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T.K. Roy, Vs. Commissioner of Wealth-tax - Court Judgment

LegalCrystal Citation
Subject;Direct Taxation
CourtGuwahati High Court
Decided On
Case NumberWealth-tax Reference Nos. 3, 4 and 5 of 1975
Judge
ActsWealth Tax Act, 1957 - Sections 14, 14(1), 14(2), 15, 16(5), 18, 18(1), 35B and 36(1)
AppellantT.K. Roy, S. Karam Singh and S.N. Roy
RespondentCommissioner of Wealth-tax
Appellant AdvocateJ.P. Bhattacharjee, K.C. Bezbarua, R.P. Agarwalla and R.L. Jain, Advs.
Respondent AdvocateG.K. Talukdar and D.K. Talukdar, Advs.
Excerpt:
- - bhattacharjee, learned counsel appearing for the assessee, submits that the 'offence' is for non-submission of the returns on 30th june of each year of assessment as required under section 14(1) of the act, the 'offence' is complete when the assessee failed to submit the returns on that date. talukdar, the point that remains for determination in these cases has been much narrowed down, and is whether the failure to file a return under section 14(1), for which the penalty has been levied constitutes a 'completed offence' as contended by the assessee, or a 'continuing default' as contended by the revenue, and which of the law--the original section 18(1)(a)(i), section 18(1)(a)(i) as amended by the 1964 amendment, or section 18(1)(a)(i) as amended by the 1969 amendment, would apply to..... baharul islam, j. 1. these references involve common questions of law; as such this judgment will dispose of all of them.2. as the facts and periods of assessments in wealth-tax reference no. 5/75 are more comprehensive, it will be more convenient to refer to the material facts of this reference first.3. the assessment years involved in this reference are from 1963-64 to 1968-69. admittedly, the assessee was liable to pay wealth-tax for all these years. he was required under section 14(1) of the w.t. act', 1957 (hereinafter called 'the act'), to furnish to the wealth-tax officer (hereinafter called 'w.t.o.') a return in the prescribed form. in this case, he did not do so. the w.t.o. issued notices to the assessee under section 14(2) of the act and the notices were served on him. he did.....
Judgment:

Baharul Islam, J.

1. These references involve common questions of law; as such this judgment will dispose of all of them.

2. As the facts and periods of assessments in Wealth-tax Reference No. 5/75 are more comprehensive, it will be more convenient to refer to the material facts of this reference first.

3. The assessment years involved in this reference are from 1963-64 to 1968-69. Admittedly, the assessee was liable to pay wealth-tax for all these years. He was required under Section 14(1) of the W.T. Act', 1957 (hereinafter called 'the Act'), to furnish to the Wealth-tax Officer (hereinafter called 'W.T.O.') a return in the prescribed form. In this case, he did not do so. The W.T.O. issued notices to the assessee under Section 14(2) of the Act and the notices were served on him. He did not comply with the notices. The W.T.O. also issued notices on the assessee under Section 16(4) of the Act. They were also not complied with. In the circumstances, he completed on October 31, 1970, the assessments for all the aforesaid assessment years under Section 16(5) of the Act. He made the.assessments as follows :

Assessment year

Net wealth assessed

Tax payable

 

Rs.

Rs.

1963-64

4,39,280

2,393

1964-65

4,04,000

1,520

1965,66

4,04,000

1,520

1966-67

4,04,000

1,520

1967-68

4,08,900

1,544

1968-69

4,08,320

1,542

4. The W.T.O. also initiated penalty proceedings under Section 18(1)(a) of the

Act and the assessee was asked to show cause as to why penalty should not

be levied. The assessee showed cause but it was not accepted in its entirety

by the .W.T.O., who, as a result, imposed various penalties for different

periods of defaults. The periods of default were found by him to be 88,

76, 64, 52, 40 and 28 months for the assessment year's from 1963-64 to

1968-69, respectively. The W.T.O. levied penalty for the years 1963-64 to

1968-69, under Section 18(1)(a)(i) of the Act as amended by the W.T. (Amend.) Act, 1964 (hereinafter called the '1964 Amendment'), which was effective from April 1, 1965. Thereafter, penalty was levied under Section 18(1)(a)(i) of the Act as amended by Section 24 of the Finance Act of 1969 (hereinafter called the '1969 Amendment').

5. The assessee appealed to the AAC of Wealth-tax. The AAC held that no penalty was imposable up to March 31, 1969, as, according to him, the assessee had sufficient ground for not furnishing the returns. He levied penalty only from September 1, 1969, and April 1, 1970, under Section 18(1)(a)(i) of the Act, as amended by the 1969 Amendment.

6. The assessee appealed to the Tribunal for all the years. The department also preferred appeals for all the years challenging the order of the AAC, both with regard to the reduction of the penalty for the years 1963-64 to 1968-69, and also against the principle adopted by him.

7. The learned Tribunal heard both sets of appeals together. It held that the assessee was liable to pay penalty for the periods from June 30, 1963, and June 30, 1964, up to March 31, 1965, under Section 18(1)(a)(i) of the Act as it originally stood. It levied penalty from April 1, 1965, to March 31, 1969, at the rate of 2% of the tax for every month during which the default continued, but not exceeding, in the aggregate, 50% of the tax. It also directed levy of penalty for the period after April 1, 1969, at the rate of 1/2% of the net wealth assessed for every month during which the default continued, but not exceeding, in the aggregate, an amount equal to the net wealth assessed. It held that the penalty leviable for the period from April 1, 1965, to March 31, 1969, was under Section 18(1)(a)(i) of the Act as amended by the 1964 Amendment and for the period after April 1, 1969, under Section 18(1)(a)(i) as amended by the 1969 Amendment.

8. An application having been made by the assessee for a reference, the Tribunal has made this reference under Section 27(1) of the Act and has referred the following question to us for opinion :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the calculation of the penalty up to March 31, 1965, was to be made under Section 18(1)(a)(i) of the W.T. Act, 1957, as it originally stood, from April 1, 1965, to March 31, 1969, under Section 18(1)(a)(i) as substituted, w.e.f. April 1, 1965, by Section 18 of the W.T. (Amend.) Act, 1964,' and thereafter under Section 18(1)(a)(i), as substituted by Section 24 of the Finance Act, 1969?'

9. Wealth-tax Reference No. 3/75.

10. This reference relates only to the assessment year 1968-69. In this

case also no return was filed under Section 14(1) of the Act or a return in spite of service of notice under Section 14(2) of the Act. The assessment was made

on October 31, 1970. The W.T.O. found the period of default to be

28 months (from July 1, 1968, to October 31, 1970). The Tribunal, however, found the cause for not filing the return up to April 3, 1970, to be reasonable and found the period of default to be six completed months. The W.T.O. had levied penalty at the rate of 2 per cent. per month for 9 months from July 1, 1968, to March 31, 1969, and levied penalty at the rate of 1/2 per cent. of the net wealth assessed for 19 months from April 1, 1969, to October 31, 1970. On appeal, the Tribunal, however, upheld the penalty at the rate of 1/2 per cent. per month for six completed months from April 3, 1970, to October 31, 1970. Wealth-tax Reference No. 4/75.

11. This reference relates to two assessment years, namely, 1966-67 and 1967-68. In this case, the assessee filed the returns for both the periods on May 18, 1970. The assessment was made by the W.T.O, on September 26, 1970. For the first period, the W.T.O. found the default for 46 completed months (from July 1, 1966, to May 18, 1970) and for the second period for 34completed months (from July 1, 1967, to May 18, 1970). He found that the assessee had reasonable cause for not filing the return and so he levied no penalty for the period from August 1, 1968, to March II, 1969, for the assessment year 1966-67, but he levied penalty at the rate of per cent. of the net wealth assessed for 13 months from April 1, 1969, to May 18, 1970. For the second period (1967-68) the W.T.O. levied penalty at the rate of 2 per cent. per month for 21 months from July 1, 1967, to March 31, 1969, and at the rate of 1/2 per cent. per month of the net wealth assessed for 13 months from April 1, 1969, to May 18,. 1970. On appeal, the Tribunal levied the penalty in the manner as mentioned above in Wealth-tax Reference No. 5 of 1975.

12. Mr. J. P. Bhattacharjee, learned counsel appearing for the assessee, submits that the 'offence' is for non-submission of the returns on 30th June of each year of assessment as required under Section 14(1) of the Act, The 'offence' is complete when the assessee failed to submit the returns on that date. So, the assessee is liable to pay penalty according to law prevailing on that date under Section 18 of the Act as it originally stood for the periods till March 31, 1965. For the same reasons, he submits, the assessee is liable to pay penalty under Section 18 as amended by the Amending Act of 1964 up to March 31, 1969, for the periods 1965-66, 1966-67, 1967-68 and 1968-69, and under Section 18 as amended by the 1969 Amendment thereafter. His submission is that the 'offence' is complete on the 30th June of each year and the assessee could not have committed the 'offence' on any subsequent day of the year for non-submission of the return by June 30 as enjoined by Section 14(1). His second submission is that the 'offence' is not a continuing one. He submits that a law creating an offence and providing for penalty is a substantive one and can have no retrospective effect, unless

the legislature has made it so, expressly or by necessary implication. In the instant cases, he submits, the amendments made in 1964 and 1969 to Section 18 of the Act, have not been made retrospective ; so the assessee cannot be penalised on the basis of the laws enacted subsequent to the dates of the commission of the 'offence' by the, assessee.

13. Mr. G. K. Talukdar, learned counsel appearing for the department, does not dispute that the law under Section 18 of the Act is a substantive one and that it has no retrospective effect. He contends that these cases are not concerned with the assessee committing any 'offence' in failing to file the return on June 30 as required under Section 14(1) of the Act, and, as such, he submits, the question of commission of a ' continuing offence ' does not arise. His submission is that the assessee by not furnishing the return on 30th of June, as required under Section 14(1) of the Act, has committed a 'default' and the default is continuing from day to day till he submitted the return as in Wealth-tax Reference No. 4/75 or the orders of assessments were made as in the other two references. He concedes that the law prevailing on the day on which the ' default ' is made would apply. In other words, his submission is that the law prevailing on June 30 of the year in question on which the 'default' was committed and on each subsequent day on which it was repeated, would apply to each case.

14. In view of the above concessions of Mr. Talukdar, the point that remains for determination in these cases has been much narrowed down, and is whether the failure to file a return under Section 14(1), for which the penalty has been levied constitutes a 'completed offence' as contended by the assessee, or a 'continuing default' as contended by the revenue, and which of the law--the original Section 18(1)(a)(i), Section 18(1)(a)(i) as amended by the 1964 Amendment, or Section 18(1)(a)(i) as amended by the 1969 Amendment, would apply to the periods in question.

15. Under Section 14(1) of the Act the assessee is liable to furnish a return by June 30 of each assessment year. Under Sub-section (2) of Section 14, the W.T.O. may serve a notice upon a person requiring him to furnish a return within a prescribed time if the said person, in his opinion, is assessable under the Act. In the instant cases, notices were served upon the assessee by the W.T.O., but they were not complied with in Wealth-tax Reference Nos. 5 and 3 of 1975.

16. If any person has not furnished a return within the time allowed under Section 14, he may yet furnish a return under Section 15 of the Act at any time before the assessment is made. The assessee only in Wealth-tax Reference No. 4 of 1975 furnished a return under Section 15 as stated earlier.

17. Let us now turn to the relevant provisions of the law.

18. The relevant portion of Section 18 of the Act, as it originally stood, is as follows :

' 18. Penalty for concealment.--(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 of his net wealth which he is required to furnish under Sub-section (1) or subsection (2) of Section 14 or Section 17 or has without reasonable cause failed to furnish it within the time allowed and in the manner required; or......

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

(i) in the case referred to in Clause (a), in addition to the amount of wealth-tax payable by him, a sum not exceeding one-and-a-half times the amount of such tax, and....'..

(3) No prosecution for an offence under this Act shall be instituted in respect of the same facts in relation to which a penalty has been imposed under this section.

(4) The Wealth-tax Officer shall not impose any penalty under this section without the previous approval of the Inspecting Assistant Commissioner of Wealth-tax.'

19. Section 18 of the Act was amended by the 1964 Amendment and the section as amended was given effect from April 1, 1965. The relevant portion of Section 18, as amended, ran thus :

' 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 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 has without reasonable cause

failed to furnish it 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 tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax ;...... '

(2) No order shall be made under Sub-section (1) unless the, person concerned has been given a reasonable opportunity of being heard......'

20. Section 18 was again amended in 1969 by Section 24 of the Finance Act, 1969 (Act 14 of 1969), and the amendment was given effect from 'April 1, 1969.

21. By this amendment Clauses (i) and (ii) of Sub-section (1) were substituted by two new clauses. Clause (i), which, is relevant, is in the following terms:

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

(A) the net wealth assessed under Section 16 as reduced by the amount of net wealth on which, in accordance with the rates of wealth-tax specified in Paragraph A of Part I of the Schedule or Part II of the Schedule, the wealth-tax chargeable is nil, or......

but not exceeding, in the aggregate, an amount equal to the net wealth assessed under Section 16, or, as the case may be, the net wealth assessed under Section 17, as reduced in either case in the manner aforesaid.'

22. It will be seen that the penal provision ingrained in Sub-section (1) of Section 18 remained the same till after the 1969 Amendment. By the 1964 and 1969 Amendments only the mode of computation of the amount of penalty resulting in the quantum of penalty was changed.

23. Under Section 35B of the Act, wilful failure to furnish, in due time, the return of net wealth which a person is required to furnish under Sub-section (1) of Section 14 or by notice given under Sub-section (2) of Section 14 of the Act has, inter alia, been made punishable.

24. Section 36(1)(a),t inter alia, provided :

'(1) If a person fails without reasonable cause--

(a) to furnish in due time any return mentioned in Section 14 ;......

he shall be punishable......' (emphasis* added).

25. Section 35B read with Section 36(1)(a) of the Act shows that what has been made punishable is failure to furnish, without reasonable cause, in due time, prescribed under Section 14(1) or in the notice under Section 14(2) of the Act. In other words, the offence is committed on June 30 of a year if return is not filed before that date or by the date mentioned in the notice under Section 14(2). Subsequent furnishing of return under Section 15 will not absolve the person of the offence already committed. The offence is a completed one and, in my opinion, it is not a continuing one.

26. Failure to furnish return under Section 14(1) or (2) may entail penalty

proceeding under Section 18 or prosecution under Section 36(1) read with Section 35B of

the Act. But Section 18(3) bars prosecution if penalty has been imposed under Section 18 in respect of the same* facts as constitute an offence. In the cases on

hand there has been no prosecution. So we are not concerned with the

'offence' aspect of the matter; we are concerned only with the ' penalty '

aspect of it.

27. Let us first take the cases of penalties for the assessment years 1963-64 and 1964-65. The due date for furnishing a return under Section 14(1) is June 30 of each year. For the purpose of coming to a decision for liability to penalties for these two years it is not necessary to consider whether the default is committed by the assessee only once, i.e., on June 30 of the year, as contended by the assessee, or the default is a continuing one, as contended by the department. It is agreed by both the parties that penalty would be levied according to the law that operates on the date of default. In other words, for imposition of penalty for failure to furnish a return under Section 14(1) for the year 1963-64, the law that existed on June 30, 1963, would apply. Similarly, the law that existed on June 30, 1964, would apply to the levy of penalty for the year 1964-65. Admittedly, the law that existed on the aforesaid two dates was Section 18(1)(a)(i) of the Act as it originally stood. The original Section 18(1)(a)(i) prescribed a penalty, in addition to the amount of wealth-tax payable by the assessee, a sum not exceeding one and a half times the amount of the wealth-tax assessed for the year in question. As the unamended section does not speak of any period of default and only a lump sum amount has been mentioned irrespective of the period of default, it is immaterial whether the default is committed only once, that is, on June 30, or is a continuing one. For a year the assessee would be liable to pay penalty in a lump sum not exceeding one and a half times the tax for each of the two years, under Section 18(1)(a)(i) of the Act as it originally stood.

28. Let us now turn to the assessment years 1965-66 to 1968-69. For these assessment years the assessee committed, according to the assessee himself, as many as four defaults, one each on June 30 of 1965, 1966, 1967 and 1968. The 1964 Amendment which is effective from April 1, 1965, prescribed the' penalty at 2 per cent. of the tax for every month during which the default is continued, but not exceeding, in the aggregate, 50 per cent. of the tax for non-compliance of Sub-section (1) or (2) of Section 14. The penalty prescribed has relation to (i) a percentage of the wealth-tax assessed for a year in question and (ii) period of default,--' every month during which the default continued '. Of course a maximum penalty not exceeding 50 per cent. of the wealth-tax assessed has been prescribed. If the interpretation to the sectjon offered by the assessee is given, namely, that he has committed a completed offence on June 30 of the assessment year in question, the penalty prescribed by the 1964 Amendment cannot be worked out, as a completed 'offence' on a day has been committed according to the assessee and the 'offence' has nothing to do with any period of default, with the result that the expression, ' a sum equal to two per cent. of the tax for every month during which the default continued' stands deleted from the section. This interpretation of the section renders the amendment unworkable and nugatory. An interpretation of a provision of a

statute, which makes the law unworkable and renders the provision nugatory, is not permitted by rules of interpretation of statutes. Rules of interpretation of statutes do not permit reading into a provision of law, or deletion from it, any word or words. The use of the expressions, ' two per cent. of the tax ', and ' for every month during which the default continued ' are material changes brought in by the amendment and not for nothing. The expression, ' two per cent. of the tax for every month during which the default continued' clearly indicates that the default is a continuing one (emphasis* added.) The default continues from day to day until it is stopped. It is stopped when the order of assessment in pursuance of which the penalty proceedings are drawn, is made, or when a return under Section 15 of the Act is filed. Filing of the return under Section 15 is optional. Although a person has not furnished a return within the time allowed under Section 14, yet he may furnish a return ' at any time before the assessment is made ' under Section 15. A return under Section 14 or Section 15 of the Act is meant to enable the W.T.O. to conveniently make an assessment of the wealth-tax. Under Sub-section (1) of Section 14 it is obligatory on the part of the assessee to furnish a return and failure to furnish such a return entails penalty or a prosecution. On the other hand, Section 15 gives the assessee an opportunity to file a return at any time before the order of assessment is made, to stop the period of penalty to his advantage as well as to enable the W.T.O. to make the assessment of wealth for a year.

29. The section, as amended by the 1964 Amendment, clearly indicates that the default is a continuing one as stated above. The admitted position is that for each of the above-mentioned four assessment years the law existing on those dates was Section 18(1)(a)(i) of the Act as amended by the 1964 Amendment, which was in existence till March 31, 1969. The assessments for those years, therefore, would be under Section 18(1)(a)(i) as amended by the 1964 Amendment.

30. The assessments having been made on October 30, 1970, in Wealth-tax

References Nos. 5 and 3 of 1975, and the return having been filed on May

18, 1970, in Wealth-tax Reference No. 4 of 1975, for both the periods, for

the reasons given above, the default would be continuing from day to day

till October 31, 1970, in the first two cases, and till May 18, 1970, in the

third case. As stated in the above paragraph, Section 18(1)(a)(i) as amended by

the 1964 Amendment having operated up to March 31, 1969, and having

been repealed on and from April 1, 1969, on which date Section 18(1)(a)(i) as

amended by the 1969 Amendment came into force, the latter provision would

come into operation till the rest of the period, that is to say, till October 31,

1970, in Wealth-tax References Nos. 5 and 3 of 1975 and till May 18, 1970,

in Wealth-tax Reference No. 4 of 1975.

31. Learned counsel for the assessee has also submitted that in these cases no previous approval of the IAC was obtained by the W.T.O. as required by Sub-section (4) of Section 18 and as such the imposition of penalty is not sustainable in law. It is true that original Section 18 imposed a bar on the W.T.O. to impose penalty without previous approval of the IAC of Wealth-tax. There is nothing in the statement of the case to show whether or not such approval was obtained. Be that as it may, we are unable to entertain this submission of learned counsel as the question, even if of law, does not arise out of the order of the Tribunal, nor is it covered by the question referred to us for opinion. The High Court under Section 27 of the W.T. Act exercises advisory jurisdiction. The jurisdiction is limited. Under Sub-section (6) of Section 27 it can alter the form of the question referred to make it more explicit, but it cannot entertain a new question, even if of law, not arising out of the order of the Tribunal, or referred to it.

32. As a result of the foregoing discussions, the question in Wealth-tax Reference No. 5/75 is answered in the affirmative and in favour of the department. For the same reasons, the question in Wealth-tax Reference No. 3/75 is also answered in the affirmative and in favour of the department. Similarly, for the same reasons, the question in Wealth-tax Reference No. 4/75 is also answered in the affirmative and in favour of the department.

33. Learned counsel cited a number of decisions, but as, in my opinion, they were beside the point and were not helpful, they have not been noticed in the judgment.

34. With regard to para : ' Learned counsel for the assessee... ...or referred

to it ' (supra) of my judgment Mr. Bhattacharjee submits that he referred to the previous approval of the IAC under Sub-section (4) of Section 18 only for the purpose of showing that the provision of Section 18 was substantive and that the maximum penalty as leviable under that substantive section could only be leviable. May be the submission was not clear to me.

N. Ibotombi Singh, J.

35. The three references, under Section 27 of the W.T. Act, 1957, by the Income-tax Tribunal, Gauhati, in which a common question of law is involved, may be disposed of by this common judgment.

36. I have had the advantage of reading the judgment of my learned brother, Baharul Islam J; but I am unable to concur with his opinion. After having listened with the utmost respect and attention to the ingenious and elaborate arguments which have been addressed to us by the learned counsel for the parties, I am of the opinion that the question of law referred to us in all the three references should be answered in the negative and against the department.

37. My learned brother, Baharul Islam J., has succinctly stated the material facts of the case in his judgment; and I need not repeat the same.

38. In order to appreciate the rival contentions of the parties, it is neces

sary to notice the changes of law made from time to time under Section 18 of the

W.T. Act, 1957 (hereinafter referred to as ' the Act '), which provides for

penalty on the assessee's failure to file return, as required under Section 14(1) of

the Act. Under the Act, as it originally stood, penalty was fixed at one

and a half times the amount of tax payable, while under the Act, as

amended by Act No. 46 of 1964, with effect from April 1, 1965, penalty was

two per cent. of the tax for every month during which the default con

tinued, but not exceeding, in the aggregate, fifty per cent. of the tax; and

under amendment, by Act No. 14of 1969, with effect from April 1, 1969, the

quantum of penalty is fixed at one-half percent, of the net wealth for every

month during which the default continued, but not exceeding, in the aggre

gate, an amount equal to the net wealth assessed.

39. Mr. Bhattacharjee, learned counsel for the assessee, submits that failure to furnish the return, without reasonable cause, by the 30th June of each assessment year, as required under Section 14(1) of the Act, amounts to an offence, which is visited with penalty, as provided under Section 18(1)(a)(i) of the Act. He further submits that Section 18(1)(a)(i) of the Act, as it stood originally, does not create a continuing offence, an offence that repeated itself every day or month ; and that there had been also no change in the nature of offence by the two subsequent amendments. In support of his contention, he relies on (1)Suresh Seth v. CWT [1977] 108 ITR 86, (2) CWT v. Ram Narain Agrawal : [1977]106ITR965(All) and (3) Balakrishna. Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan : AIR1959SC798 .

40. Mr. Talukdar, learned counsel for the department, on the other hand, contends that what is material in these three references is not whether failure to furnish the return, as required under Section 14(1) of the Act, amounts to an offence or not ; but he submits that the assessee, on his failure to do so, commits a 'default', within the meaning of Section 18(1)(a)(i) of the Act, which continues de die in diem, until the return is filed or assessment is made. Reliance was placed on the case of CWT v. Smt. V. Pathummabi : [1977]108ITR689(Ker) . He has also drawn our attention to the following cases with a view to assisting us in determining the question whether an offence, consisting of breach of statutory duty of the type which we are considering, is a continuing one or not ; (1) G. D. Bhattar. v. State : AIR1957Cal483 and (2) State v. A. H. Bhiwandiwalla : (1956)IILLJ153Bom .

41. The precise question, which I shall consider is, what is the proper construction and operation of the provisions of Section 18(1)(a)(i) of the Act, as it

originally stood, and amended by Act No. 46 of 1964 and Act No. 14 of 1969 respectively ?

42. Before I proceed to examine the question posed before us, it is necessary to understand the meaning of the word ' default ' occurring in Section 18(1)(a)(i) of the Act.

43. It is true, we are not concerned in these cases with the question whether a ' default ' under Section 18(1)(a)(i) of the Act for disobedience to the Act promission to comply with th'is statutory duty, is a criminal offence, rendering the person guilty of ' default ' to legal punishment. An act may, however, be prohibited or commanded by a statute in such a way that a person contravening a statute is liable to a pecuniary penalty recoverable as a debt by civil proceeding; in such a case, contravention is an offence against the statute but is not a crime. See Halsbury's Laws of England, 3rd Edn., Vol. 10, p. 271. It is this kind of 'default' which is described as an offence making the assessee liable, for failure to file the return within the stipulated period, to pecuniary penalty. For the purpose of Section 18(1)(a)(i) of the Act, the omission does not create an offence in the sense that it is punishable as a criminal offence, although penalty may be recovered in what is generally called a penal proceeding.

44. I now turn to the precise question posed before us. In Suresh Seth [1977] 108 ITR 86, the High Court of Punjab and Haryana was concerned with the interpretation of Section 18(1)(a)(i) of the Act for non-submission of returns for two assessment years 1964-65 and 1905-66, as required under Section 14(1) of the Act. The returns were filed only on March 22, 1971. The WTO levied penalty on the assessee under Section 18(1)(a)(i) of the Act for delay in filing the returns at the rate prescribed by Amendment Act No. 46 of 1964 for the period up to March 31, 1969, in both the years, and the rate prescribed by the amendment, under Act No. 14 of 1969., for the period from April 1, 1969, to March 18, 1971. The Tribunal upheld the penalties above. The question involved in the case was whether the penalties should be imposed on the assessee under Section 18(1)(a)(i) of the Act, as it stood, prior to its amendment on April 1, 1969, by Act No. 14of 1969, or the. same should be increased from April 1, 1969, onwards by which date the section had been amended. The High Court was of the view that the omission of the assessee to file a return on the date completed ' default ' on that date and did not render it a continuing default, and as such penalty could be imposed on him only on the basis of the law which was prevalent on that date. In that case the court also expressed agreement with the similar view taken by the Allahabad High Court in CWT v. Ram Narain Agarwal : [1977]106ITR965(All) and, after distinguishing the cases relied on by the learned counsel for the revenue in support of his submission, as to what is meant by continuing offence the court observed at page 90 (of 108 ITR) :

' The aforementioned three cases are obviously distinguishable. Only these acts and omission were held to be continuing wrongs which the party concerned was obliged under law to perform or to refrain from performing from day-to-day and at least on the point of failure of the accused to apply for registration and to give a notice of occupation of the factory, the default was not held to be a continued default by the Bombay High Court. To that, extent the view of the Bombay High Court goes against the revenue because omission to file a return or the omission to give a notice of occupation are the types of acts or omission which can properly be regarded as of the same type. Had the statute provided that the possession of wealth, without filing a return in respect of it before the WTO would constitute a wrongful act, the default would certainly be regarded as a continuing one. There is, however, no such provision in the Act.'

45. The High Court proceeded to refer to the observation of the Supreme in Balakrishna Savalram's case : AIR1959SC798 , on the principle of law about ' continuing wrong ', and then concluded that the assessee's omission to file return, as required under the Act, did not make the wrongful act a continuing one, merely because a penalty Impqsable on him might continue or get enhanced.

46. I am in respectful agreement with the view above. In CWT v. Ramnarain Agrawal : [1977]106ITR965(All) the Allahabad High Court expressed a similar view ; and at page 969, it observed :

' By filing of the return the default did not cease. It had already taken place and the assessee by his act only absolved himself from computation of penalty for future. Once the law has applied it shall apply to the entire period of default. It cannot be said to be in a state of suspension.'

47. In CWT v. Pathummabi : [1977]108ITR689(Ker) relied on by Mr. Talukdar, learned counsel for the revenue, the Kerala High Court took, however, a contrary view, holding that the omission which had been made penal under the Act, as it originally stood before the amendments, and which offence was complete on the expiry of the due date, had been, after the amendment, made into a continuing offence, an offence that repeated itself every month.

48. In Balakrishna Savalram : AIR1959SC798 , the Supreme Court explained the principle of law to determine the question whether a wrongful act or omission is a continuing wrong or not. At page 807, it observed 1

' It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury. If the wrongful act causes an injury which is complete, there is no continuing wrong

even though the damage resulting from the act may continue. If, however, a wrongful act is of such a character that the injury caused by it itself continues, then the act constitutes a continuing wrong.'

49. Bearing the principles of law and authority placed before us, in my mind, I have read and re-read Section 18(1)(a)(i) of the Act, but I am unable to find words in the section, by any canon of construction, to extract a provision to enable one to say that they mean a continuing offence. As a general rule, the court will not say that a continuing offence is created by a statute unless there are express words which make clear that that was the intention of the legislature when the statute was passed. It is also a settled rule of construction of statute that although in construing an Act of Parliament the court must always give effect to the intention of the Act and must look not only at the remedy provided, but also at the mischief aimed at, it cannot add words to a statute or read words into it, which are not there, and if the statute creates a specific offence, it is not for the court to find other offences which do not appear in the statute. It is also the settled canon of construction that even if two views are possible, the view which is favourable to the assessee must be accepted while construing the provisions of a taxing statute. See CIT v. Kulu Valley Transport Company Pvt. Ltd. : [1970]77ITR518(SC) .

50. I entertain no shadow of doubt on this point that ' default ', as con

templated in Section 18(1)(a)(i) of the Act, does not disclose a continuing offence.

The assessee commits the offence 'once and for all. When he fails, without

reasonable cause, to furnish the wealth-tax return, as required under Section 14(1) of the Act. That is to say, the offence is complete on the 30th June

of each assessment year. What is punishable here by imposition of a penalty

is for failure of the assessee to file return of his wealth to the WTO within

the time fixed under law, and not for possession of wealth, without filing

of return of his wealth to the WTO. The offence cannot, therefore, be a

continuing one. There are no words in this penal provision from which I

can conclude that the legislature intended to create a continuing offence

after the amendments. The subsequent two amendments do not alter the nature of the offence created by the Act, as it originally stood. , The only

effect of the amendments is to prescribe the quantum of penalty different

from the one provided in the original Act for the default.

51. Mr. Bhattacharjee, learned counsel for the assessee, next submits that (a) amendment of Section 18 of the Act has the effect of repealing the original Act, attracting thereby Section 5(d) of the General Clauses Act, (b) the amendment relates to a substantive law which is not to be given retrospective operation, as to impair an existing right, obligation or liability acquired, accrued or incurred under the enactment so repealed, and (c) that

Section 18(1)(a)(i) of the Act, as amended from time to time, relating to the penalty for default is of penal character, and the object being to punish the assessee so as to deter him from transgressing the law in future, the quantum of penalty would have to be determined with relation to the law prevailing on the date when the ' default ' was committed. The default was committed, it is contended, on the 30th June of each assessment year, and as such the law applicable on the aforesaid date in regard to the penalty will be applicable and not the amended law. The learned counsel cited also the following cases, in support of the proposition of law above, in addition to the cases which he already cited : (i) CIT v. K. Ahmed : [1974]95ITR599(Ker) ; (ii) CIT v. Bhan Singh Boota Singh ; (iii) CGT v. C. Muthukumaraswamy Mudaliar : [1975]98ITR540(Mad) ; (iv) CIT v. Ram Chand Kundanlal Saraf : [1975]98ITR474(MP) .

52. Mr. Talukdar, learned counsel for the revenue, does not controvert the correctness of the proposition of law that an amendment which pertains to a substantive law cannot have a retrospective effect, unless it is so expressly made in the statute or there is necessary implication from the words employed that the legislature intended a particular section to have a retrospective operation. As contended earlier, his case is that ' default ' contemplated in Section 18(1)(a)(i) of the Act continues or remains unabated, until it ceases by 61ing of the return or assessment is made, and that the entire period is to be covered pro rata with reference to the original law and the amended law made from time to time. In view of the matter, it is submitted that the penalty imposed by the Tribunal on the assessee in all the three references is justified. Reliance was also placed on the case of (1) Biswanath Ghosh v. ITO : [1974]95ITR372(Orissa) and (2) CWT v. K. Butchaiah : [1977]108ITR324(AP) .

53. In my opinion, the contention of the learned counsel for the revenue has no force. I have'already held that an offence is complete, on the date when the assessee failed to file return, as required under Section 14(1) of the Act, and it is not a continuing offence. As such, penalty for an offence--default or omission--must be determined with reference to law prevailing at the date of commission of the offence and such a law will be applicable to the entire period of default. Penal provisions are quasi-criminal in nature; and they should be construed strictly. The cases cited by Shri Bhattacharjee, learned counsel for the assessee, support the proposition of law above. In Biswanath Ghosh's case : [1974]95ITR372(Orissa) , which is relied on by the learned counsel for the revenue, the question involved was payment of interest for ' continuing default' on failure to file return, as provided under Section 139(1) of the I.T. Act, 1961. This case has no bearing on the question before us.

54. In CGT v. C.Muthukumaraswamy Mudaliar : [1975]98ITR540(Mad) , the Madras High Court was concerned with the interpretation of penalty leviable under Section 17(1)(a) of the G,T. Act, 1958, as amended by the Amendment Act of 1962, with effect from April 1, 1963, which is in pari materia with Section 18(1)(a)(i) of the W.T. Act, 1957, as amended by the Act of 1954.

55. In that case, the gift was made on July 14, 1961; return was due to be filed on June 30, 1962, but it was filed on October 22, 1963 ; the assessment was made levying tax on March 31,1964, and the order for penalty was passed on August 29, 1969. Section 17(1)(a) of the Act was amended by the Amendment Act of 1962, with effect from April 1, 1963, providing for penalty of two per cent. of the tax for every month during which the default continued, and not exceeding, in the aggregate, fifty per cent. of the tax. The Madras High Court took the view that the assessee, not having filed his return on 30th June, 1962, was liable for levying of penalty according to the unamended provision in Section 17 of the Act and not according to the amended provision. At page 554, the High Court observed :

' 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. In cases of non-compliance with a notice under Section 15(2) or Section 15(4) the infringement takes place when the notice is not complied with and, therefore, the law as on the date of the non-compliance will have to govern the levy of penalty.'

56. Again at page 555, it observed :

' Thus, on a clue consideration of the matter, we hold that the amendment which took effect from first of April, 1963, would not be applicable to cases where the default has been committed before the amended Act came into force, and that the law applicable to the levy of penalty for such defaults is the law as it stood at the time when the default is committed and not as it stood in the financial year for which the assessment is made as urged by the learned counsel for the assessee, nor as it stood on the date when the penalty proceedings were initiated or when the penalty order was imposed as urged by the revenue.'

57. I am in respectful agreement with the view expressed above.

58. In CWT v. K. Butchaiah : [1977]108ITR324(AP) , the High Court of Andhra Pradesh was concerned with the levying of penalty on the assessee, who filed voluntary returns of his net wealth on 26th November, 1963, for the assessment years 1958-59 to 1962-63. On 28th July, 1965, notices were issued under Section 18(2) of the Act, as amended by the Act 46 of 1964, for penal proceeding for delay in filing the return; and ultimately the Tribunal imposed penalty under Section 18(1)(a)(i) of the Act, as it originally

stood prior to its amendment, in the view that the law that prevailed at the time when a default was committed would apply. On a reference made by the CWT, Andhra Pradesh, the High Court expressed the opinion that the provisions of Section 18(1)(a)(i) of the Act, as amended on 1st of April, 1965, would be applicable to the case. At page 334 it observed :

' Section 6(d) of the General Clauses Act provides that a repeal shall not affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed. This provision is applicable only in cases where the penalty provided by the repealing Act is more onerous than the penalty provided in the repealed Act. We have already shown that the provisions of the new Section 18 are not more onerous in regard to penalty than the provisions of the old Section 18. We are, therefore, of the opinion that Section 6(d) of the General Clauses Act is not attracted.'

59. With due deference to their Lordships, I am unable to agree with the view given above. The effect of the amendments, as observed earlier, is to alter penalty for the offence created by the Act, as it originally stood, and the amendment is not intended to apply in relation to offence committed before its commencement. Reference may be made to Halsbury's Laws of England, 3rd Edn., Vol. 36, page 425, wherein it is stated as follows :

' The presumption against retrospection applies in general to legislation of a penal character, and to be presumed that a statute creating a new offence, or extending an existing one, is not intended to render criminal an act which was innocent when it was committed, and that a statute increasing the penalties for existing offences is not intended to apply in relation to offences committed before its commencement.......

Fiscal legislation, similarly, is subject in general to the presumption against retrospection.'

60. From the foregoing discussions, I am of the opinion that the question referred to us should be answered accordingly as above.

Pathak, J.

61. These three references by the Tribunal under Section 27(1) of the Wealth-tax Act, 1957, hereinafter referred to as the Act, are being disposed of by this common judgment as the question of law arising in them are similar.

62. It will be Relevant at this stage to set out the facts in each of the references, but as the facts and periods of assessment in W.T, Reference No. 5 of 1975 are more comprehensive, it would be convenient first to refer to the facts of this reference.

63. W.T. Ref. No. 5 of 1975.--The assessment years involved in this reference are from 1963-64 to 1968-69. Admittedly, the assessee was liable to pay wealth-tax for all these years. He was required under Section 14(1) of the Act to furnish to the WTO a return in the prescribed form. In this case the

assessee did not file any return. The WTO issued notices to the assessee under Section 14(2) of the Act and they were served on him. He did not comply with the notices. Thereafter, the WTO also issued notices on the assessee under Section 16(4) of the Act. They were also not complied with. In the circumstances, the WTO completed the assessment for all the aforesaid assessment years under Section 16(5) of the Act on October 31, 1970.

64. The WTO also initiated penalty proceedings under Section 18(1)(a) and after giving opportunity to the assessee and finding no satisfactory explanation, imposed various penalties for different periods of default as found by him for the respective assessment years. The periods of default were found by him to be 88, 76, 64, 52, 40 and 28 months for assessment years from 1963-64 to 1968-69, respectively. The WTO imposed penalty for the years 1963-64 to 1968-69, under Section 18(1)(a)(i) of the Act, as amended by W.T. (Amend.) Act, 1964, hereinafter called 'the 1964 Amendment Act ', which was operative from April 1, 1965. Thereafter, penalty was levied under Section 18(1)(a)(i) of the Act as amended by Section 24 of the Finance Act of 1969 (hereinafter called ' the 1969 Amendment Act ').

65. The assessee appealed to the AAC of Wealth-tax. The AAC held that the penalty was leviable only in accordance with the prevailing law as embodied in Section 18 as amended with effect from April 1, 1969, and, therefore, no penalty is imposable for the defaults up to March 31, 1969, for all the years under appeal. For the years 1967-68 and 1968-69, he found that the balance-sheet of M/s. Bogihola Tea and Trading Co, (P.) Ltd., whose shares formed the bulk of the wealth of the assessee/were adopted in annual general meetings held on February 22, 1969, and September 3, 1969, respectively. Allowing further relief under the proviso to Section 14(1) of the Act, the AAC held that the delay in these years should be computed only from September 1, 1969, and April 1', 1970, respectively. Following the principles earlier laid down by him that the penalty could be imposed only under Section 18(1)(a)(i) of the Act as it was substituted with effect from April 1, 1969, he allowed proportionate relief in the quantum of penalty for these years. The assessee appealed to the Tribunal for all the years. The department also preferred appeals for all the years challenging the order of the AAC both with regard to the reduction of penalty for the years 1963-64 to 1968-69 and also against the principle adopted by him. The learned Tribunal heard both the appeals together and held that the assessee was liable to pay penalty for the period from June 30, 1963, and June 30, 1964, up to March 31, 1965, under Section 18(1)(a)(i) of the Act as it originally stood. It levied penalty from April 1, 1965, to March 31, 1969, at the rate of 2% of the tax for every month during which the default continued, but not exceeding in aggregate 50% of the tax. It also directed levy of penalty for the period after April 1, 1969, at the rate of 1/2% of the

net wealth assessed for every month during which the default continued, but not exceeding, in the aggregate, an amount equal to the net wealth assessed. The Tribunal further held that the amount leviable for the period from April 1/1965, to March 31, 1969, was under Section 18(1)(a)(i) of the Acs as amended by the 1964 Amendment and for the period after April 1, 1969, under Section 18(1)(a)(ii) as amended by the 1969 Amendment.

66. On an application by the assessee, the Tribunal referred the following question for our opinion :

' Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the calculation of the penalty up to March 31, 1965, was to be made under Section 18(1)(a)(i) of the W.T. Act, 1957, as it originally stood, from April 1, 1965, to March 31, 1969, under Section 18(1)(a)(i) as substituted with effect from April 1, 1965, by Section 18 of the W.T. (Amend.) Act, 1964, and; thereafter, under Section 18(1)(a)(i) as substituted by Section 24 of the Finance Act, 1969 '

67. Wealth-tax Reference No. 3 of 1975 :

This reference relates only to the assessment year 1968-69. In this case also no return was filed under Section 14(1) of the Act or a return in spite of service of notice under Section 14(2) of the Act. The assessment was made on October 31, 1970. The WTO found the period of default to be 28 months (from July 1, 1968, to October 31, 1970). The Tribunal, however, found the cause for not filing the return up to April 3, 1970, to be reasonable and found the period of default to be six completed months. The WTO had levied penalty at the rate of 2% per month for nine months from July 1, 1968, to March 31, 1969, and levied penalty at the rate of 1/2% per month for six completed months from April 3, 1970, to October 31, 1970. On appeal, the Tribunal, however, upheld the penalty at the rate of 1/2% per month from April 3, 1970, tp October 31, 1970.

68. Wealth-tax Reference No. 4 of 1975 :

This reference relates to two assessment years, namely, 1966-67 and 1967-68. In this case the assessee filed returns for both the periods on May 18, 1970. The assessment was made by the WTO on September 26, 1970. For the first period the WTO found the default for 46 completed months (from July 4, 1966, to May 18, 1970) and for the second period for 34 completed months (from July 1, 1967, to May 18, 1970). He found that the assessee had reasonable cause for not filing the return and so he levied no penalty for the period from August 1, 1968, to March 31, 1969, for the assessment year 1966-67, but he levied penalty at the rate of 1/2% of the net wealth assessed for 13 months from April 1, 1969, to May 18, 1970.

69. For the second period, that is, 1967-68, the WTO levied penalty at the rate of 2% per month for 21 months from July 1, 1967, to March 31. 1969, and at the rate of 1/2% per month of the net wealth assessed for 13 months

from April 1, 1969, to May 18, 1970. On appeal the Tribunal levied penalty as mentioned above in Wealth-tax Reference No. 5 of 1975.

70. These references were earlier heard by a Division Bench consisting of Islam and Ibotombi Singh JJ. Their Lordships differed in their opinion in answering the questions referred to the court, and that is how this matter has come befpre me.

71. Islam J. answered these references in the affirmative and in favour of the department. But Ibotombi Singh J. answered the references in the negative and against the department.

72. Mr. J. P. Bhattacharjee, the learned counsel appearing for the assessee, submits that the 'offence' or the 'infringement' is for non-submission of returns on 30th June of each year of assessment as required under Section 14 of the Act. According to the learned counsel, the offence is complete when the assessee failed to submit the returns on that date. The learned counsel further submits that the assessee is liable to pay penalty according to the law prevailing on that date under Section 18 of the Act as it originally stood for the periods till March 31, 1965. For the same reason he submits that the assessee is liable to pay penalty under Section 18 as amended by the Amending Act of 1964 up to March 31,1969, for the periods 1965-66, 1966-67, 1967-68 and 1968-69, and thereafter, under Section 18 as amended by the 1969 Amendment. His submission is that the infringement is complete on the 30th June of each year and the assessee could not have committed any offence on any subsequent date of the year for non-submission of the return as enjoined by Section 14(1).

73. The next submission of the learned counsel is that the offence is not a continuing one. He submits that the law creating an offence and providing for penalty is a substantive one and can have no retroactive effect, unless the legislature has made it so, expressly or by necessary implication. The learned counsel submits that the amendments made in 1964 and 1969 to Section 18 of the Act have not been made retrospective and so the assessee cannot be penalised on the basis of the laws enacted subsequent to the commission of the offence by the assessee.

74. Mr. G. K. Talukdar, the learned counsel appearing for the department, submits that the assessee by not furnishing the return on 30th, June as re quired Sunder s! 14(1) has committed a default and the default is continuing from that date till he submitted the return as in Wealth-tax Ref. Case No. 4/75, or the orders of assessment made in the other two references. He submits that the law prevailing on the date on which the default is made would apply. He farther -submits that the law prevailing on June 30 of the year in question on which the default was committed and on each subsequent day on which it was repeated would apply to each case.

75. In order to appreciate the rival contentions of the parties it would be appropriate to notice the relevant provisions of the Act. According to the provisions of Section 14(1) of the Act the assessee is required to submit his return before the 30th June of the corresponding, assessment year. Sub-section (2) of the section operates when Section 14(1) has not been complied with. Section 18(1) providing for penalty for non-submission of return on the crucial date as mentioned should be examined in the light of Section 14(1) to find out whether Section 18(1) specifies the completion of the default once and for all, or whether it provides for a continuing offence.

76. Section 15 provides that if any person has not furnished a return within the

time allowed under Section 14, or having furnished a return under that section,

discovers any omission or a wrong statement therein, he may furnish a

return or a revised return, as the case may be, at any time before the

assessment is made. It is to be noted that the submission of a return under Section 15 is not a substitute for the submission of a return under Section 14. Submission

of return under this section may only reduce the period for the computa

tion of penalty under Section 18 of the Act. It is necessary also to state the

position of law as it stood prior to April 1, 1964, and the position of law

that stood, thereafter until April 1, 1969, as well as the position of law as

it stood after April 1, 1969.

77. The relevant portions of Section 18(1)(a) of the Act as it stood originally are as follows :

'(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 it within the time allowed and in the manner required; 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 payable by him, a sum not exceeding one and a half times the amount of such tax, and ......'

78. By Section 18 of the W.T. (Amend.) Act, 1964 (46 of 1964), this section was substituted with effect from April 1, 1965, by the following Section 18 :

'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 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 (I) 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 it 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 tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax;.....,'

79. By Section 24 of the Finance Act, 1969 (Act No. 14 of 1969), in Sub-section (1) (as substituted by Act No. 46 of 1964), Clauses (i) and (ii) had been substituted with effect from April 1, 1969, along with an Explanation. We are concerned in these references only with Clause (i), which reads :

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

(A) the net wealth assessed under Section 16 as reduced by the amount of net wealth on which, in accordance with the rates of wealth-tax specified in Paragraph A of Part I of the Schedule or Part II of the Schedule, the wealth-tax chargeable is nil, or

(B) the net wealth assessed under Section 17, where assessment has been made under that section, as reduced by--

(1) the net wealth, if any, assessed previously under Section 16 or Section 17, or

(2) the amount of net wealth on which, in accordance with the rates of wealth-tax specified in Paragraph A of Part I of the Schedule or Part II of the Schedule, the wealth-tax chargeable is nil,

whichever is greater,

but not exceding, in the aggregate, an amount equal to the net wealth assessed under Section 16, or, as the case may be, the net wealth assessed under Section 17, as reduced in either case in the manner aforesaid...'

80. The precise question involved in these references is whether penalty should be imposed on the assessee on the basis of Section 18(1)(a) of the Act as it stood at the time of the default or the same should be increased due to the amendments of the said section by the 1964 and 1969 Amendments.

81. From a perusal of the relevant provisions of Section 18 it appears that Sub-section (1)(a) is attracted when the assessee 'has without reasonable cause failed

to furnish return' as required under Section 14 of the Act. Clause (i) of that sub-

section is the provision, according to me, for the computation of the penalty imposable under this section. In the original section as well as in the subsequent amendments noticed above, Sub-section (1)(a) has used the present tense, namely, 'has...failed to furnish...' Therefore, the provision in this subsection indicates that it is only prospective and cannot have any retroactive operation. In other words, the assessee will be liable according to the law as it stood at the time of his failure to furnish the return under Section 14 and that liability can be computed or calculated in accordance with the provision of Clause (i) of this section. In the 1964 Amendment Sub-section (i)(a) of the section is to the same effect, that is to say, when the assessee fails to furnish the return as required under Section 14 of the Act. In other words, if the default is committed for the corresponding year of assessment after the amendment, the penalty will be imposable according to the amended provision but that by itself would not attract any default prior to the commencement of the amendment. Similar should be the interpretation to be given to the 1969 Amendment.

82. Mr. Talukdar, the learned counsel appearing for the department, submits that in the two Amendments of 1964 and 1969 in Clause (i) of Sub-section (1)(a) of Section 18, it is. specifically enacted that the assessee would be liable for penalty ' for every month during which the default continued ' according to the rates prescribed by the above amendments. Reading Section 18, I find that Sub-section (1)(a) of the section is the infringement of offence clause for not filing return in terms of Section 14 for which the assessee is visited with penalty provision under the section. Clause (i) of the said sub-section is only for the purpose of calculating or computing the quantum of penalty imposable on the assessee considering the length of period during which the assessee has not filed any return under Section 15 (which if filed would reduce the quantum of penalty under this section) or the assessment for the corresponding year is not completed. The expression ' default continued ', in my opinion, has been used in the aforesaid two amendments in clause (i) for the purpose of computing the quantum of penalty. The original Clause (i) of Sub-section (1) of Section 18 provided for the maximum penalty which could be imposed on the assessee. In the 1964 Amendment, Clause (i) of the said section provides for the maximum as well as for the number of completed months during which the infringement for not filing the: return under Section 14 continued. Similar is the case in the: 1969 Amendment wherein the maximum of the penalty with reference to the completed months has: been provided in Clause (i) of Section 18(1)(a).

83. On a careful consideration of the various provisions noticed above, I am of the opinion that infringement is complete once and for all as and when there isiailure on the part ;of the -assessee to file a return as required under Section 14 of the Act. Such infringement is complete and it cannot be stopped by filing of any subsequent return. If any return is filed subse-

quentiy that would hot be a return under Section 14, but it may be a return under Section 15 which may reduce the period of default, but would not absolve the assessee of the offence committed by him by riot filing the return on the crucial date, namely, on 30th June of each corresponding year. Accordingly, I am of the firm opinion that the penalty imposable under Section 18 would be on the basis of the law as it stood on the date of the failure of the assessee to file the return on the crucial date as aforesaid. In other words, if there is default for a particular assessment year, before the 1964 Amendment, the penalty that can be imposed would be according to the provision of the law prior to April 1, 1965. In such a case although the return is filed under Section 15 or the assessment is made after the 1964 Amendment or 1969 Amendment, the amended provisions of Clause (i) of Sub-section (1)(a) of Section 18 would not apply. Similarly, if the failure of the assessee to furnish the return is after the 1964 Amendment, the penalty that can be imposed on him would be on the basis of the law as it stood on the date of his failure to file the return. It would not attract the provision of Clause (i) of Section 18(1)(a) of the 1969 Amendment although the assessment for that year is not complete or no return is filed before that amendment. From the above discussion and also on a perusal of Section 18(1)(a), before and after amendments, it shows that there was no change in the clause levying penalty, but the rate of penalty was vitally' altered by the two amendments with effect from April 1, 1965, and April 1, 1969. If the contention of the learned counsel for the department is accepted, that would have the effect of operating the penal clause retrospectively. But reading Section 18, I do not find such retrospective operation intended by the legislature. Indeed, it is difficult to see on what principle we can refuse to give its plain natural meaning to the expression ' has failed......' as used in Section 18(1)(a) and to read it in a sense so as to have in

its sweep retroactive effect. I do not think that this would be the correct

way of interpreting the provision of a section where no such retrospective

operation is expressly enacted.

84. A number of decisions have been cited by the learned counsel for both

sides, but I may only refer, to some of them having direct bearing on our

case.

85. The point whether the non-filing of a return under Section 14(1) constitutes a continuing default or not is not without authority, At least some of the High Courts have held thajt default is net continuing. In CWT v. Ram Narain Agrawal : [1977]106ITR965(All) a similar question arose before the Allahabad High Court under the following circumstances :

86. The assessee was assessed to wealth-tax as an individual, for the assessment years 1964-65, 1965-66,1966-67 and 1967-68. No voluntary return of wealth was filed by him as required under Section 14(1): of the Act. The WTO issued notice under Section 17(1) calling for return of net wealth for the assessment

years which were served upon the assessee on October 26, 1969. The returns were filed by him on September 18, 1970, and the assessments were completed on January 30, 1971. The WTO initiated proceedings unders. 18(1)(a) of the Act for the delay in filing returns and levied penalty against the assessee. The appeal filed by the assessee was dismissed by the AAC of Income-tax, but the second appeal filed by him before the Tribunal was partly allowed and it was held that the increased scale of penalty was applicable only in a case where the default in furnishing the return of net wealth occurred on or after April 1, 1969. After allowing the appeal, the Tribunal directed the WTO to impose the penalty on the scale in force prior to the Finance Act, 1969. Aggrieved by this order, the CWT had the following question referred for the opinion of the High Court; ' Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Finance Act, 1969, was not retrospective in effect and the penalties under Section 18(1)(a) of the W.T. Act, 1957, were exigible in these cases for the assessment years 1964-65, 1965-66, 1966-67 and 1967-68 on the scale in force prior to the Finance Act, 1969 ?'

87. While answering the question against the department and in favour of the assessee, the Bench observed as under (page 968) :

' The law operative on the date when the infringement takes place is the law applicable unless it is made punishable ex post facto. If the argument of the department is accepted it shall make the operation of the amended law retrospective when there are no such words in the statute itself. There is no scope for culling out an intention of the legislature as the language is explicit and unambiguous. It is well settled both by English and Indian courts that a fiscal statute cannot be regarded as retrospective by implication. We cannot read any intention of retrospective operation by implication. Moreover, we are concerned with a penal provision and the rule against the retrospectivity applies with greater rigour in such cases.'

88. The Punjab and Haryana High Court in Suresh Seth v. CWT [1977] 108 ITR 86 had to consider the scope, intent, reach and interpretation of Section 18

'of the W.T. Act. The court following CWT v. Ram Narain Agrawal : [1977]106ITR965(All) and CGT v. C. Muthukumaraswamy Mudaliar : [1975]98ITR540(Mad) , observed as follows :

' A fiscal statute cannot be construed retrospectively unless there are clear words to that effect in the statute itself. Section 18(1)(a) of the W.T. Act, 1957, as amended by the Finance Act, 1969, is not retrospective in its operation.

Under Section 18 the wrongful act on the part of an assessee becomes complete as soon as he does not file the return of his wealth on the stipulated date. His omission to do so does not make the wrongful a6t a continuing one, merely because the penalty on him may either continue or get enhanced.

Penalty can be imposed on an assessee for failure to file a return on the due date only on the basis of the law which was prevalent on that date.'

89. In CGT v. C. Muthukumaraswamy Mudaliar : [1975]98ITR540(Mad) , a Division Bench of the Madras High Court was concerned with the interpretation of Section 17(1)(a) of the G.T. (Amend.) Act, 1962, which is in pari materia with Section 18(1)(a) of the Act. It was held in that case that the non-submission of return on June 30, 1962, was an infringement of the law for which penalty was sought to be levied and as such the provisions relating to penalty that were in force on that date would have to be applied in the assessee's case. In CWT v. R.D. Chand : [1977]108ITR787(AP) , the Andhra Pradesh High Court had to consider the scope of Section 18(1)(a) as amended by the W.T. (Amend.) Act of 1964 and the Finance Act of 1969. The case before the court came up under the following circumstances. For the assessment year 1961-62, the assessee filed his return on June 27, 1966, and the assessment was completed on July 22, 1966. For the delay in filing the return, penalty was imposed under the provisions of the Act as it stood on April 1, 1965. In appeal, the AAC held that the law that is applicable to the proceedings was as it stood as on the date of commission of the default and as the default is deemed to have been committed by the assessee on the date on which he was required to file the return, that is, June 30, 1961, in the instant case, the penalty should be imposed as per the law as it stood on July 1, 1961, and as no minimum was prescribed then, he reduced the penalty to Rs. 1,000. The assessee as well as the department being aggrieved filed appeals before the Tribunal which were dismissed. On a reference, the court adhered to its earlier view in Addl. CIT v. Medisetty Kamarao : [1977]108ITR318(AP) (that was a case under Section 271(1)(iii) of the I.T. Act) wherein it had been observed (page 323) :

' It is a cardinal principle of criminal jurisprudence that, unless otherwise provided expressly or by necessary implication, the penalty that was provided for at the time of the commission of the offence would be the. proper penalty to be levied, and not the penalty that was provided for at the time of conviction of the offender. In other words, penalty for infraction takes place not when it is detected but when it actually has been committed,'

90. The court further held thus : [1977]108ITR787(AP) :

'...when Clause (a) to Section 18(1) read with Section 18(1)(i) of the Act does not expressly or by necessary implication treat the default as a continuing default, it would, in our opinion, be stretching the point too far to hold that from the scale of penalty provided in Clause (i) it should be assumed that the legislature intended that the default in not filing the return on the due date would be a continuing default.'

91. The court also observed (page 797) :

' Section 18(1)(a), as amended by the W.T. (Amend.) Act, 1964, clearly lays down as to what would be considered a default. Clause (a) does not provide expressly nor'can it be deduced by necessary implication to have provided that once a default is committed in not filing the returns on the due date, it should be considered to be a continuing default until the returns are filed. We are of the opinion that Section 18(1)(a) explicitly provides that if the assessee does not file his return before 30th June of the corresponding assessment year, he commits a default. In other words, the default is a completed default as on that date, and what is provided in Clause (i) to that section is the scale of penalty that should be levied in cases of contravention of Section 18(1)(a). By no stretch of imagination, it could be concluded that by providing Clause (i) of Section 18(1) by the W.T. (Amend.) Act, 1964, the legislature had intended that infraction of Section 18(1)(a) would be a continuing default until the returns are filed.'

92. In CIT v. Ramchand Kundanlal Saraf : [1975]98ITR474(MP) , the Madhya Pradesh High Court had to consider the scope of Section 271(1) of the I.T. Act, 1961, regarding the penalty proceeding for the concealment of income. In that case, the court observed as follows (page 478) :

' Liability for penalty is incurred by an assessee for concealment of income. The provisions relating to penalty are of a penal character and their object is to punish the assessee so as to deter him from concealing his income in future. Penalty is in the nature of punishment for the act of concealment, and, therefore, the quantum of penalty must be determined with reference to the law prevailing on the day when the act of concealment was committed and not when the penalty proceedings are initiated or the order imposing penalty is passed, unlike proceedings for assessment of tax which are governed by the law prevailing during the assessment year. Therefore, where the concealment of income took place when the returns for the assessment years 1961-62 and 1962-63 were filed, long before the amendment of Section 271 of the I.T. Act, 1961, on April 1, 1968, penalty for such concealment of income would be leviable in accordance with the provisions of Section 271 of the Act as they stood prior to the amendment and not after the amendment, even where the penalty proceedings have been initiated after the amendment came into force as a result of a reassessment. This will be in accordance with the principle underlying Article 20 of the Constitution under which no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of an offence and also in accord with the settled rule of construction that an amending statute must be given effect to prospectively and not retrospectively unless there is an express provision to that effect.'

93. We may now consider whether it is a continuing default or not. In the context, whether the default is a continuing one alter the two amendments it is worthwhile to mention some observations made by the Supreme Court of India in Balakrishna Savalram Pujari Waghmere v. Shree Dhyaneshwar Maharaj Sansthan : AIR1959SC798 . These observations

are :

' It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury. If the wrongful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from the act may continue.'

94. Referring to the above observations of the Supreme Court, the Punjab and Haryana High Court in Suresh Seth v. CWT [1971] 108 ITR 86 has made the following significant observations with which I am in respectful agreement. The said observation reads :

' If Section 18 of the Act is tested on the touchstone of the aforementioned principle, it becomes obvious that the wrongful act on the part of an assessee becomes complete as soon as he does not file the return of his wealth on the stipulated date. His omission to do so does not make the wrongful act a continuing one, merely because the penalty imposable on him may either continue or get enhanced.'

95. On behalf of the department the cases in ITO v. Gwalior Rayon Silk Mfg.

(Wvg,) Co. Ltd. : [1975]101ITR457(SC) , Biswanath Ghosh v. ITO : [1974]95ITR372(Orissa) and CWT v. Pathummabi : [1977]108ITR689(Ker) were relied

on. Both Biswanath Ghosh v. ITO : [1974]95ITR372(Orissa) and ITO v.

Gwalior Rayon Silk Mfg. (Wvg,) Co. Ltd. : [1975]101ITR457(SC) were cases

dealing with levy of interest under the I.T. Act. According to Sub-section (8) of Section 139, the legislature itself had provided for the levy of interest at a

particular rate :

'.........reckoned from the 1st day of October of the assessment year

to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under Section 144, on the amount of the tax payable on the total income as determined on reguard assessment, as reduced by the advance tax, if any, paid and any tax deducted at source......... '

96. It was in the light of this provision that the courts have held that ' infraction of Section 139 of the I.T, Act was a continuing offence '.

97. It is now well-settled that proceedings for levy of interest and proceedings for levy of penalty are totally different proceedings. In ITO v. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. : [1975]101ITR457(SC) , the Supreme Court observed as follows (page 463) :

' Furthermore, it is the Finance Act which fixes the rate of interest payable under Sub-section (2) of Section 220 and it is common knowledge that every year the Finance Act makes important amendments in the rates payable under the various provisions of the I.T. Act. In these circumstances, therefore, it is not within the competence of the ITO to vary the rate of interest fixed by the Finance Act under Sub-section (2) of Section 220 from time to time.'

98. In my opinion, the above two cases, namely, ITO v. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. : [1975]101ITR457(SC) and Biswanath Ghosh v. ITO : [1974]95ITR372(Orissa) , have no application in the present case. In CWT v. Smt. Pathummabi : [1977]108ITR689(Ker) , the Kerala High, Court no doubt held that after the amendment of Section 18(1) by the W.T, (Amend.) Act,

1964. the non-filing of the return would be considered as a continuing default. But with great respect I am unable to subscribe to that view for the reasons which are already set out in the earlier part of my judgment, Moreover, after going through the report, I find in para 6 of the judgment where their Lordships have observed as follows (page 694) :

' As we read Section 18(1)(i) of the W.T. Act, 1957, as amended, along with the main Section 18(1) we find that an offence that had become complete had been changed into a continuing offence and visited with consequences every month for continued default even by the amending Act 46 of 1964.'

99. I find it difficult to appreciate how an offence which is complete under the Act as it stood before the Amendment of 1964, could be considered to be a continuing offence when the main Section 18(1)(a) with certain amendments which are not material for the purpose of this case has been fully retained by the W.T. (Amend.) Act of 1964. It is only Clause (i) of Section 18(1) that had been amended and that clause, as we have already pointed out, provides for the scale of penalty that should be levied after April 1,

1965, for the default in not filing the return for the corresponding year of

assessment falling due after that date.

100. In the ultimate analysis, can we ask--Does, the expression 'default

continued' usgd in Clause (i) of Section 18(1) mean that every month the assessee

does not file the return, he commits a fresh default I think the answer

must be in the negative because Section 14(1) en joins on the assessee an obliga

tion to file his return by the 30th June of the corresponding year of assess

ment. By reading Section 14(1) in conjunction with Section 18(1)(a), it cannot be said

that the non-filing of the return by 30th June of the corresponding assess

ment year amounts to commission of a fresh default every month there

after.

101. After careful consideration of the whole matter, I am of the considered view that the omission of an assessee to file a return on the due date completes his default as on that date and does not render it a continuing

default. Consequently, the penalty can be imposed on him only on the basis of law which stood on that date.

102. I, accordingly, answer all the questions in these three references in favour of the assessees and against the revenue.


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