: - The Tribunal's Third Member answered that an appeal would lie against the Wealthtax Officer's penalty orders before the Appellate Assistant Commissioner. Having held that the Wealthtax Officer's orders were in substance orders under s. 18(1)(c), they are amenable to appeal to the statutory appellate forum and were accordingly treated as such by the Tribunal. [Paras 10, 12]An appeal would lie before the Appellate Assistant Commissioner against the penalty orders of the Wealthtax Officer.Finding of fact on leviability of penalty - Whether the Tribunal's cancellation of penalties involved a question of law fit for reference. - HELD THAT: - The Tribunal considered the evidence and recorded a factual finding that no penalty was leviable under s. 18(1)(c) on the merits. The court held that such a conclusion is a finding of fact and not a question of law; accordingly, the Reference Applications which sought to raise questions of law out of those factual determinations did not disclose any question of law for referral. [Paras 14, 15]The cancellation of penalties was a factual determination and did not raise any question of law; the Reference Applications are therefore liable to be dismissed.Final Conclusion: The court dismissed the Reference Applications: the penalty orders challenged were correctly characterised as orders under s. 18(1)(c) (and hence appealable), the Tribunal's cancellation of penalties was a factual finding on the merits, and no question of law arose for reference. Issues:1. Interpretation of orders passed by Wealth-tax Officer under s. 18(1)(c) and s. 18(2A) of the Wealth-tax Act, 1957.2. Whether penalties imposed by Wealth-tax Officer were justified and appealable.3. Difference of opinion between members of the Tribunal on the nature of the orders passed by the Wealth-tax Officer.Analysis:The Commissioner of Wealth-tax sought a reference to the Tribunal regarding the nature of orders passed by the Wealth-tax Officer under s. 18(1)(c) and s. 18(2A) of the Wealth-tax Act, 1957, and the validity of penalties imposed. The original assessments were completed under s. 16(3) of the Act, but later discrepancies were found, leading to penalty proceedings under s. 18(1)(c) initiated by the Wealth-tax Officer. Assessees moved applications under s. 18(2A) to reduce penalties, which were partially granted by the Commissioner. The Wealth-tax Officer imposed penalties under s. 18(1)(c) citing concealment of assets by the assessees. The Appellate Assistant Commissioner dismissed appeals against these penalties, leading to a difference of opinion within the Tribunal.The Tribunal deliberated on whether the penalties were justified under s. 18(1)(c) or merely to give effect to orders under s. 18(2A). The Judicial Member opined that the penalties were correctly imposed under s. 18(1)(c) based on the concealment of income, while the Accountant Member believed the Wealth-tax Officer was implementing orders under s. 18(2A). The President was consulted on this matter, and the Third Member concluded that the penalties were indeed under s. 18(1)(c) and appealable before the Appellate Assistant Commissioner.Subsequently, the Tribunal re-heard the appeals, with the Accountant Member ruling that no penalty was justified on merit, leading to the appeals being allowed. The Tribunal cited Supreme Court precedents emphasizing that penalties under s. 18(1)(c) are based on the assessment proceedings and the concealment of income. The Tribunal held that the penalties imposed by the Wealth-tax Officer were indeed under s. 18(1)(c) and not merely to give effect to orders under s. 18(2A), dismissing the Reference Applications as no questions of law arose.In conclusion, the Tribunal upheld the penalties imposed under s. 18(1)(c) and dismissed the applications, emphasizing that the penalties were justified based on the concealment of income and were not merely to give effect to orders under s. 18(2A).