(Per : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. These appeals arise out of common background. The appellant-assessee is also common. The impugned judgement of the Tribunal is also common. We have, therefore, heard these appeals together and disposed of the same by this common judgement.
2. At the time of admission of the appeals, this Court had framed the following common substantial question of law for consideration :
“Whether in the facts and circumstances of the case, the Tribunal was right in law in sustaining the levy of penalty under section 18(1)(a) and in doing so ignored the assessment case under the Wealth Tax Act of the same assessee and of his brother?”
3. Briefly stated facts are as follows.
3.1 The appellant-assessee is a Hindu Undivided Family. For the assessment years 1985-86 and 1986-87, the Assessing Officer had imposed penalty under section 18(1)(a) of the Wealth Tax Act, 1957 (“the Act” for short) on the premise that the assessee had failed to file wealth tax returns though held wealth in excess of the threshold limit.
3.2 The assessee carried such orders of the Assessing Officer before the Commissioner (Appeals). The Appellate Commissioner by a common reasoned order dated 12.9.1994, dismissed such appeals. The assessee thereupon approached the Tribunal. The Tribunal by the impugned order, upheld the orders passed by the revenue authorities, whereupon the assessee has approached this Court in the present appeals.
3.3 It is not in dispute that the assessee had not filed the returns of wealth tax within the time prescribed under section 14 of the Act. Such returns were filed only after there was a search operation in the premises of the assessee, subsequent to which notice under section 17 of the Act came to be issued on the assessee calling upon the assessee to file such wealth tax returns. It was only thereafter that the returns came to be actually filed.
3.4 The only defence that the assessee presented before the revenue authorities and the Tribunal was that the assessee had a bona fide belief that such returns were not required to be filed. The case of the assessee was that under bona fide impression that the wealth did not exceed the maximum limit for paying of tax, the assessee did not file such returns. Such contentions were, however, not accepted. The Commissioner (Appeals) as well as the Tribunal gave detailed reasons and rejected such defence of the assessee.
4. We may notice that in the common question framed, there is a reference to the assessment case of the brother of the assessee under the Wealth Tax Act. Counsel for the assessee, however, clarified that there is no bearing on the order in case of the brother of the Karta of the assessee – HUF has no bearing on the question of penalty under section 18(1) (a) of the Act in this case. We have, therefore, examined the appeals only from the limited angle of the assessee's contention that it was under bona fide impression that no such returns were required to be filed.
4.1 Learned counsel Shri Soparkar for the appellant-assessee drew our attention to the provisions contained in section 18(1) (a) of the Act and contended that prior to 1.4.1986, there was reference to the expression “any assessee has without reasonable cause” failed to furnish the return. Even after 1.4.1986 when such words were deleted, the Assessing Officer could not impose penalty if the assessee could point out that under bona fide though wrong belief, such returns were not filed, penalty could not be imposed.
4.2 Counsel submitted that the assessee had voluntarily filed the returns for both the assessment years. Subsequent assessment thereof and any increase in the wealth of the assessee from what was disclosed in the returns could not be the ground for imposing penalty under section 18(1)(a) of the Act, which is imposable only for non-filing or late filing of the return though required under the Act.
4.3 In support of his contentions, counsel relied on the decision of the Rajasthan High Court in the case of Commissioner of Wealth Tax v. Sardar Harnam Singh v. Sardar Harnam Singh, reported in (2002) 255 ITR 591. In such decision, the High Court upheld the order of the Tribunal deleting the penalty on the ground that there was bona fide belief on the part of the assessee.
4.4 Counsel also relied on a decision of Full Bench of Patna High Court in the case of Commissioner of Wealth-Tax v. Sri Jagdish Prasad Choudhary, reported in (1995) 211 ITR 472. In the said case, the High Court observed that penalties contemplated under section 18(1)(a) of the Wealth Tax Act did not by way of a legislative mandate fasten an absolute liability on the assessee. Even in the case of a default contemplated under such provisions, levy of penalty was not a must. The Court, of course, placed considerable reliance on the expression “without reasonable cause, failed to furnish the return”.
5. On the other hand, learned counsel Mr. Manav Mehta for the revenue opposed the appeals contending that the revenue authorities as well as the Tribunal concurrently found that the assessee had breached the provisions of section 18(1)(a) of the Act. It was held that there was no bona fide belief on the part of the assessee in not filing the returns. In short, he submitted that the appeals be dismissed.
6. We may notice the statutory provisions contained in section 18(1)(a) of the Act, before and after 1.4.1986.
Before 1.4.1986 :
18. (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 -
(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 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
(b) xxx xxx
(c) xxx xxx 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.
Explanation : In this clause, “assessed tax” means the wealth-tax chargeable under the provisions of this Act.
(ii) xxx xxx
(iii) xxx xxx”
After 1.4.1986 :
18. (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 -
(a) has 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 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
(b) xxx xxx
(c) xxx xxx 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.
Explanation : In this clause, “assessed tax” means the wealth-tax chargeable under the provisions of this Act.
(ii) xxx xxx
(iii) xxx xxx”
7. Before 1.4.1986, clause (a) of sub-section (1) of section 18 of the Act provided for penalty for non-filing or late filing of return which was done without reasonable cause. After 1.4.1986, however, such words came to be deleted. However, it cannot be disputed that either before 1.4.1986 or even after, if the assessee could show that he had reasonable grounds to believe that no such returns were required to be filed, the penalty could not be imposed. In other words, if the assessee bona fide believed that the return of wealth tax was not required to be filed, no penalty under section 18(1)(a) of the Act could be imposed. However, mere assertion of the assessee that he bona fide believed that no such returns were required to be filed, can hardly be sufficient. The assessee, therefore, had to present before the Assessing Officer necessary reasons why he held such a belief. Only if such a belief was found to be genuine and bona fide, the assessee's case for non-imposition of penalty under section 18(1)(a) of the Act had to be considered.
8. In the present case, much of the facts are not in dispute. In terms of section 14(1) of the Act, the assessee had to file return of wealth tax before 30th June of the year under consideration or latest before the last date of filing the return under section 139 of the Income Tax Act. For the assessment year 1985-86, therefore, such wealth tax return had to be filed on or before 30th June 1986, or at least by the time the return under section 139 of the Income Tax Act had to be filed. Similarly, for the assessment year 1986-87, wealth tax return had to be filed in middle of 1987 or shortly thereafter. In the present case, no such returns were filed. In the meantime, the assessee was subjected to search on 12th June, 1986. Even thereafter, no returns of wealth tax came to be filed. It was only when the Department issued notice under section 17 of the Act on 26.2.1988 that in response to such a notice, the assessee filed the returns on 17.5.1988.
9. In addition to such long delay in filing the returns, the assessee did not present any convincing facts before the Department why it held the belief that no returns for the wealth tax were required to be filed. We may notice that in the returns which the assessee filed, eventually under the Wealth Tax Act, it disclosed net wealth of Rs.4,98,163/- for the assessment year 1985-86 and Rs.4,09,194/- for the subsequent assessment year. We are informed that the maximum limit of wealth beyond which the assessee had to pay wealth tax and file return, was Rs.2,50,000 at the relevant time.
10. The Commissioner (Appeals) as well as the Tribunal both gave detailed reasons why the defence of the assessee could not be accepted. The Commissioner (Appeals) noted that the assessee had computed the wealth on the basis of the valuation of residential and commercial properties disclosed in the books of accounts as against the valuation prescribed under the rules. The Commissioner (Appeals), therefore, observed that the assessee had not established that there was any reasonable cause for not filing the returns of wealth in time. It was observed that the assessee was deriving substantial rental income out of such immovable properties and it was, therefore, incumbent on the part of the assessee to discharge the wealth tax liability and also file the return within the statutory limit.
11. These observations were confirmed by the Tribunal. The Tribunal held that the Wealth Tax Officer was justified in imposing the penalty and that the order of the Commissioner (Appeals) suffered from no infirmity in upholding such penalty and discarding the explanation of the assessee. In fact, the Tribunal held that the explanation of the assessee was found to be false.
12. We do not find that the authorities committed any error. Even according to the valuation of the properties as per the books of the assessee, the assessee's net wealth exceeded the maximum limit beyond which the wealth tax was required to be paid and returns were required to be filed within the statutory time limit. The assessee did not file such returns for both the years though in the meantime there was a search operation carried out. Long time thereafter, only when the notice under section 17 of the Act came to be issued, such returns were filed. When the authorities below as well as the Tribunal have come to concurrent finding that there was no bona fide belief on basis of which the assessee could have carried an impression that no such returns were required to be filed, we do not see any illegality in such conclusions.
13. In the case of Commissioner of Wealth Tax v. Sardar Harnam Singh v. Sardar Harnam Singh (supra), the Rajasthan High Court dismissed the revenue's appeal confirming the order of the Tribunal in which the Tribunal had come to the conclusion that the assessee was under bona fide TAXAP/144/2000 10/10 JUDGMENT belief that his wealth was below the taxable limit. No ratio which can be applied in the present case was laid down in the said decision. In the Full Bench judgement of the Patna High Court, in case of Commissioner of Wealth-Tax v. Sri Jagdish Prasad Choudhary (supra), it was held that penalties under section 18(1)(a) and 18(1)(b) of the Act are not mandatory. With respect to such proposition, there can hardly be any dispute. What is of essence in the present appeals is that the assessee could not show that it had bona fide belief that the returns were not required to be filed.
14. When the Assessing Officer had imposed penalty which was in tune with statutory provision, we do not see any reason to interfere. In the result, the question is answered in the affirmative, that is, in favour of the revenue and against the assessee. Both the Tax Appeals are dismissed.
[AKIL KURESHI, J.] [HARSHA DEVANI, J.] parmar*