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Bankatlal Tody Vs. Commissioner of Wealth-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 155 of 1979
Judge
Reported in(1983)35CTR(MP)245; [1982]138ITR754(MP)
ActsWealth Tax Act, 1957 - Sections 18(1) and 18(3)
AppellantBankatlal Tody
RespondentCommissioner of Wealth-tax
Appellant AdvocateA.M. Mathur, Adv.
Respondent AdvocateR.C. Mukati, Adv.
Excerpt:
.....estimate, the order was bad even relating to the part, which had been originally deleted by the wto, and, therefore, could not be maintained qua that part ? '2. the material facts giving rise to this reference briefly are as follows :3. for the assessment year 1974-75, the assessee filed his return of net wealth declaring a net wealth of 1,38,000. the assessment, however, was completed by the wto on a net wealth of rs. 1. whether, on the facts and in the circumstances of the case, the iac of wealth-tax had any jurisdiction to impose penalty under section 18(1)(c) of the wealth-tax act, 1957, on march 26, 1977, after the amendment of section 18(3) with effect from april 1, 1976, by the taxation laws (amendment) act, 1975 ? and 2. whether, on the facts and in the circumstances of the..........on 29th january, 1977. it is in the light of this additional fact that we have to answer the first question referred to this court. 5. by the taxation laws (amendment) act, 1975, which came into force from 1st april, 1976, the provisions of section 18(3), of the act, which required the wto to refer the case to the iac in the cases covered by that provision, has been recast as follows: ' 18. (3) notwithstanding anything contained in clause (iii) of sub-section (1), if, in a case falling under clause (c) of that sub-section, the amount (as determined by the wealth-tax officer on assessment) in respect of which penalty is imposable under clause (c) aforesaid exceeds a sum of twenty-five thousand rupees, the wealth-tax officer shall not issue any direction under sub-section (1) for payment.....
Judgment:

Sohani, J.

1. By this reference under Section 27(1) of the W.T. Act, 1957 (hereinafter referred to as 'the Act'), the Income-tax Appellate Tribunal, Indore Bench, Indore, has referred the following questions of law to this court for its opinion :

'(1) Whether, on the facts and in the circumstances of the case, the IAC of Wealth-tax had any jurisdiction to impose penalty under, Section 18(1)(c) of the Wealth-tax Act, 1957, on March 26, 1977, after the amendment of Section 18(3) with effect from April 1, 1976, by the Taxation Laws (Amendment) Act, 1975

(2) Whether, on the facts and in the circumstances of the case, once the IAC had imposed composite penalty for concealment detected by the. WTO and enhanced by the AAC in value of shares and jewellery on estimate, the order was bad even relating to the part, which had been originally deleted by the WTO, and, therefore, could not be maintained qua that part '

2. The material facts giving rise to this reference briefly are as follows :

3. For the assessment year 1974-75, the assessee filed his return of net wealth declaring a net wealth of 1,38,000. The assessment, however, was completed by the WTO on a net wealth of Rs. 2,89,705. The WTO also initiated penalty proceedings under Section 18(1) of the Act and referred the case to the IAC. When the penalty proceedings came up for consideration before the IAC, he found that the assessee had committed defaults for the assessment year in question in terms of the Explanation to Section 18(1)of the Act and accordingly penalty was imposed on him. 'Aggrieved by that order, the assessee preferred an appeal before the Tribunal. On behalf of the assessee, it was, inter alia, contended before the Tribunal that the IAC had no jurisdiction to impose penalty after 1st April, 1976. It was urged that the order of the IAC dated 26th March, 1977, imposing penalty under Section 18(1)(c) of the Act was without jurisdiction. The Appellate Tribunal, however, rejected that contention. Aggrieved by the order passed by the Tribunal, the assessee sought a reference and it is at the instance of the assessee that the aforesaid questions have been referred to this court for its opinion.

4. When the matter came up for consideration before this court, by an order dated 20th of March, 1981, this court directed the Appellate Tribunal to send a supplementary statement of the case and to state the date on which the matter regarding the imposition of penalty was referred by the WTO to the IAC in the instant case. In pursuance of this order, a supplementary statement of the case has been received and it has been stated therein that the reference was made by the WTO on 29th January, 1977. It is in the light of this additional fact that we have to answer the first question referred to this court.

5. By the Taxation Laws (Amendment) Act, 1975, which came into force from 1st April, 1976, the provisions of Section 18(3), of the Act, which required the WTO to refer the case to the IAC in the cases covered by that provision, has been recast as follows:

' 18. (3) Notwithstanding anything contained in Clause (iii) of Sub-section (1), if, in a case falling under Clause (c) of that sub-section, the amount (as determined by the Wealth-tax Officer on assessment) in respect of which penalty is imposable under Clause (c) aforesaid exceeds a sum of twenty-five thousand rupees, the Wealth-tax Officer shall not issue any direction Under Sub-section (1) for payment by way of penalty without the previous approval of the Inspecting Assistant Commissioner. '

6. Thus, from 1st April, 1976, the IAC has no jurisdiction to impose penalty. While considering similar provisions in the I.T. Act, 1961, a Division Bench of this court in CIT v. A.N. Tiwari : [1980]124ITR680(MP) , held that what was important to see was whether the reference was validly made to the IAC and that if the reference was valid in accordance with the provisions, as they stood at the time of making the reference, it would not be invalidated by a subsequent amendment in that provision. The jurisdiction of the IAC for the purpose of imposing a penalty is derived on a reference made to him by the WTO and if the reference was not validly made, then it follows that the IAC would have no jurisdiction to impose the penalty. In the instant case, as stated in the supplementary statement of the case, the reference was made by the WTO on 29th of January, 1977, when the provisions of Section 18(3) of the Act requiring the WTO to refer the case to the IAC were substituted by the aforesaid provisions of Section 18(3) of the Act. In our opinion, therefore, on the facts and circumstances of the case, the IAC had no jurisdiction to impose penalty under Section 18(1)(c) of the Act after the amendment of Section 18(3), with effect from 1st April, 1976, by the Taxation Laws (Amendment) Act, 1975. Our answer to the first question referred to this court, therefore, is against the Department. In view of our answer to the first question, learned counsel for the parties conceded that it would not be necessary to answer the second question referred to this court. We, therefore, decline to answer that question.

7. Reference answered accordingly.

8. Parties shall bear their own costs of this reference.

The following order of the court (dated March 20, 1981) was delivered by

Shukla, J.

9. Income-tax Appellate Tribunal, Indore Bench, has referred the following questions under Section 27(1) of the W.T. Act for our opinion:

'1. Whether, on the facts and in the circumstances of the case, the IAC of wealth-tax had any jurisdiction to impose penalty under Section 18(1)(c) of the Wealth-tax Act, 1957, on March 26, 1977, after the amendment of Section 18(3) with effect from April 1, 1976, by the Taxation Laws (Amendment) Act, 1975 and

2. Whether, on the facts and in the circumstances of the case, once the IAC had imposed composite penalty for concealment detected by the WTO and enhanced by the AAC in value of shares and jewellery on estimate, the order was bad even relating to the part which had been originally detected by the WTO had, therefore, could not be maintained qua thatpart ?

10. For assessment year 1974-75, the assessee, filed his return of wealth declaring a net wealth of Rs. 1,38,000. The assessee in his return had disclosed the value of 1,600 shares in M/s. Jaora Sugar Mills P. Ltd. at Rs. 1,55,536, i.e., at Rs. 97.21 per share. He also disclosed the value of shares in Active Transport Company at Rs. 14,500. Against the total value of the above shares declared at Rs. 1,70,036, the assessee claimed exemption of Rs. 1,50,000 and the net wealth of the shares was declared at Rs. 20,036. The assessee did not show any value against the shares of M/s. Western India Glass Works Co. Ltd., Bombay. The assessee also claimed deduction of a sum of Rs. 4,15,162 on account of debts owed by the assessee in India. The WTO while completing the assessment computed the net wealth of the assessee at Rs. 2,89,705 after allowing a deduction of Rs. 4,15,162 on account of debts owed by the assessee. The WTO initiated penalty proceedings against the assessee under Section 18(1)(c) of the W.T. Act and referred the case to the IAC.

11. The IAC invoked the Explanation to Section 18(1)(c) of the Act and by his order dated March 26, 1977, imposed a penalty of Rs. 1,84,832.

12. An appeal was filed before the Appellate Tribunal and the contention of the assessee was that the IAC has no jurisdiction to impose a penalty in view of the amendment to Section 18(3) of the Act by the Taxation Laws (Amendment) Act, 1975, with effect from 1st April, 1976; jurisdiction to levy penalty was with the WTO only. This objection was overruled by the Tribunal holding that the IAC had jurisdiction to levy the penalty. Other objections were also raised about the jurisdiction of the IAC but they are relevant for question No. 2, and, at this stage, we do not propose to answer that question because we find that certain more facts have to be obtained for deciding question No. 1. On similar facts in Indrasen Bhoot v. CWT (M.C.C. No. 116 of 1979, dated July 11, 1980) (See Appendix-I at p. 758 infra) and Anil Kumar Tody v. CWT (M.C.C. No. 117 of 1979, dated March 13, 1981) (See Appendix-II at p. 759 infra), we have directed the Tribunal to submit a supplementary statement of case.

13. In view of this, we, therefore, direct the Tribunal to send a supplementary statement of the case and state therein the date on which the matter regarding the imposition of penalty was referred by the WTO to the IAC in the instant case. After receipt of such a statement the reference shall be fixed for further hearing.


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