JUDGMENT R.K. Agrawal, J.
1. The present appeal under Section 27A of the Wealth Tax Act, 1957 (hereafter referred to as the Act) has been filed against the order of the Income Tax Appellate Tribunal, Delhi Bench, New Delhi dated 11th August, 1998.
2. Briefly stated the facts giving rise to the present appeal are as follows:
The present appeal relates to the imposition of penalty under Section 18(1)(c) of the Act for the Assessment Year 1977-78. The respondent assessee was assessed to wealth tax up to the Assessment Year 1976-77. Thereafter he had not filed any return. The notice under Section 17 of the Act was issued to him but no return was filed. Notices under Section 16(4) of the Act was issued fixing various dates but the respondent-assessee did not appear before the Assessing Authority. The assessment was completed on 16th March, 1988 under Section 16(5) of the Act on the net wealth of Rs. 2752700/- and penalty under Section 18(1)(c) of the Act was also initiated in the course of assessment proceedings. The penalty proceedings were completed ex parte and a sum of Rs. 51,420/- was imposed as penalty. The appeal preferred by the respondent assessee was allowed by the Commissioner of Income Tax (Appeals) on the ground that no penalty under Section 18(1)(c) can be levied as he had not filed return for this year. According to Commissioner of Income Tax (Appeals) unless an assessee submits a return actually concealing particulars of his net wealth, he could not be said to have concealed wealth or to have furnished inaccurate particulars thereof and consequently in such cases no penalty can be levied. The case of the assessee does not fall under any of the Explanations to Section 18(1)(c) of the Act as he has been previously assessed. The Revenue's appeal preferred before the Tribunal has been dismissed.
3. We have heard Sri A. N. Mahajan, learned standing counsel appearing on behalf of the Revenue. Nobody has appeared on behalf of the respondent assessee.
4. Learned standing counsel submitted that in respect of the notice issued under Section 17 of the Act the respondent assessee did not file the return and thus he concealed his wealth exposing himself to penalty under Section 18(1)(c) of the Act. The fact that he has been previously assessed under the Act is not material for imposition of penalty. He further submitted that the respondent assessee did not submit any explanation whatsoever and, therefore, the wealth assessed would be the wealth which has been concealed by him and the penalty levied has, therefore, wrongly been annulled.
5. Having given our anxious consideration to the various pleas raised by the learned standing counsel we are of the considered opinion that the penalty under Section 18(1)(c) is exigible only where a person has concealed the particulars of any assets or furnished inaccurate particulars of any assets or debts. For ready reference Section 18 is reproduced below:
18. Penalty for failure to furnish returns, to comply with notices and concealment of assets, etc. (1) If the Wealth-tax Officer, Appellate Assistant Commissioner, (Commissioner (Appeals)) Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person--
(c) has concealed the particulars of any assets or furnished inaccurate particulars of any assets or debts;
he or it may, by order in writing, direct that such person shall pay by way of penalty--
(iii) in the cases referred to in Clause (c), in addition to any wealth-tax payable by him, a sum which shall not be less than, but which shall not exceed five times, the amount of tax sought to be evaded by reason of the concealment of particulars of any assets or the furnishing of inaccurate particulars in respect of any assets or debts. Explanation 1. For the purposes of Clause (iii) of this sub-section, the expression "the amount of tax sought to be evaded"-
(a) in a case to which Explanation 3 applied, means the tax on the net wealth assessed;
(b) in any other case, means the difference between the tax on the net wealth assessed and the tax that would have been chargeable had the net wealth assessed been reduced by the amount which represents the value of any assets in respect of which particulars have been concealed or inaccurate particulars have been furnished and of any debts in respect of which inaccurate particulars have been furnished.
Explanation 2: Where in respect of any facts material to the computation of the net wealth of any person under this Act-
(A) such person fails to offer an explanation or offers an explanation which is found by the Wealth-tax Officer or the Appellate Assistant Commissioner (or the Commissioner (Appeals) to be false or (B) such person offers an explanation which he is not able to substantiate, then, the amount added or disallowed in computing the net wealth of such person as a result thereof shall, for the purposes of Clause (c) of this Sub-section, be deemed to represent the value of the assets in respect of which particulars have been concealed:
Provided that nothing contained in this Explanation shall apply to a case referred to in Clause (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his net wealth have been disclosed by him.
Explanation 3. Where any person who has not previously been assessed under this Act fails, without reasonable cause, to furnish within the period specified in Clause (a) or, as the case may be, Clause (b) of Sub-section (1) of Section 17A, a return of his net wealth which he is required to furnish under Section 14 in respect of any assessment year and, until the expiry of either of the periods applicable to him, no notice had been issued to him under Sub-section (2) of Section 14 or Sub-section (1) of Section 17 and the Wealth-tax Officer or the Appellate Assistant Commissioner (or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has assessable net wealth, then, such person shall, for the purpose of Clause (c) of this sub-section, be deemed to have concealed the particulars of his assets or furnished inaccurate particulars of any assets or debts in respect of such assessment year, notwithstanding that such person furnishes a return of his net wealth at any time after the expiry of either of the periods aforesaid applicable to him in pursuance of a notice under Section 17.
Explanation 4: Where the value of any assets returned by any person is less than seventy per cent of the value of such asset as determined in an assessment under Section 16 or Section 17, such person shall be deemed to have furnished inaccurate particulars of such asset within the meaning of Clause (c) of this Sub-section, unless he proves that the value of the asset as returned by him is the correct value.
6. From a perusal of the aforesaid provisions we find that present is not a case where it can be said that the respondent assessee has furnished inaccurate particulars of any assets or debts. The only question survives is whether he has concealed the particulars of any assets or not when pursuant to the notice issued under Section 17 no return has been filed.
7. The question as to whether an assessee has concealed the particulars of his turnover where he has not filed the return came up for consideration before the Apex Court in the case of Narain Das Suraj Bhan v. Commissioner, Sales Tax, U.P. Lucknow (1968) 21 S.T.C. 104. The Apex Court while considering the provisions regarding the imposition of penalty provided under Clause (b) of Section 15-A (1) of the U.P. Sales Tax Act has held as follows:
In our opinion, Clause (b) of Section 15-A(1) is attracted as soon as it is shown that the assessee has concealed the particulars of its turnover or deliberately furnished inaccurate particulars of such turnover in the return filed under Section 7 of the Act. It is manifest that from the grammatical point of view the words "inaccurate particulars of such turnover" in Clause (b) of Section 15-A (1) refer back to Clause (a) where the return under Section 7 is specified. In other words, Clause (b) refers to default in respect of a return furnished under Section 7 and cannot possibly refer to any default in respect of anything done by the assessee in a proceeding under Section 21. As there is no question of furnishing a return of a turnover in a proceeding under Section 21, the assessee cannot be guilty of concealing particulars of its turnover from, or of furnishing inaccurate particulars in a proceeding under Section 21. The concealment or furnishing inaccurate particulars must be in the return furnished under Section 7. Clause (a) of Section 15A(1) deals with the failure of the assessee to furnish the return of the turnover, which he is required to furnish under Section 7 or the failure of the assessee to furnish it within the time allowed or in the manner prescribed. Clause (b) of the section deals with the concealment or inaccurate furnishing of particulars of the turnover in respect of which the return was required to be filed and which is referred to in Clause (a).
8. This Court in the case of Commissioner of Sales Tax, U.P. v. Shahid tiussain Rakesh Kumar (1977) 39 STC 520 has held that in a case where no return has been filed penallyproceedings can be initiated only under Section 15-A(1)(a) and not 15-A(1)(b) of the U.P. Sales Tax Act, 1948. It has held as follows:
A perusal of the two parts clearly establishes that Section 15-A(1)(a) applies in a case where the dealer has failed to furnish the return under Section 7, where sub- Clause (b) applies in a case where the return has been furnished but there is deliberate concealment or the return furnished is inaccurate. The legislature has in the two sub-clauses mentioned two different categories and has also laid down different penalties in Sub-clause (c). They deal with different situations, and the Sales Tax Officer in this case proceeded under Section 15-A(1)(b) and from the amount of penalty imposed it is clear that he exercised his jurisdiction under Section 15-A(1)(b) and not under Section 15-A(1)(a). The language of the section clearly indicates that in a case where no return has been filed penal proceedings can be initiated only under Section 15-A(1)(a). There are observations in a decision of the Supreme Court in Narain das Suraj Bhan v. Commissioner of Sales Tax, which supports the view that we are taking.
9. In the case of Thoppil Kutti Eroor v. Commissioner of Income Tax Mysore, Travancore-Cochin and Coorg, Bangalore (1958) 34 ITR 850 the Kerala High Court while considering the question of imposition of penalty under Section 38(1)(c) of the Cochin Income Tax Act which provides imposition of penalty for concealment or for furnishing inaccurate particulars has held as follows:
It is impossible to say that when a person has failed to furnish any return at all what he has done is to conceal the particulars of income or to deliberately furnish inaccurate particulars of such income within the meaning of Clause (c) of Section 38(1) of the Act. We entertain no doubt that the offence in such a case should be considered as one coming under Clause (a) and not under Clause (c) of Sub-section (1) of Section 38.
10. In the case of S. Narayanappa and Brothers v. Commissioner of Income Tax, Mysore the Mysore High Court has held as follows:
What was argued before us was that in a case where an assessee has furnished no return at all before the Income Tax Officer, it should be presumed for the purposes of Section 28(1)(b) that he has furnished a return of his income intimating the Income Tax Officer that his income is nil. It seems to me that the language of Section 28(1) does not admit of any such construction since the clear requirement of the provisions of this sub-section is that an assessee on whom a penalty is proposed to be imposed under Section 28(1)(b) should have in the first instance furnished his return. That, in my opinion is the ordinary and grammatical meaning of the words occurring in the Act. To interpret the language of this provision in the manner suggested by the learned Government Pleader would, in my opinion, be too artificial and too far-fetched to commend itself for acceptance. Although it is true that the provisions of a statute like those contained in Section 28(1)(b) have to receive to construction so as to promote the object of the statute, it is clear that when we interpret a penal provision like that contained in Section 28(1)(b), the interpretation we should place upon it must accord with reason and justice and must be in accordance with the plain ordinary and rational meaning of the words contained in those provision. So interpreted, I would not, in my opinion, be right in placing on Section 28(1)(b) the construction for which the learned Government Pleader contends.
11. The Madras High Court in the case S. Santhosa Nadar v. First Additional Income Tax Officer, Tuticorin and Anr. (1962) 46 ITR 411 has gone to the extent that a voluntary return filed after the period of four years from the close of the assessment year is not a valid return and such a case should be regarded as if no return has been filed at all and it cannot be said in such a case that there has been a concealment of the particulars of income or deliberate furnishing of inaccurate particulars and Section 28(1)(c) of the Income Tax Act, 1922 would not be applicable. The Madras High Court has held as follows:
When we come to Section 28(1)(c), it deals specifically with the concealment of "particulars" of income or the deliberate furnishing of inaccurate "particulars" of income. In the setting in which this Sub-section finds place it is impossible to construe Section 28(1)(c) except as relating to a case where a return has been filed but from which return, particulars of income have been omitted or any particulars have been deliberately inaccurately furnished. The use of the expression "particulars of his income" and "particulars of such income" would be wholly inapposite in a case where no return has at all been filed; such a case would clearly come within the scope of Section 28(1)(a) alone.
12. What amounts to concealment came up for consideration before the Apex Court in the case of K.C. Builders and Anr. v. The Assistant Commissioner of Income Tax . The Apex Court has held that it is implicit in the word "concealed" that there has been a deliberate act on the part of the assessee. The meaning of the word "concealment" as found in Short Oxford English Dictionary, 3rd Edition, Volume I, is as follows:
In law, the intentional suppression of truth or fact known, to the injury or prejudice of another.
16. The word "concealment" inherently carried with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even it takes out the case from the purview of nondisclosure, it cannot be itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In order that a penalty under Section 271(1)(c) may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income. Where the additions made in the assessment order, on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment and therefore in such a case no such penalty can survive and the same is liable to be cancelled as in the instant case. Ordinarily, penalty cannot stand if the assessment itself is set aside. Where an order of assessment or reassessment on the basis of which penalty has been levied on the assessee has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by itself and the same is liable to be cancelled as in the instant case ordered by the Tribunal and later cancellation of penalty by the authorities.
13. We are in respectful agreement with the principles laid down in the aforementioned cases and of the considered view that where an assessee does not file the return of income there cannot be any concealment of income or deliberate furnishing of inaccurate particulars.
14. None of the explanations appended to Clause (1) of Sub-section (c) of Section 18 of the Act applies in the present case. It may be mentioned here that the words "who has not previously been assessed under this Act" occurring in Explanation 3 has been deleted by Direct Tax Laws (Amendment) Act, 1987 with effect from 1st April, 1989. This Explanation 3 as it stands today would be applicable to a case where a person has not filed his return in response to the notice issued to him for filing the return or where any notice had been issued. Prior to this deletion Explanation 3 was applicable only in the case where a person who has not been previously assessed under the Act fails to furnish the return in response to the notice or where no notice has been issued. In that event such person was deemed to have concealed the particulars of his assets for the purpose of Clause (1) of Sub-section (c) of Section 18 of the Act.
15. The Apex Court in the case of Commissioner of Income Tax, West Bengal I v. Vegetable Products Ltd. has held that if the language employed is ambiguous or capable of more meaning than one, then we have to adopt that interpretation which favours the assessee, more particularly so because the provision relates to imposition of penalty.
16. In the case of J.K. Synthetics Ltd. v. Commercial Taxes Officer(1994) 94 STC 422, the Constitution Bench of the Apex Court has held that penalty provisions in a statute have to be strictly construed.
17. Thus applying the strict construction of penalty provisions contained in Clause (1) of Sub-section (c) of Section 18 of the Act, we find that prior to the amendment in Explanation 3 by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1st April, 1989 in a case where the person who has previously been assessed under the Act does not file any return in response to the notice or even where time for tiling the return has expired has not filed any return there cannot be any concealment for which penalty provision can be imposed. In view of the foregoing discussions, we are of the considered opinion that in the present case the respondent assessee has not concealed the particulars of his income for which wealth no penalty under Clause (1) of Sub-section (c) of Section 18 of the Act is exigible.
18. In view of the foregoing discussions, we do not find any merit in this appeal, which is hereby dismissed.