(1.) THE following question has been referred to this Court under S. 27 of the WT Act, 1957 (hereafter referred to as "the Act") :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that penalty was leviable in accordance with the provisions of S. 18(1) of the Act, prior to its amendment on 1st April, 1969, in so far as the returns filed by the assessee in respect of the asst. yrs. 1964 65 to 1968 69 were concerned.?"
(2.) FOR the asst. yrs. 1964 65 to 1967 68, the assessee filed returns of his wealth on 3rd Oct., 1969, and for the asst. yrs. 1968 69 and 1969 70, he filed them on 20th Jan., 1970. Really, he should
have filed them on or before 30th June of each of those assessment years. The WTO noticed these
defaults during the assessment proceedings, and after they were over, he initiated penalty
proceedings under S. 18(1) of the Act. The contention raised on behalf of the assessee was that the
returns were filed voluntarily; and, therefore, no penalty should be levied. The WTO held that the
returns were not filed voluntarily, but were filed only after enquiries regarding his total wealth were
made during the income tax assessment proceedings. He also held that the assessee had without
any reasonable cause, failed to file the returns within the prescribed time. He, therefore, passed
orders on 30th Nov., 1972, imposing penalty for each of those assessment years. Penalties were
computed in accordance with the provisions of S. 18(1)(a) as they stood then. The assessee filed
appeals before the AAC (hereafter referred to as "the AAC"). It was urged before the AAC that the
total wealth, though returned and assessed in the hands of the assessee in his "individual"
capacity, in fact, belonged to the HUF of which the assessee was the Karta, and that the assessee
in his individual capacity did not have any taxable wealth at all. This contention was raised for the
first time before the AAC. For that reason and also because he did not find any merit in it, he
rejected the same. He also agreed with the finding that the assessee had committed the defaults
without a reasonable cause. He, therefore, confirmed the orders passed by the WTO. The assessee
then preferred appeals to the Tribunal (hereafter referred to as "the Tribunal"). The Tribunal also
confirmed the finding regarding the defaults committed by the assessee. However, it upheld the
contention that so far as the asst. yrs. 1964 65 to 1968 69 are concerned, penalty should have
been computed in accordance with S. 18(1) as it stood before its amendment which came into force
from 1st April, 1969, and directed the WTO to recompute the penalty accordingly. Dissatisfied with
this decision, the Department moved the Tribunal for making a reference to this Court. In all, five
applications were filed before the Tribunal. The question of law involved in all those applications
being common, a common reference has been made by the Tribunal.
The contention of the Revenue is that for the purpose of the imposition of penalty, the law applicable is the law on the date when the officer decides to impose penalty and the Tribunal
committed an error of law in holding that the law in force at the time when the default was
committed should apply in such cases.
In respect of a similar default under the GT Act, 1958, the Madras High Court in CGT vs.
Muthukumaraswamy Mudaliar (1975) 98 ITR 540, following the judgments of the Punjab and
Haryana High Court and the Madhya Pradesh High Court in CIT vs. Bhan Singh Boota Singh (1974)
95 ITR 562 (Punj) and CIT vs. Ramchand Kundanlal Saraf (1975) 98 ITR 474 (MP), respectively, held that where the infringement is said to be the failure to furnish the return in time, the offence
is complete when the return is not filed on the due date. Therefore, in such cases, the offence
having taken place on the date fixed for furnishing the return, the law as on that date has to
govern the levy of penalty.
(3.) IN Brij Mohan vs. CIT (1979) 120 ITR 1 (SC), the contention of the assessee was that an assessment proceeding for the determination of the total income and the computation of the tax
liability must ordinarily be made on the basis of the law prevailing during the assessment year, and
inasmuch as concealment of income was concerned with the income relevant for assessment
during the assessment year, any penalty imposed in respect of concealment of such income should
also be governed by the law pertaining to that assessment year. The Supreme Court rejected that
contention, with the following observations (p. 4) :
"In our opinion, the assessment of the total income and the computation of tax liability is a proceeding which, for that purpose, is governed by entirely different considerations from a proceeding for penalty imposed for concealment of income. And this is so notwithstanding that the income concealed is the income assessed to tax. In the case of the assessment of income and the determination of the consequent tax liability, the relevant law is the law which rules during the assessment year in respect of which the total income is assessed and the tax liability determined. The rate of tax is determined by the relevant Finance Act. In the case of a penalty, however, we must remember that a penalty is imposed on account of the commission of a wrongful act, and plainly it is the law operating on the date on which the wrongful act is committed which determines the penalty. Where penalty is imposed for concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which is relevant. It is wholly immaterial that the income concealed was to be assessed in relation to an assessment year in the past. In CWT vs. Suresh Seth (1981) 129 ITR 328 (SC), the facts were similar to the facts of the present case. In that case, the assessee had filed his wealth tax returns for the asst. yrs. 1964 65 and 1965 66 on 18th March, 1971. He was required by S. 14(1) of the Act to file the return for the asst. yr. 1964 65 on or before 30th June, 1964, and the return for the asst. year 1965 66 on or before 30th June, 1965, and as the returns were filed late, penalty proceedings were initiated by the WTO. The contention raised on behalf of the Department was that the default or failure to file a return in time is a continuing default and, therefore, the penalty had to be computed in accordance with s. 18 of the Act as it stood prior to its amendment by the Wealth tax (Amendment) Act, 1964, for the period prior to 1st April, 1965, in accordance with S. 18 of the Act as amended by the Wealth tax (Amendment) Act, 1964, for the period between 1st April, 1965, and 31st March, 1969, and in accordance with S. 18 of the Act as amended by the Finance Act, 1969, for the period between 1st April, 1969, and 18th March, 1971. The Supreme Court negatived this contention and observed as under (p. 335) : "A liability in law ordinarily arises out of an act of commission or an act of omission. When a person does an act which law prohibits him from doing it and attaches a penalty for doing it, he is stated to have committed an act of commission which amounts to a wrong in the eye of law. Similarly when a person omits to do an act which is required by law to be performed by him and attaches a penalty for such omission, he is said to have committed an act of omission which is also a wrong in the eye of law. Ordinarily, a wrongful act or failure to perform an act required by law to be done becomes a completed act of commission or of omission, as the case may be, as soon as the wrongful act is committed in the former case and when the time prescribed by law to perform an act expires in the latter case and the liability arising therefrom gets fastened as soon as the act of commission or of omission is completed. The extent of that liability is ordinarily measured according to the law in force at the time of such completion." ;