TaxTMI 
TaxTMI 
2010 (10) TMI 719
X X X X Extracts X X X X
X X X X Extracts X X X X
....sment years, but no return was filed by the assessee in response thereto. Since no return was filed within time allowed in notice issued under sec. 17 of the Act, the AO issued a letter dated 19.09.1995, which was served on the same date, requiring the assessee to show cause as to why, in the absence of Wealth-tax return, assessment be not completed on a total wealth to be determined keeping in view the profit and loss account and balance-sheet filed along with the Company's Income-tax return for the relevant assessment year. The assessee then filed return of wealth in October, 1995 showing total wealth of Rs.44,89,476/- and Rs.3,09,96,038/- for the assessment years 1991-92 and 1992-93 respectively. The assessment then came to be made under sec. 16(3) of the Act vide order dated 25.3.1997 in both the years. The net wealth assessed by the AO was at Rs.6,23,20,500/- and Rs.10,84,82,800/- for assessment years 1991-92 and 1992-93 respectively. The assessee then preferred appeal before the Commissioner of Wealth-tax (Appeals) and the total wealth determined after appeal effect given to the CWT(A)'s order stood determined at Rs.44,89,476/- and Rs.2,58,76,613/-. In other words, returned w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stence. The assessee has pleaded ignorance as a reasonable cause. But it is a well settled canon of law that ignorance of law can not be a defence against the consequences of its violation. Admittedly, the assessee had taxable wealth but the return was not furnished by the due date. It was also not furnished by the last date for furnishing a late return i.e. 3103.1993. Thus, it is a clear case of wealth escaping assessment, particularly in view of the Explanation to sec. 17(1A) of the Act which reads as below: "Explanation:- For the purposes of sub-section (1) and sub-section (1A), the following shall also be deemed to be cases where net wealth chargeable to tax has escaped assessment, namely:- (a) where no return of net wealth has been furnished by the assessee although his net wealth or the net wealth of any other person in respect of which he is assessable under this Act on the valuation date exceeded the maximum amount which is not chargeable to wealth-tax....". 6. The undisputed Facts of this case are as below: I. The assessee had not previously been assessed under the Act. II. It failed, without reasonable cause, to furnish th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n, there was no compliance. A reminder was issued on 19.02.97, requiring compliance on 27.02.97. On 31.02.97, a notice u/s 16(4) of the Act was issued to the assessee calling for information about assets of the assessee, by 03.03.97. It was only on 03.03.97 that a representative of the assessee appeared for the first time. Even though a letter signed by Mr. R.K. Singh, the Controller (finance) were submitted on behalf of the assessee on 03.03.97, the power of attorney in his favour was furnished only on 10.03.97. The assessment was made on 25.03.97. Ignorance of law is no defence. In this particular case, as the foregoing narration of events shows, it was not ignorance but sheer callousness which was the cause of the concealment of wealth. The plea of ignorance also does not stick because the assessee is a part of the Sahara India group of cases which even during the previous year had gained prominence and was assisted by a qualified team of professionals in matters of taxation. There is nothing on record to suggest that, had the notice u/s 17(1) not been issued, the assessee would have furnished the return and paid the tax. 8. The tax sought to be evaded in this case, ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppellant on this count. Thus, it will be seen that there is no concealment vis-àvis wealth assessed and wealth returned and only the concealment is confined to non-filing of the return of wealth for the first time as mentioned in explanation 3 of section 18(1) of the Wealth Tax Act. The said explanation, speaks of levy of penalty in the case of persons who are not previously being assessed to tax if they without reasonable cause fail to furnish the return within the period specific under section 17A(1) of the Wealth Tax Act. It is thus clear that penalty can only be imposed if there is no reasonable cause. I find considerable force in the arguments of the appellant that levy of penalty is not mandatory and the levy of wealth-tax on companies was incorporated under the Wealth Tax Act itself but wealth tax was being levied through section 40 of the Finance Act, 1983 and, therefore, the bonafideness of the belief of the appellant should not be doubted in the matter. There is not hard and first rule which can be laid down or rigid method which is capable of being prescribed for reasonable cause. The word reasonable cause would mean a cause which prevents a re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he knowledge of the assessee and as to why the assessee failed to file the return voluntarily before issue of notice under sec. 17 of the Act by the AO. He further pointed out that the assessee has even failed to file the return promptly within the time specified in the notice issued under sec. 17 of the Act, and it is only after the reminder given by the AO that the assessee did file the return showing taxable wealth in both the years. He therefore, supported the AO's order and submitted that the CWT(A) has merely accepted the assessee's explanation on the face of it without there being any adequate material to support the same. 7. The learned counsel for the assessee on the other hand, reiterated his contentions and submissions that where made before the authorities below and contended that the assessee was not aware about the provision of sec. 40 of the Finance Act, 1983 and hence no return of wealth was filed for the Assessment Years 1991-92 and 1992-93 though the return for Assessment Year 1993-94 onwards were filed voluntarily by the assessee. The learned counsel for the assessee therefore, supported the CWT(A)'s order and relied upon the various decisions referred ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct. In the present case it is not in dispute that the assessee had assessable net wealth chargeable to tax in both the assessment years as would be clear from the returned wealth disclosed by the assessee in a return filed after notice under sec. 17 was issued. It is not in dispute that the assessee has failed to furnish the return of its net wealth which he was required to furnish under sec. 14 within the period specified in sub-sec. (1) of sec. 17A of the Act i.e. within 2 years from the end of the relevant assessment year. Therefore, in the light of the provisions contained in Explanation 3 to sec. 18(1)(c), the assessee shall for the purpose of sec. 18(1)(c) of the Act, be deemed to have concealed the particulars of his assets or furnished inaccurate particulars of any assets or debts in respect of the assessment yeas under consideration. Now the question arises for our determination is as to whether the assessee has failed to do so with any reasonable cause or not. In this respect, the assessee has submitted that the assessee was under bona fide belief that no wealth-tax was leviable as per Wealth-tax Act, 1957 on the assessee company in the assessment years 1991-92 and 1992-9....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e knowledge of legal provisions and as such, was under bona fide belief that no wealth-tax was leviable as per Wealth-tax Act, 1957 on the companies. It was further contended that the assessee did not enquire into and did not make any efforts to file its return of wealth. From these submissions it is clear to us that the assessee was aware that the wealth-tax Act was in existence. The assessee is also aware that the wealth-tax on companies was withdrawn from 1.4.1960 and it was revived with effect from 1.04.1983 to a limited extent by sec. 40 of the Finance Act, 1983. The assessee is also aware about the position that sec. 40 of the Finance Act, 1983 has been abolished and consequential effect was made in sec. 3(1) of the Wealth-tax Act by including the word "Company" in sec. 3(1) of the Act for bringing charge of levy of wealth-tax on all the companies by incorporating the provisions in the Wealth-tax Act itself. We are concerned with the assessment years 1991-92 and 1992-93. In the present case, a return of net wealth under sec. 14 could have been filed by the assessee within the extended period by 31.3.1993 and 31.3.1994 for the Assessment Years 1991-92 and 1992-93 respectively.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Act by the Finance Act, 1992 with effect from 1.04.1993 whereby sec. 40(3) of the Finance Act was omitted. Section 3(1) of the Wealth-tax Act creates liabilities to pay wealth-tax on all companies on and from A.Y. 1993-94 as so amended by the Finance Act, 1992. Reading sec. 40 of the Finance Act, 1983, along with the Finance act, 1992, this makes it clear that the levy of wealth-tax on closely-held companies was revived by sec. 40 of the Finance Act, 1983. There is no ambiguity in that regard. Therefore, the assessee's contention that the assessee was under bona fide belief that no wealth-tax was leviable on the assessee company in the Assessment Years 1991-92 and 1992-93, is misconceived or make-believe as it is not based on any adequate and sufficient material. The assessee has also contended that the assessee was in its initial stage of operation and expansion and was not having expertise knowledge of legal provisions. In this connection, we have examined audited statement of account and the income-tax returns for the assessment years 1989-90 to 1992-93. The assessee has filed its income-tax return for assessment year 1989-90 on 11th March, 1991, for Assessment Year 1990....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for bringing charge of levy of wealth-tax on the companies in the Act itself. Therefore, in the year 1992 when the amendment was brought in the Finance Act, 1992, the assessee could have submitted voluntarily the return of wealth for the Assessment Years 1991-92 and 1992-93 by which the time, the period prescribed under sec. 14 read with sec. 17A to file return was still available with the assessee, but the assessee has failed to file the return of wealth even at that point of time. Further, the Assessing Officer issued notice under sec. 17 of the Act on 31.08.1994 asking the assessee to file return of net wealth for the Assessment Years 1991-92 and 1992-93 but at that stage also the assessee did not file its return of net wealth which compelled the AO to issue a letter dated 19.09.1995 requiring the assessee to show cause as to why in the absence of wealth-tax return, assessment may not be completed on the basis of profit and loss account and balance-sheet of the company available in the Income-tax return. After receiving this show cause notice, the assessee then filed return of net wealth in October, 1995. This shows lack of bonafideness on the part of the assessee. The assessee....