TaxTMI 
TaxTMI 
1977 (5) TMI 23
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.... could not be completed because of these disputes for quite some time. The assessee was, therefore, not in a position to know his wealth and was, therefore, unable to file wealth returns earlier. In this connection, the assessee claimed that there was no malafide or deliberate intention to withhold the WT returns. A reference was also made to the fact that penalty imposed under s. 271(1)(a) of the IT Act against the firm had been cancelled by the Tribunal accepting the contention that the delay in the closing of accounts was on account of serious disputes between the partners. The WTO found that the contentions of the assessee had no force. The firm Nanhoomal Jyoti Pd. had been dissolved on 31st Aug., 1966 and its business was thereafter divided between three partners Sri Motilal Jain, the assessee, Sri Narain Das Jain and Sri Jawaharlal Jain. After the division of the business between the three partners. the WTO felt that non finalization of the account books of the firm could not be relevant for filing of the WT returns by the assessee for the assessment years under consideration as the assessee had no interest in the firm on the valuation date relevant for these years. The other....
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....oceedings were invalid as penalty notices had been issued long after the close of the assessment proceedings for these years. He also agreed with the assessee that the penalties had been levied without giving the assessee an opportunity of being heard. Relying in the Patna decision reported in 100 ITR 253, the AAC also held that no penalty could be levied for default under s. 14(1) of the WT Act in cases where notice under s. 14(2) has been issued. The AAC held that penalty orders for all these four years were not sustainable in view of the above mentioned legal defects. Even on facts, the AAC accepted the assessee's claim that he was not in a position to file the WT returns for these years unless the account books of the firm Nanhoo Mal Jyoti Pd. were closed. The delay in filing of the returns was, therefore, held to be for reasonable cause. The AAC also accepted the assessee's contention that the penalty notices issued by the WTO were defective inasmuch as they did not bring out the exact default for which the assessee was sought to be penalised. The total wealth of the assessees shown by him in the returns was below taxable limit. The AAC therefore, also held that no penalty cou....
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....d be levied for default under s. 14(2) of the WT Act. The wealth of the assessee was found to be much above the taxable limit. The assessee could not, therefore, claim that he was not required to file his WT returns under s. 14(1). In any case, after the issue of notice under s. 14(2) he was bound to submit his WT returns and failure to comply with his notice within the time allowed would render him liable to penalty. The AAC was, therefore, not justified in cancelling the penalties on this ground. he was also not justified in accepting the assessee's claim that the delay in filing of the WT returns was due to delay in the finalisation of the accounts of Nanhoomal Jyoti Pd. That firm was dissolved on 31st Aug., 1966. The delay in the closing of the accounts of the firm for that period would not be relevant for the submission of the returns for the years under consideration. There was also no evidence to show that the accounts of that firm were actually closed in December, 1971, as claimed by the assessee. Referring to the Tribunal's order in he case of that firm for the asst. yr. 1965-66, in ITA 358(A)/1972-73 Sri Basu claimed that "Even after the settlement of the disputes, no att....
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.... 1969-70 30-5-69 19-8-69 -do- Rs. 2,88,005 7,42,031 1070-71 30-6-70 7-9-70 -do- Rs. 3,28,776 7,71,220 All the assessments were completed on 24th Feb., 1973 and all these orders contained the direction for issue of penalty notices under s. 18(1)(a) of the WT Act for delay in filing the returns. These orders were passed by Sri A.K. Misra, WTO. Sri A.K. Misra was succeeded by Sri P.N. Pathak WTO. Sri Pathak issued notices under s. 18(2) of the WT Act for all these years on 3rd Dec., 1974. These notices requested the assessee to appear before the WTO in person or through a duly authorised Representative on 18th Dec., 1974 at 11 a.m. and show cause why an order imposing penalty should not be made under s. 18(1) of the WT Act. As an alternative to personal appearance the assessee could show cause in writing. The notices further stated that the written explanation submitted by the assessee would be considered before any order is made under s. 18(1)(a). In response to these notices, the assessee sent written replies. The assessee claimed that the notices issued by the WTO were illegal in asmuch as they have not been issued during the course of assessme....
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....for levy of penalties, Sri Misra even if he so wanted, could not close the penalty proceedings without passing a formal order. Admittedly, there is no such order by Sri Misra cancelling his earlier direction. We, therefore, fell that the AAC was wrong in holding that the delay in the issue of penalty notices would render the penalty proceedings invalid. There is also no justification for him to hold that the penalty notices were defective as they did not mention the exact default of the assessee. The notices, copies of which are at page 14 to 17 of the assessee's paper book, clearly show that they have been issued for levying penalties under s. 18(1)(a) of the WT Act The only defect is that these notices did not indicate whether the penalties are sought to be levied for the default of s. 14(1) or s. 14(2) or s. 17. All the same, the assessee as is apparent from the replies submitted by him clearly understood the import of these notices and was able to give detailed reply explaining his position. These notices had, therefore, served their purpose and any defect in the same would not render the penalty proceedings invalid. The Kerala High court decision in the case of N.N. Subramania....
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.... is supported by the Patna decision in the case of Bihar Textiles 100 ITR 253 Del. But the decision of the Delhi High Court in CIT vs. Hindustan Industrial Corpn. 85 ITR 657 Del and the Andhra Pradesh High Court decision in Mullapudi Venkatarayulu vs. Union of India 99 ITR 448 AP are against this view. The very scheme of the Act is that in cases where an assessee does not file the return in compliance with s. 14(1) the WTO has got to serve a notice under s. 14(2) for initiating the assessment proceedings. Therefore, it cannot be held that the default of s. 14(1) cannot be penalised in case where notice under s. 14(2) is served upon the assessee by the WTO. Even if the view taken by the AAC was correct, he could not cancel the entire penalty so far as it related to the delay after the date on which the returns had become due under s. 14(2) would have to be upheld. The fact that the wealth as shown by the assessee in his returns was belong the taxable limit could only explain his non-compliance with the provisions of s. 14(1). This could, however, be no reason for not filing the WT returns inspite of service of notices under s. 14(2). After the service of these notices, the assessee ....