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Xyz Vs. Third Wealth-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Judge
Reported in(1982)2ITD566(Mum.)
AppellantXyz
RespondentThird Wealth-tax Officer
Excerpt:
.....hearing it was submitted that the assessee had not concealed any particulars of her wealth in the original proceedings. she had declared her jewellery itemwise in the original proceedings. she had declared the value of this jewellery as in the past. she got the jewellery revalued on 1-10-1976 for the relevant valuation dates at the instance of the wto. in the first place, the learned counsel for the assessee has pleaded before us that such subsequent revaluation of the jewellery does not justify reopening of the assessment. the reassessment proceedings, thus, were bad in law. on the top of it, the levy of the penalty was totally erroneous. in support, the counsel for the assessee has relied on the tribunal, bombay bench 'b' decision in wt appeal no. 78 (all.)of 1981 in the case of.....
Judgment:
1. In these appeals, the asses-see has disputed the penalties levied by the WTO under Section 18(1)(c) of the Wealth-tax Act, 1957 ('the Act'), as sustained by the AAG for the five years under consideration.

2. The facts in brief are that the assessee filed original returns of wealth on 4-9-1968, 29-6-1969, 30-6-1970, 30-6-1971 and 30-6-1972, respectively, admitting jewellery worth Rs. 57,550. The assessments were completed for these five years valuing the jewellery at Rs. 58,244 and Rs. 58,166 for the first two years and at the figures declared by the assessee for the last three years under consideration. In the meanwhile, the assessment for the year 1976-77 came up for consideration, during the course of which, at the instance of the WTO, the assessee got the jewellery valued. According to the assessee's valuer, the value of the jewellery was Rs. 95,131 for the first two years and Rs. 1,24,702 for the last three years, which the assessee had shown in her returns of wealth for the five assessment years under consideration, which were reopened in the meanwhile. In the assessment proceedings, the WTO accepted the value of the jewellery as declared by the assessee as per the valuer's report. After completion of the reassessment proceedings, the WTO proceeded to levy penalties, under Section 18(1), equivalent to the difference in the value of the jewellery as assessed in the original assessments and the value of the jewellery as assessed in the reassessment proceedings.

3. The assessee objected before the AAC both on merits and on legalities of the penalties levied by the WTO. Having failed before the AAC, the assessee appealed before the Tribunal.

4. During the course of the hearing it was submitted that the assessee had not concealed any particulars of her wealth in the original proceedings. She had declared her jewellery itemwise in the original proceedings. She had declared the value of this jewellery as in the past. She got the jewellery revalued on 1-10-1976 for the relevant valuation dates at the instance of the WTO. In the first place, the learned counsel for the assessee has pleaded before us that such subsequent revaluation of the jewellery does not justify reopening of the assessment. The reassessment proceedings, thus, were bad in law. On the top of it, the levy of the penalty was totally erroneous. In support, the counsel for the assessee has relied on the Tribunal, Bombay Bench 'B' decision in WT Appeal No. 78 (All.)of 1981 in the case of Ajaypat Singhania v. WTO decided on 30-11-1981, to which decision both of them were parties. Further, he relied on the Tribunal, Bombay Bench 'B' decision in WT Appeal No. 514 (Bom.) of 1979 decided on 24-11-1980 and the Tribunal, Delhi Bench 'D' decision in IT Appeal No.124 (Delhi) of 1977-78 decided on 29-4-1978. In all these appeals in identical circumstances, the three Benches had held that the respective assessees were not liable to penalties under Section 18(1)(c) or Section 271(1)(c) of the Income-tax Act. Reliance is also placed on the Bombay High Court decision in the case of Tulsidas Kilachand. D.R.Chawla [1980] 122 ITR 458 to the effect that a subsequent valuation does not justify the reopening. Further reliance is also placed on the Kerala High Court decision in the case of CIT v. Sankarsons & Co.

[1972] 85 ITR 627 and the Punjab and Haryana High Court decision in case of Addl. CIT v. Karnail Singh V. Kalaran [1974] 94 ITR 505. On behalf of the revenue, the learned departmental representative has relied on the Allahabad High Court decision in the case of CIT v.Chiranji Lal Shanti Swamp [1981] 130 ITR 651 and CIT v. Rupabani Theatres (P.) Ltd. [1981] 130 ITR 747 (Cal.). The case law stated by the two parties relates to the burden of proof regarding concealment in the case where the Explanation to Section 18(1)(c) is applicable.

5. We have considered the facts and circumstances of the case. As stated earlier, the assessee has not concealed any particulars of the items of jewellery. The assessments have been reopened merely on the basis of a valuation report subsequent to the original assessments. We are not directly concerned here with the question whether the assessments could have been reopened. But the problem before us is whether in such circumstances penalties under Section 18(1)(c) could be levied. It may be recalled that in identical circumstances in Ajaypat Singhania (supra), we had made the following observations : 4. We have carefully considered the facts and circumstances of the case. At no stage of the proceedings it was the case of revenue that the assessee had concealed any item of jewellery. He was disclosing the value of the jewellery at Rs. 25,000, year after year, as a part and parcel of the total wealth running into seven digits. On being called upon to get the jewellery valued, the assessee got it valued and there was a nominal difference between the value as disclosed by him and the value as determined by the valuer. In our opinion considering the contents of the Board's circular and letter referred to earlier, which has the force of instructions under Section 13 of the Wealth-tax Act, the Wealth-tax Officer could not have proceeded to levy the penalty. In fact, this is the consistent view of the Tribunal as referred to earlier. Further, the assessee cannot be accused of gross and wilful neglect within the meaning of Explanation to Section 18(1)(c) of the Wealth-tax Act. In our opinion, therefore, the order of the Commissioner (Appeals) upholding the penalty was wrong and required to be reversed. The penalty sustained by the Commissioner (Appeals) is hereby vacated.

6. Apart from the aforesaid position on merits, the learned counsel for the assessee has challenged the penalties on the legality. Firstly, that the WTO erred in imposing penalty when the proceedings were not validly reopened, as the WTO could not rely upon the valuation report obtained subsequently to the completion of the original assessments as the basis for reopening. This ground is supported by the Bombay High Court decision in the case of Tulsidas (supra). The next ground on which the learned counsel has challenged the levy of penalty is that the WTO has erred in imposing the penalty when he had no jurisdiction to do so. It was explained that since the original returns of wealth were filed prior to 1-4-1976, the alleged default for the levy of the penalty had taken place: prior to 1-4-1976, when the original returns for these assessment years were filed. The relevant law applicable would be only the law prevalent on that date on which date the assessee had concealed the particulars of her wealth, i.e., the dates on which the original returns were filed. The dates of filing of the returns for all the assessment years under consideration were prior to 1-4-1976.

Therefore, following the Supreme Court decision in the case of Brij Mohan v. CIT [1979] 120 ITR 1, the WTO could not have levied the penalties. Further, the quantum of penalty also would be substantially different from the penalties levied according to the law as applicable with affect from 1-4-1976.

7. We have carefully considered the submissions on either side on this issue. Apart from the fact that the assessee is eligible to succeed for the cancellation of penalties for the five years on merits as discussed in the earlier paragraphs, the orders imposing penalties suffer from infirmity on these two additional grounds also, viz., that the penalties were levied during the course of the assessment proceedings, which were not properly initiated and secondly, the penalties were levied by the WTO according to the law as prevailing after 1-4-1976, when in fact the proceedings should have been initiated and the penalties should have been levied according to the law prevalent prior to 31-3-1976. The penalties are bad on these counts also.

8. In the result, the penalties are, therefore, hereby cancelled and the appeals are allowed.


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