JAGANNATH SINGH Vs. COMMISSIONER OF WEALTH TAX
LAWS(PAT)-1979-5-2
HIGH COURT OF PATNA
Decided on May 08,1979

JAGANNATH SINGH Appellant
VERSUS
COMMISSIONER OF WEALTH-TAX Respondents





Cited Judgements :-

RAM SINGH VS. COMMISSIONER OF WEALTH TAX [LAWS(PAT)-1982-12-7] [REFERRED]
GANGOTRI TEXTILES LTD VS. DEPUTY COMMISSIONER OF INCOME TAX [LAWS(MAD)-2020-8-291] [REFERRED TO]


JUDGEMENT

Brishketu Saran Sinha, J. - (1.)BY an order dated 26th February, 1975, this court framed the following question :
"Whether, on the facts and in the circumstances, of the case, the imposition of penalty and the quantum of penalty levied for the late filing of return is legal and proper ?"

and directed the Income-tax Appellate Tribunal, Patna Bench (hereinafter referred to as "the Tribunal"), to state a case under Section 27(3) of the W.T. Act, 1957. It has been done.

(2.)FOR the assessment year 1969-70, the wealth-tax return of the assessee was due by 30th June, 1969. It was filed on 3rd February, 1970. The return being late by seven months the WTO issued show-cause notice under Section 18(1)(a) of the W.T. Act to the assessee. In the cause shown in response to the notice, the assessee submitted that he had furnished the return of the wealth-tax voluntarily and had paid the "amount soon after filing the return. He further stated that although the return was filed late, he filed the return as soon as he came to know about his liability and accordingly prayed that no penal action be taken as it was not called for. The WTO, having found the explanation not satisfactory, held the assessee to be in default and imposed a penalty as provided under Section 18(1)(a) of the Act which was to the tune of Rs. 6,825.
It appears that for the assessment years 1964-65, 1965-66, 1966-67, 1967-68, 1968-69 and 1969-70, the assessee had filed the returns after delay on February 3, 1970, under the W.T. Act for which six separate proceedings under Section 18 had been initiated. As the WTO had imposed penalties for all the six years, appeals filed by the assessee against such penalties were heard together by the AAC of Wealth-tax, "A" Range, Patna, and disposed of by a common order, copy of which is annex. "B". On behalf of the assessee it was submitted before the AAC that, in the absence of any directive from the WTO, the assessee also lost sight of the fact that he was liable to pay wealth-tax and as soon as he came to know of his responsibility to file his returns, he did so and also paid the taxes due after assessment, and this circumstance deserved due consideration. It was also submitted that, in any event, a token penalty was sufficient for meeting the ends of justice and the penalties imposed by the WTO were severe and excessive. The AAC held that under the W.T. Act, it was not the duty of the WTO to have apprised the assessee of his responsibility for filing returns. He further held that by looking at the balance-sheet of the company of which the assessee was a shareholder, the WTO was not is a position to determine that the assessee was liable to wealth-tax. He also held that the WTO knew that the assessee was liable to wealth-tax. It was, however, clarified that even if the WTO knew about the assessee's liability, there was no obligation on the WTO to inform the assessee to furnish the wealth-tax returns. The AAC, therefore, dismissed the appeals after holding that the assessee had, without reasonable cause, failed to furnish returns in time. However, certain reliefs were granted to him for the year 1964-65 and some reduction was made in the penalty. No relief was given for the other periods including that of 1969-70.

The assessee, therefore, filed six appeals before the Tribunal which were heard along with five appeals filed by one Srimati Saraswati Devi. All these appeals were heard together and the main order of the Tribunal was passed in the appeals filed by Srimati Saraswati Devi. As the counsel for the assessee adopted those very arguments in the case of the assessee, the Tribunal dismissed the appeals of the assessee with certain modifications in the amount of penalty for the other years except that for the year 1969-70.

Therefore, in order to consider the reasonings given by the Tribunal in rejecting the appeals of the assessee, the order passed by the Tribunal in Srimati Saraswati Devi's case has to be taken into account. It was urged before the Tribunal that the explanation given by the assessee that she was under a bona fide belief that her wealth was not taxable should have been accepted by the AAC. The Tribunal, however, also came to the conclusion that the explanation given by the assessee could not be considered to be reasonable for the delay in filing the return. The plea of the assessee that the department had not issued notice to the assessee to file the return was also negatived. It was, however, held by the Tribunal that there was nothing to show as to how the assessee came to know about the wealth-tax liability only on 3rd February, 1970, when the returns for all the years were filed. The Tribunal further held :

"No doubt the penalty cannot be levied only because there is delay but what is to be seen is whether there was any reasonable cause which prevented the assessee from filing the return. We agree with the reasoning given by the Appellate Assistant Commissioner that no such reasonable cause has been shown and we, therefore, uphold that the penalty was leviable."

The Tribunal, however, made certain reductions in the penalty imposed on the basis of the law as it was for imposing penalties in the relevant year. However, having come to the conclusion that the penalty imposed for the year 1969-70 was in accordance with the amended law applicable for the assessment year, no reduction was given for this year.

(3.)THE main question that falls for consideration in this reference is as to when a penalty can be imposed under Section 18(1)(a) of the W.T. Act. It would, at this stage, be convenient to quote it, which runs thus :
"18. (1) If the Wealth-tax Officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person--

(a) has without reasonable cause failed to furnish the return which he is required to furnish under Sub-section (1) of Section 14 or by notice given under Sub-section (2) of Section 14 or Section 17, or has without reasonable cause failed to furnish within the time allowed and in the manner required by Sub-section (1) of Section 14 or by such notice, as the case may be ; or...

he or it may, by order in writing, direct that such person shall pay by way of penalty-

(i) in the cases referred to in Clause (a), in addition to the amount of wealth-tax, if any, payable by him, a sum equal to two per cent, of the assessed tax for every month during which the default continued."

On a plain reading of this provision it seems that penalty can only be imposed if a person has without reasonable cause failed to furnish the return within the time as prescribed therein. Admittedly, in the instant case, the return was not filed within the time allowed and, therefore, it has to be considered further whether it was filed beyond time without reasonable cause.

In the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 ; [1970] 25 STC 211 (SC), the provisions of the Orissa Sales Tax Act providing for penalty under certain circumstances fell for consideration before the Supreme Court. Under Section 9(1) of the Orissa Sales Tax Act, no dealer who was liable under Section 4 of the Act to pay tax could, carry on business as a dealer unless he has been registered under the Act and possessed a registration certificate. Section 12(5) of that Act further provided that if the authorities were satisfied that a dealer without sufficient cause failed to apply for registration, the authorities after giving the dealer a reasonable opportunity of being heard, assess the dealer for the amount of tax and may further direct that the dealer shall pay by way of penalty, in addition to the amount so assessed, a sum not exceeding 11/2 times that amount. Section 25(1)(a) provided that whoever carried on business in contravention of Section 9(1) shall be punishable with imprisonment for a certain period and fine as provided therein. Penalties had been imposed on the directors of the Hindustan Steel Ltd. for failure to get itself registered as a dealer. One of the questions formulated by the Supreme Court was whether imposition of penalties for failure to register as a dealer was justified. In answering this question, Shah, Acting C.J., observed as follows (p. 29 of 83 ITR):

"Under the Act penalty may be imposed for failure to register as a dealer : Section 9(1), read with Section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonesty or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute."

From what I have quoted above it follows :

(a) that a proceeding for imposing a penalty for failure to carry out a statutory obligation is a quasi-criminal proceeding ;

(b) penalty will not ordinarily be imposed unless a party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation; and (c) when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by statute, it would be justified in refusing to impose penalty.



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