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Wealth-tax Officer Vs. O.P. Kapoor - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1983)4ITD91(Delhi)
AppellantWealth-tax Officer
RespondentO.P. Kapoor
Excerpt:
1. this appeal has been preferred by the revenue against order dated 6-8-1980 of the commissioner (appeals).2. 1973-74 is the assessment year concerned. the assessee is an individual. the assessment was completed by the wto as per order dated 23-10-1974 determining net wealth at rs. 1,69,633. the said figure included an amount of rs. 19,597 as belonging to the assessee and lying in the standard bank ltd., london in the sum off 1,088.32. the assessee had filed the return of net wealth for the said assessment year claiming the status of non-resident. thus, according to the assessee in the light of provisions of clause (i) of section 6 of the wealth-tax act, 1957 ('the act') the value of the assets and debts located outside india was not includible in the computation of the assessee's net.....
Judgment:
1. This appeal has been preferred by the revenue against order dated 6-8-1980 of the Commissioner (Appeals).

2. 1973-74 is the assessment year concerned. The assessee is an individual. The assessment was completed by the WTO as per order dated 23-10-1974 determining net wealth at Rs. 1,69,633. The said figure included an amount of Rs. 19,597 as belonging to the assessee and lying in the Standard Bank Ltd., London in the sum off 1,088.32. The assessee had filed the return of net wealth for the said assessment year claiming the status of non-resident. Thus, according to the assessee in the light of provisions of Clause (i) of Section 6 of the Wealth-tax Act, 1957 ('the Act') the value of the assets and debts located outside India was not includible in the computation of the assessee's net wealth. The learned WTO, however, completed the assessment on the assessee in the status of resident. In this regard, the WTO, actually relied on the finding arrived at by the ITO in the present assessee's income-tax assessment relating to the assessment year 1973-74. That income-tax assessment was also completed as per order dated 23-10-1974.

In the return of net wealth filed by the assessee, he had, in view of his claim as to status as nonresident, made a specific statement. 'The assessee is having bank balance with a London bank, which is exempt under Section 6(z) being a nonresident'. Thus in the return of net wealth, the assessee had not disclosed at all any deposits lying in any London bank. Actually, the assessee had two deposits in two different London banks as on the valuation date, namely, 31-3-1973. One deposit was of Rs. 72,724 lying in National City Bank, London in the sum of 4040.24 and the other deposit was of 1088.32 as aforesaid in the Standard Bank Ltd., London. Shri N.K. Sharma was the ITO as well as the WTO for Distt. III (25) New Delhi. It appears that during the course of wealth-tax assessment under consideration, the WTO (Shri N.K. Sharma) in view of the progress made in the assessee's income-tax case for the assessment year 1973-74 having made up his mind regarding residential status of the assessee individual, enquired from the assessee as to the detail of the debts and assets lying outside India. This is indicated from the following scribbling appearing in photostat copy of the assessee's statement of assessable wealth in the wealth-tax folder: Balance 3. In the wealth-tax assessment as completed by the WTO on 23-10-1974 there was no recording of any satisfaction as to concealment of particulars of net wealth by the assessee. No appeal was filed against the said wealth-tax assessment on question of status or on any other question.

4. Against the aforesaid income-tax assessment, however, the assessee went in appeal to the AAC and assailed the ITO's finding as to his residential status. The AAC turned down the assessee's claim as to status as non-resident during the previous year relating to the assessment year 1973-74, as per consolidated order dated 31-3-1975 passed regarding the assessment years 1972-73 and 1973-74.

5. Meantime, i.e., on 16-7-1974, the assessee had filed return of net wealth for the assessment year 1974-75 disclosing both the deposits in the London banks. For the said assessment year, the assessee had himself declared his status as resident. That assessment was completed by the WTO as per order dated 15-11-1975 determining net wealth at Rs. 2,52,810 as rounded off. The said figure included sums of Rs. 8,006 and Rs. 2,83,538 as being deposits/Fixed deposits with Banks. It is not clear whether both or either of the said deposits in London Banks were included in this assessment.

6. On 6-11-1975, the assessee suo moto filed a photostat scribbling together with purported revised return of net wealth for the assessment year 1973-74 disclosing the deposit of 4040.24 (Rs. 72,724) in the National City Bank, London. On receipt of the aforesaid purported revised return dated 6-11-1975 accompanied by forwarding letter of even date, the WTO issued to the assessee a notice under Section 17(1)(a) of the Act, calling upon the assessee to furnish a revised return. The assessee, accordingly, filed a revised return marked duplicate and wealth-tax assessment was, accordingly, completed by the WTO as per order dated 30-9-1976 under Section 16(3) read with Section 17(1)(a) determining net wealth at Rs. 2,42,357, whereas the initial assessment had been completed at net wealth of Rs. 1,69,633. Thus, in the net result, an amount of Rs. 72,724 came to be added being Indian rupee equivalent of the assessee's deposit in National City Bank, London as aforesaid. On completion of the said reassessment order, the WTO initiated against the assessee proceedings for penalty for concealment of particulars of net wealth. Ultimately, penalty of Rs. 72,724 was levied by the WTO as per order dated 24-3-1980 under Section 18(1)(c)ofthe Act.

7. The assessee, in his reply dated 15-2-1979, submitted that as the revised return had been filed by him suo moto there was no question of any concealment. The WTO relying on N.A. Malbary & Bros. v. CIT [1964] 51 ITR 295 (SC) and CIT v. Gopal Krishna Singhania [1973] 89 ITR 27 (All.) took the view that concealment penalty was straightway imposable, when there was a difference between the net wealth determined as per the initial assessment and the net wealth determined as per reassessment.

8. The assessee went in appeal to the Commissioner (Appeals). The learned Commissioner allowed the appeal and cancelled the penalty. On strength of Brij Mohan v. CIT [1979] 120 ITR I (SC), the Commissioner held that to dispose of the instant penalty matter, it would be the law as prevalent or operating on the day on which the wrongful act is committed. From this, the learned Commissioner went on to hold that 30-10-1973, when the initial return was filed by the assessee, was the date to determine the relevant law as aforesaid and in this connection, the Commissioner purported to derive support from CIT v. Ram Achal Ram Sewak [1977J 106 ITR 144 (All.). From this, in turn, it was inferred that the WTO had no jurisdiction to impose penalty under Section 18(1)(e), inasmuch as, according to the text of Section 18 as it stood on 30-10-1973. It was obligatory for the WTO to refer the penalty proceedings to the IAC, inasmuch as the concealed wealth exceeded a sum of Rs. 25,000. Hence, the penalty order was found by the Commissioner to have been made by the WTO without any jurisdiction whatsoever.

9. Next the learned Commissioner took notice of the fact that the assessee had filed revised return on 6-11-1975 voluntarily and before receipt of Section 17 notice from the WTO. The Commissioner found that there was nothing on record to show that the WTO was at all aware before 6-11-1975 as to the existence of the assessee's deposit in National City Bank, London to the tune of rupees equivalent Rs. 72,724.

Thus, according to the Commissioner, the ratio laid down in Addl. CIT v. Radhey Shyam [1980] 123 ITR 125 (All.), was applicable to the facts of the present case. Consequently, the levy of penalty was held not justified.

10. The revenue being aggrieved from the aforesaid finding has come up in second appeal to the Tribunal.

11. Broadly speaking, two contentions were raised by the revenue before the Tribunal. First contention was legal, namely, that the WTO was, on 30-9-1976 when the penalty proceedings were initiated against the assessee, competent to levy penalty in this case merely with the approval of the IAC and that the penalty did not have to be levied by the IAC himself.

12. To appreciate the said controversy the comparative texts of Section 18 as on 1-4-1976 and as prior to that date need be contrasted.

13. Section 18(1)(c) specified the ingredients of the fault made punishable, namely, concealment of particulars of any assets or furnishing of inaccurate particulars of any assets or debts. There was no change in the said provision effective from 1-4-1976. However, it may be noted that until 31-3-1965 furnishing of inaccurate particulars of assets had to be deliberate for constituting the fault. The word 'deliberate' was dropped from Clause (c), effective from 1-4-1965.

14. Section 18(1)(iii) provided for the quantum of punishment leviable in cases where the aforesaid fault stood established. There was no change in the said provisions effective from 1-4-1976.

15. The Explanation below Section 18(1)(iii) contained a rule of evidence as to the proof of the guilt or fault mentioned in Section 18(1)(c). There was no change in the said provision also effective from 1-4-1976.

16. Section 18(3) as until 31-3-1965 stated that no prosecution for an offence was to be instituted in respect of the same facts in relation to which a penalty had been imposed under Section 18.

17. Effective from 1-4-1965, Section 18(3) provided that if in a case falling under Section 18(1)(c), the minimum penalty imposable exceeded a sum of Rs. 1,000 the WTO was to refer the case to the IAC, who, in turn, exercised all the powers relating to imposition of penalty.

Effective from 1-4-1971, Section 18(3) provided that if in a case falling under Section 18(1)(c), the amount as determined in respect of which penalty was imposable exceeded a sum of Rs. 25,000, the WTO was to refer the case to the IAC, who in turn would exercise all the powers relating to imposition of penalty. It was this provision which was in force as on 1-4-1973, the first day of the assessment year under consideration, also as on 23-10-1974 when the initial assessment was completed.

18. Effective from 1-4-1976, Section 18(3) underwent a further change.

According to the amended provision, if in a case falling under Section 18(1)(c), the amount as determined by the WTO in the assessment, in respect of which penalty was imposable exceeded a sum of Rs. 25,000, the WTO was not to issue any direction under Section 18(1) for payment by way of penalty without previous approval of the IAC.19. It was in the light of the last said change in the provisions of Section 18(3), that controversy arose between the parties, whether in the case under consideration, it was enough that the WTO had obtained prior approval of the IAC or whether the penalty itself had to be levied by the IAC. There was no controversy between the parties as to the fact that the WTO had obtained prior approval of the IAC in the case under consideration.

20. At the hearing a general argument was addressed as to whether in concealment penalty cases, it was the law as obtaining on the date of commencement of the assessment year under consideration that had to be applied or the law as it existed on the date of committing the fault of concealment, etc., and it was emphasised that it was the law as existing on the date of committing fault of concealment that has to rule.

21. From the analysis of the provisions of various portions of Section 18 as given above, it may be clear that the law, which has to be applied may relate either to the ingredients constituting the fault or to the rule of evidence falling within the domain of procedural law or to the quantum of penalty that may be imposable or to the field of jurisdiction.

22. In the case of Brij Mohan (supra) relied on by the learned Appellate Commissioner, the controversy between the parties related to the law applicable as regards quantum of penalty and in that connection, it had been laid down that the quantum of penalty had to be determined with reference to the law as in force on the day of committing the fault of concealment, etc. In the case under consideration, there is no controversy as to the law relating to the quantum of penalty. Ruling in the case of Brij Mohan (supra), therefore, have no bearing.

23. In the case of Ram Achal (supra) again relied on by the learned Appellate Commissioner, the controversy before the lower authorities seem to relate as regards the applicability of the rule of evidence as contained in the statutory Explanation below Setion 18(1)(iii).

However, when the matter went to the High Court, the dispute was settled on the basis of the law relating to the ingredients of the fault involving dropping of the word 'deliberately' from Section 18(1)(c) as aforesaid. Thus, in the said case of Ram Achal (supra) also the controversy was not about the law relating to jurisdiction.Jain Bros.

v. Union of India [1970] 77 ITR 107 (SC) throws light. In that case, it was delay penalty that was involved and the question arose whether question of jurisdiction had to be determined with reference to the provisions of the Indian Income-tax Act, 1922 or the provisions of the Income-tax Act, 1961. The Supreme Court laid down: ". . .It is obvious that for the imposition of penalty it is not the assessment year or the date of the filing of the return which is important but it is the satisfaction of the income-tax authorities that a default has been committed by the assessee which would attract the provisions relating to penalty. Whatever the stage at which the satisfaction is reached, the scheme of Section 274(1) and Section 275 of the Act of 1961 is that the order imposing penalty must be made after the completion of the assessment. The crucial date, therefore, for purposes of penalty, is the date of such completion." In the instant case, the reassessment during which satisfaction was recorded by the ITO, was completed on 30-9-1976. Thus, in the light of the Supreme Court ruling in Jain Bros, (supra), it would be that date which could be crucial for determining as to what law is to prevail. We, therefore, conclude that in the present case so far as the question of jurisdiction was concerned, namely, whether the WTO could himself impose the penalty after obtaining approval of the IAC or whether the IAC alone was to impose penalty, it would be decided with reference to the law as it was on 30-9-1976. In view of amendment of Section 18(3), with effect from 1-4-1973 as aforesaid, we hold that the WTO himself was competent to levy penalty with the approval of the IAC. The Commissioner's finding in this regard is reversed.

25. In Continental Commercial Corporation v. ITO [1975] 100 ITR 170 (Mad.), it was held that Section 274(2) of the 1961 Act related to the jurisdiction to impose penalty and that after 31-3-1976, the IAC had no jurisdiction to impose penalty. Similar view taken in CIT v. Dhadi Sahu [1976] 105 ITR 56 (Ori.), after noticing Nain Gopal Mitra v. State of Bihar AIR 1970 SC 1636, CIT v. Om Sons [1979] 116 ITR 215 (All.) and CIT v. Pearey Lal Radhey Raman [1979] 117 ITR 319 (All.), is also in point. These rulings lend further strength to the conclusion drawn by us in the foregoing paragraph.

26 Next contention raised on the revenue's side related to facts, i.e., that on the question of exigibility of penalty on merits, the facts had not been properly appreciated by the learned Commissioner (Appeals). In this regard, the sequence of events put on the revenue's side was like this, that the assessee in response to a query from the WTO as to the detail of the debts and assets of the assessee lying outside India (made some time during the period after receipt of the assessee's initial return of net wealth and before completion of the initial assessment dated 23-10-1974), the assessee misinformed the WTO about the assets lying outside India, in the sense that the assessee disclosed" only the deposit of 1088.32 in the Standard Bank, London, and not the deposit of 4040 and odd in National City Bank, London, that the assessee was under legal obligation to disclose correctly both the said assets despite and irrespective of his claim as to the residential status when the WTO made specific query from the assessee ; and that the aspect that the assessee disclosed information about the deposit with National City Bank on 6-11-1975 is of no avail in view of Durga Timber Works v. CIT [1971] 79 ITR 63 (Delhi).

27. As against this, it was submitted on the assessee's side by way of reply that the WTO had during the course of the initial assessment proceedings, made no specific query from the assessee at all as to the detail of the assets lying outside India and that thus, there was no occasion for the assessee to conceal one of the two deposits lying abroad. It was emphasised on the assessee's side that when the return was filed, there was in view of the assessee's claim to status as non-resident no obligation on his part to disclose the deposits lying abroad and that none was actually disclosed. The assessee's suggestion was that the scribbling that the learned WTO made on the assessee's statement of wealth as accompanying the initial return of net wealth, might have been made by the WTO on the basis of information available to him from the assessment record of the assessee in the income-tax case relating to the assessment year 1973-74. On the assessee's side, it was emphasised that no detection as to the existence of the impugned deposit had been made by the department before the assessee had himself disclosed the same, as per letter dated 6-11-1975. The case of Qammar-ud-Din & Sons v. CIT [1981] 129 ITR 703 (Delhi) was cited on the assessee's side. That ruling laid down that subsequent conduct of the assessee, namely, subsequent to the filing of the initial return of total income, by coming forward to set right the mistake or under statement in the original return had necessarily to be taken into account and that such conduct could lead to the result that penalty was not imposable.

28. For determining whether the assessee in the instant case committed the fault of concealment of an asset of his, the following three questions arise for decision: (i) Whether the source of wrong information (as to just one deposit of pound equivalent of Rs. 19,957) as scribbled by the WTO on the asses-see's statement of wealth was directly given by the assessee or whether that information was only culled out by the WTO himself from the asses-see's income-tax assessment record, as suggested on the assessee's side during arguments before us.

(ii) If the assessee was the source of the said information, was it just a casual communication made by the assessee without exercising due care or it was part of a design of the assessee to disclose but one of the two foreign deposits and the smaller one at that.

(iii) Does the assessee's conduct in writing letter dated 6-11-1975 to the WTO disclosing the second foreign deposit have the effect of washing off or explaining away the fault of the earlier non-disclosure of concealment, if any.

29. We are of the view that the information, as to their being just one foreign deposit was passed on to the WTO by the assessee directly.

There are two reasons for this view. When during the course of initial wealth-tax assessment for the assessment year 1973-74, the WTO became of the mind that the assessee's status was that of resident, it was in view of the assessee's note 'about the bank balance in the London Bank' in his statement of wealth, it was natural for the WTO to enquire from the assessee himself as to the detail of such foreign deposits, instead of just banking on any information that might have been possibly gathered by him from income-tax assessment record without referring to the assessee himself.

30. Secondly, there is no material on record to suggest that on the record of income-tax assessment, the assessee had disclosed either only one foreign deposit of pound equivalent of Rs. 19,597 or that, the disclosure of other foreign deposit in the income-tax assessment record of the assessee was in an obscurer form, so as to miss the WTO's eye and to lead the WTO to notice one foreign deposit and not the other.

31. The aspect that in the statement of wealth, the assessee did not choose to disclose the details as to the amounts or the banks as regards the foreign deposits is understandable in view of the assessee's claim to status as non-resident. But the fact that in the note on the statement of wealth also, the assessee chose to indicate by implication that there was but one foreign deposit, goes to suggest that the assessee wished to hide the second foreign deposit in any case. Thus, at the stage of communication of information by the assessee to the WTO regarding one foreign deposit only the assessee could justifiably be said to be guilty of concealment of an asset. We hold accordingly.

32. Technically speaking, the assessee's communication dated 6-11-1975 by reason of its having been sent otherwise than during the pendency of wealth-tax assessment cannot be termed as a revised return of net wealth within the meaning of Section 15 of the Act. The assessee's conduct comprised by the said communication all the same cannot be said to be devoid of relevance. It would certainly have a bearing when we are faced with the question as to whether the assessee was guilty of concealment of an asset. The said communication would, therefore, merit consideration from the angle whether it was bonafide and if so shown, the advantage would go to the assessee.

33. Opening portion of second para of the assessee's letter dated 6-11-1975 reads "on reconciliation of the wealth of the assessment year 1973-74 with that of 1974-75 it has been observed that the bank balance held in another bank almost amounting to Rs. 72,724 was omitted to be included in the net wealth inadvertently".

34. First, the above statement confirms our view that the other foreign deposit of Rs. 19,597 had been disclosed by the assessee himself to the WTO.35. Next we are to understand what reconciliation between the wealth for the assessment year 1973-74 and the wealth for the assessment year 1974-75 had to be made, which led to the assessee's observance or perception that the bank balance held in another bank was omitted by him to be disclosed for inclusion in the net wealth. In this connection, we find that copy of relevant entries in the assessee's accounts, calling for reconciliation, talked of in the said letter dated 6-11-1975, have not been placed on our record. Thus, it is not clear as to what discrepancy, if any, was noticed by the assessee, when exactly and under what circumstances. We tend to think that occasion for such reconciliation (assuming that some discrepancy in some entries was noticed by the assessee subsequent to his verbal communication to the WTO regarding one foreign deposit during the initial wealth-tax assessment proceedings for the assessment year 1973-74) could arise when the assessee prepared and filed net wealth return for the assessment year 1974-75 on 16-7-1974, i.e., before the completion of initial wealth-tax assessment itself for the assessment year 1973-74.

The assessee obviously did not intimate the WTO (seized of assessment for an assessment year 1973-74) regarding the discrepancy reconciled by him in July 1974 or so when net wealth return for 1974-75 was filed. If going along with the assessee, we accept his version that he preferred to wait for the decision of the AAC in appeal against the income-tax assessment for the assessment year 1973-74 before he brought the factum of non-disclosure of second foreign deposit to the notice of the WTO concerned even then the said second foreign deposit should have been intimated right on receipt of copy of the AAC's order dated 31-3-1975, if the assessee were acting bona fide. Such, however, was also not the case. The assessee brought the second foreign deposit to the notice of the WTO only in November 1975 as aforesaid. Thus, the assessee has failed to show bona fides as regards 6-11-1975 letter. We agree with the assessee that there is no material on record to show that prior to 6-11-1975, the WTO had detected the existence of the second foreign deposit in question. That, however, is not the end of the matter. It could not be ruled out that the assessee chose to intimate the existence of the second foreign deposit in November 1975 under the apprehension that the second foreign deposit might emerge and come to surface during the income-tax or wealth tax proceedings still pending in November 1975. That would bring the case within the ratio of Mool Chand Mahesh Chand v. CIT[ 1978] 115 ITR 1 (All.) in the sense that if in the investigations in the assessment proceeding pending in November 1975 as aforesaid, there was scope for the concealed foreign deposit being laid open and the assessee made disclosure under those circumstances, the disclosure even when made voluntarily, could not be said to be bona fide so as to wash off or satisfactorily explain away the earlier fault of concealment. In that view of the matter, we hold that the assessee had committed the fault of concealment of the asset in question. Penalty was, therefore, exigible.

37. I am in respectful disagreement with my learned brother. The relevant facts had been stated by my learned brother in paragraphs 2, 3, and 4. It is common ground that the return was filed by the assessee for ths assessment year 1973-74 in the status of non-resident together with a specific statement in the return itself to the effect 'assessee is having bank balance with London bank which is exempt under Section 6(i), being a non-resident'. The assessee had filed his returns, both under the Income-tax Act and the Wealth-tax Act, in the status of non-resident. It was in the course of the assessment proceedings in connection with the income-tax assessment that the ITO (and he was the WTO also) had come to consider that the status to be adopted in the case of the assessee was that of resident and not of non-resident and he had made the income-tax assessment accordingly in the status of resident. For wealth-tax purposes my learned brother has referred to certain scribbling in the handwriting of the ITO wherein it appears that the assessee had given information to the ITO about his balance with the London bank only. The assessment under the Wealth-tax Act also was made by the WTO on the same day on which he completed the income-tax assessment. The assessee had gone in appeal against the adoption of the status of resident by the department but he did not succeed there.

38. For the assessment year 1974-75 the assessee had become resident because he had returned to India and he himself filed the return for that year in the status of a resident. For this year he included the balances belonging to him and lying with two banks in England. The assessment for that year was made accordingly. In the meantime the assessee had lost his matter before the appellate authority regarding his claim of status. It was explained before us that when the assessee compared the net wealth returned for the year 1974-75 with the net wealth assessed in 1973-74 (in which year he had claimed the status of non-resident) he found that there was a certain difference. A closer scrutiny revealed that that was on account of the assessee's another deposit of 4040.24 in the National City Bank, London. The assessee explained that he wanted to clear his conscience and immediately filed a revised return along with a covering letter stating therein about the existence of the said deposit of 4040.24 in respect of the year 1973-74 also. Till then the department had not proceeded against the assessee further in respect of the said year 1973-74. It was only after the receipt of the said letter and the filing of the revised return that the WTO proceeded to issue to the assessee a notice under Section 17(1)(a). There had been no prior detection by the WTO. The assessee filed a return which was the same as was filed by him a little earlier along with the said covering letter and he marked it 'duplicate' because this return disclosed the same position as was shown in the return voluntarily filed.

39. The relevant facts thus are that for the assessment year 1973-74 the assessee had claimed the status of non-resident. In the status of nonresident the deposits of the assessee lying in London were not to be included in the net wealth of the assessee for the purposes of his assessment in India. Even then the assessee had made a specific statement saying that he had a bank balance in the London bank. The fact that the other balance was not mentioned in the return would not make much difference because the assessee was claiming the status as that of a non-resident. There was nothing on record to show that a specific letter was sent by the ITO to the assessee to disclose all the bank balances lying outside India since the department was then seeking to assess him for the year 1973-74 also in the status of resident. In fact the status of resident was allotted to the assessee against his contention and this was contested by the assessee in appeal also. Again it was the assessee himself who had disclosed about the existence of the other bank balance when he found that he was to be assessed correctly in the status of resident and that the other balances in City Bank of London was also to be assessed in the year 1973-74. Where is the question of concealment on the part of the assessee, it is difficult to understand. I am inclined to agree with the Commissioner (Appeals) who had deleted the penalty and the reasons for the said conclusion are the same as are discussed above and as have been mentioned by the Commissioner (Appeals).

1. There being a difference of opinion amongst us the matter is referred to the President under Section 255(4) of the 1961 Act, in respect of the following: Whether, on the facts and in the circumstances of the case, a penalty of Rs. 72,724 is exigible on the assessee under Section 18(1)(c) of the Wealth-tax Act, 1957 for the assessment year 1973-74 1. On a difference of opinion between the learned members of Delhi Bench 'B' the following point of difference has been referred to me by the learned President, Tribunal, under Section 24(11) of the Wealth-tax Act, 1957 ('the Act') read with Section 255(4) of the income-tax Act, 1961: Whether, on the facts and in the circumstances of the case, a penalty of Rs. 72,724 is exigible on the assessee under Section 18(1)(c) of the Wealth-tax Act, 1957 for the assessment year 1973-74 2. The assessee was appointed as Chief Accountant of the Mercantile Bank Nigeria Ltd. under the conditions applicable to the United Nations Technical Assistants personnel by the South Eastern State of Nigeria with effect from 24-8-1971. For the previous years ending 31-3-1972 and 31-3-1973 relevant to the assessment years 1972-73 and 1973-74, respectively, he filed his income-tax returns on 30-10-1973 and claimed that salaries of Rs. 30,240 and Rs. 47,250 received from the Government of Nigeria for the assessment years 1972-73 and 1973-74, respectively, were not taxable for two reasons. One reason was that being a United Nations' official he was exempt from paying any income-tax under Act No. XLVI of 1947 (passed by the Dominion Legislature giving effect to convention on Privileges and Immunity of United Nations under Section 18 thereof). The second reason though alternative, was that in these two years he should be treated as a non-resident and, therefore, the salary earned outside India should not be brought to tax. The ITO completed the assessments for both the years on 22-10-1974/23-10-1974, but did not accept the assessee's submission on any ground. The assessee filed appeals for both the years and the AAC by his order dated 31-3-1975 in Appeal Nos. 712 of 1974-75 and 911 of 1974-75, held that the ITO was justified in including the salary income from Nigerian Government in the two assessments and also treating the assessee as resident so far as the assessment year 1973-74 is concerned.

3. Along with the income-tax return for the assessment year 1973-74.

the assessee had also filed his wealth-tax return for the valuation date 31-3-1973 claiming his status as non-resident and declaring net wealth of Rs. 1,48,760. A note was made in the statement of net wealth which reads as under: Assessee is having bank balance with London Bank which is exempt under Section 6(1) of the Wealth-tax Act, 1957 being a non-resident.

In this return, the salaries of Rs. 30,240 and Rs. 47,250 for the assessment years 1972-73 and 1973-74 were not included in the net wealth for the assessment year 1973-74. The salary received by the assessee in Nigeria used to be remitted to certain banks in London. The officer who made the income-tax and the wealth-tax assessments for the assessment year 1973-74 was the same. When the wealth-tax assessment for that year was taken up the WTO asked the assessee about his deposits, if any, in any foreign bank and the scribbling opposite the aforesaid note is about the bank balance of 1088.72 equivalent to Rs. 19,597, which amount was included in the net wealth assessment at Rs. 1,69,633 on 23-10-1974, as the status of the assessee has been determined as that of a resident.

4. Even before the wealth-tax assessment for the year 1973-74 came to be made on 23-10-1974 the assessee had filed his wealth-tax return for the valuation date 31-3-1974, relevant to the assessment year 1974-75 on 16-7-1974 declaring net wealth of Rs. 2,51,230. The difference between the net wealth shown as on 31-3 1973 and 31-3-1974 was Rs. 1,02,470 (Rs. 2,51,230--Rs. 1,48,760). The wealth-tax assessment for that year was completed on 15-11-1975 and the net wealth determined was Rs. 2,52,810.

5. The assessee wrote a letter dated 6-11-1975 to the WTO, which reads as under: Your honour had assessed the abovementioned case vide order dated 23-10-1974 on net assessable wealth of Rs. 19,633. For this year the return was filed declaring net wealth of Rs. 1,48,760 on the status of non-resident. But as per your findings in the income-tax proceedings the status was taken as Resident and the assessee held abroad were included in the net assessable wealth.

On reconciliation of the wealth of the assessment year 1973-74 with that of 1974-75 it has been observed that the bank balance held in any other bank almost amounting to Rs. 72,724 was omitted to be included in the net wealth inadvertently. The same was not declared in the return of wealth unintentionally as while filing the return the assessee was under the bonafide belief that his status for this year was non-resident which was ultimately held to be resident in the income-tax proceedings.

The assessee being an honest taxpayer comes forward voluntarily and wishes to be taxed for the amount which has escaped your kind attention. The revised wealth-tax return is being filed accordingly, after including the bank balance held abroad but omitted to be included in the original return.

Your honour has discretionary power to waive any interest or penalty and the assessee being an honest taxpayer requests that this discretion be exercised in his favour and the unintentional omission be condoned for which he is ready to be taxed. The following documents are being enclosed: In the revised statement of net wealth, the net wealth was disclosed at Rs. 2,42,357 (including the aforesaid sum of Rs. 72,724). Since a return after the assessment was completed was invalid, the WTO issued a notice under Section 17(1)(a). The assessee filed a duplicate of the revised return and the revised assessment was completed on 30-9-1976 on net wealth of Rs. 2,42,400.

6. The WTO initiated penalty proceedings under Section 18(1)(c) on the ground that in the original return, the assessee had concealed the particulars of the asset of Rs. 72,724 or had furnished inaccurate particulars in respect of that asset. The assessee filed the following reply dated 5-2-1979 in response to the show cause notice issued by the WTO: There is no concealment of this case as the revised return was filed voluntarily by the assessee after the completion of the original assessment. In the revised return the resident and the assets held abroad were offered for wealth-tax. The revised return was regularised under Section 17 on 15th September, 1975.

Filing of revised return declaring true and correct wealth voluntarily, after completion of assessment shows the honest conduct of the assessee who came forward to pay the due taxes on escaped wealth which was omitted to be returned as well as returned. There is no concealment of wealth as such the proceedings initiated which were infructuous are requested to be dropped.

The WTO did not accept the assessee's submission. He was of the opinion that the WTO had to impose penalty if there was difference between the wealth determined in the reassessment and wealth assessed in the original assessment. The WTO relied on the judgments in N.A. Malbary & Bros, (supra) and Gopal Krishna Singhania (supra) and imposed penalty of Rs. 72,724 under Section 18(1)(c) of the Wealth-tax Act with the approval of the I AC concerned.

7. The assessee filed an appeal to the Commissioner (Appeals). For the following reasons, inter alia, the Commissioner (Appeals) cancelled the penalty levied by the WTO: 6. Besides, this, I am also satisfied that the appellant revised his return because his omission to declare the bank balance in the return filed on 30-10-1973 was based on an honest belief that he was a non-resident and hence was not liable to be taxed on his foreign assets. As soon as this belief was unsettled by the decision of the AAC in the income-tax proceedings the appellant filed a revised return on 6-11-1975 without waiting for a notice under Section 17 from the WTO. There is nothing on the record to show that the WTO was aware at all of this deposit of Rs. 72,724 before the assessee himself filed the voluntary return. Hence its filing on 6-11-1975 satisfies the conditions of a revised return filed voluntarily laid down by the Allahabad High Court in a recent case of Addl. CIT v. Radhey Shyam [1980] 123 ITR 125. In this view of the matter I hold that the imposition of this penalty was not justified.

8. The revenue came in appeal before the Tribunal. The learned Judicial Member was of the view that it was the assessee who only gave information regarding the deposit of Rs. 19,957 in the London bank and this information was not culled out by the WTO himself from the income-tax assessment record of the assessee, as suggested by the assessee. This inference was, according to the learned Judicial Member, supported by the fact that while filing the return of net wealth the assessee had used the words "Assessee is having bank balance with London bank . . .". According to the learned Judicial Member, the assessee wished to hide the second bank disposit in any case. Thus, according to the learned Judicial Member, at the stage of communication of information by the assessee to the WTO regarding one foreign deposit only the assessee could be said to be guilty of concealment of an asset. The learned Judicial Member referred to the assessee's explanation that "On reconciliation of the wealth of the assessment year 1973-74 with that of 1974-75 it has been observed that the bank balance held in another bank almost amounting to Rs. 72,724 was omitted to be included in the net wealth inadvertently." According to the learned Judicial Member, the return for the assessment year 1974-75 was filed on 16-7-1974 and the occasion for reconciliation of the net wealth for two years in question would have arisen on or about 16-7-1974, but before the assessment for the year 1973-74 was completed on 23-10-1974 no information regarding the deposit of Rs. 72,724 was furnished to the WTO. The learned Judicial Member also observed that the assessee did not even intimate the details of the deposit of Rs. 72,724 immediately after the order of the AAC dated 31 -3-1975, when the status for this year was held to be as a resident. Thus according to the learned Judicial Member, the conduct of the assessee was not bonafide. The learned Judicial Member did observe "we agree with the assessee that there is no material on record to show that prior to 6-11-1975, the WTO had detected the existence of the second foreign deposit in question." He, however, went on to observe that: "It could not be ruled out that the assessee chose to intimate the existence of the second foreign deposit in November, 1975 under the apprehension that the second foreign deposit might emerge and come to surface during the income-tax or wealth-tax proceedings still pending in November, 1975." According to the learned Judicial Member, the assessee's case came within the ratio of the judgment in Moolchancl Maheshchand v. CIT (supra). The learned Judicial Member expressed the opinion that the assessee had committed the fault of concealment and, therefore, penalty was exigible. He was of the opinion that the revenue's appeal should be allowed.

9. The learned Accountant Member was of the opinion that the appeal of the revenue should be dismissed because in the original return the foreign bank balances were not shown as the assessee claimed the status of non-resident and even then the assessee had made a statement that he had bank balance with London Bank, that there was nothing on record to show that a specific letter was sent by the ITO to the assessee to disclo.se all bank balances lying outside India since the department was then seeking to assess him for the year 1973-74 also in the status of resident, that the status of non-resident was contested in appeal, that the assessee himself disclosed the existence of the deposit in question and thus there was no question' of any concealment of any asset. The learned Accountant Member agreed with the reasoning of the Commissioner (Appeals), who had cancelled the penalty levied by the WTO. It is in these circumstances that the matter has been referred to me.

10. I have heard the learned representatives of both the parties and have very carefully considered their submissions. I am inclined to agree with the learned Accountant Member that no penalty for concealment of any asset is exigible in this case. I may immediately clarify that no legal controversy is involved in the point of difference and the pure and simple question of fact to be determined is whether on the facts and in the circumstances of the case a penally of Rs. 72,724 is exigible in this year. There does not seem to be any difference of opinion on the point that when the assessee filed the return of net wealth and claimed the status as non-resident, it was understandable that he did not disclose the details of the deposits in foreign banks at that stage. According to the learned Judicial Member, when the assessee mentioned (in the return of net wealth) that he was having bank balance with London Bank and that when he gave the details of only one deposit equivalent to Rs. 9,597, the assessee was guilty of concealment of an asset. I am afraid, I cannot agree with this line of reasoning. When the assessee claim his status as non-resident and when he was not required to give the details of any deposits in foreign banks, I cannot come to the conclusion that by mentioning that the 'assessee was having bank balance with London Bank', the assessee can be said to be guilty of any concealment of any asset. I also do not agree with the learned Judicial Member that firstly it was the assessee who communicated the information regarding one deposit of 1088.72 equivalent to Rs. 19,597 and at the stage of communication of that information, the assessee could be said to be guilty of concealment of an asset. There is no material on record as to when the information regarding the sum of Rs. 19,597 come to be noted by the WTO and from what sources. On 16-7-1974, the assessee had filed his income-tax return for the assessment year 1974-75 showing total income of Rs. 18,520, wherein salary from the Government of Nigeria amounting to Rs. 17,900 was claimed to be exempt. A revised return was filed on 6-11-1975, wherein salary from Government of Nigeria was included in the revised return. On 16-7-1974, the wealth-tax return for the assessment year 1973-74 had not been made. The wealth-tax return filed on 30-10-1973 disclosed net wealth of Rs. 1,48,760 for the assessment year 1973-74. If the salary of Rs. 18,520 shown in the return for the assessment year 1974-75, is added, the net wealth would be Rs. 1,67,280, against which the net wealth shown in the return filed on 16-7-1974 (same date when income-tax return was filed) was Rs. 2,51,230. The difference between Rs. 2,51,230 and Rs. 1,67,280 would be Rs. 83,950. The total of the salary received in Nigeria for the assessment years 1972-73 and 1973-74 would be Rs. 77,490 (Rs. 30,240 + Rs. 47,250) and Rs. 83,950 appears to be including these two amounts which were transferred from Nigeria to U.K. I would thus go to the extent of saying that when the assessee filed his income-tax and wealth-tax returns for the assessment year 1974-75, he gave information about all the deposits, because by the end of that previous year all the money held in foreign banks had been received in India and was mostly in the shape of fixed deposits for which details were filed in each year. Thus when only Rs. 19,597 came to be included in the assessment made on 23-10-1974, there was no concealment of any asset on the part of the assessee. The assessee did not furnish any partial information to the WTO with a view to conceal any asset from the department.

11. The learned Judicial Member has observed that in any reconciliation between the net wealth for the assessment years 1973-74 and 1974-75, was to be made it should have been either on 23-10-1974 when the wealth-tax return for the assessment year 1973-74 was made or on 31-3-1975, when the status of the assessee was declared as resident by the AAC. On 23-10-1974 the status of the assessee was still in dispute and if the assessee did not furnish a revised return of wealth-tax on 23-10-1974, his bona fides cannot be questioned. It is true that the question regarding status came to be determined by the AAC on 31-3-1975, but even for purposes of income-tax the revised return for the assessment year 1974-75 (showing Nigerian income as taxable) was filed on 6-11-1975. The assessee may have taken some time in understanding the full implication of the order of the AAC dated 31-3-1975, but having understood the full implication of that order the assessee revised the income-tax return for the assessment year 1974-75 and also wealth-tax return for the assessment year 1973-74 on 6-11-1975. The learned Judicial Member himself says that: "We agree with the assessee that there is no material on record to show that prior to 6-11-1975, the WTO had detected the existence of the second foreign deposit in question." Even so the learned Judicial Member observes that the assessee's case is covered by the judgment in Moolchand Maheshchand (supra). The learned Accountant Member has not mentioned anything about this judgment. All that has been held in that case is that even a case where the ITO starts investigation by laying upon what was concealed or hidden, would be covered in a case of 'detection' within the meaning of that word. The facts of that case are entirely different and that judgment has no application to the facts of the present case. When the assessee had himself filed revised income-tax returns for the assessment year 1974-75 and revised wealth-tax return for the assessment year 1973-74 on 6-11-1975, how could there be any scope for detection of the foreign deposit, which was disclosed in the revised return. On a consideration of the entirety of the circumstances of this case, I have no hesitation in coming to the conclusion, and agreeing with the learned Accountant Member, that penalty under Section 18(1)(c) is not exigible in this case.

12. The case will now go back to the Delhi Bench 'B' for passing an order according to the majority opinion.


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