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Second Wealth-tax Officer Vs. Pukhraj Kushalchand - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1984)8ITD64(Mad.)
AppellantSecond Wealth-tax Officer
RespondentPukhraj Kushalchand
Excerpt:
.....liability of rs. 7,121 in the aggregate for the said five years, for the reason that the wealth-tax returns to be voluntarily furnished were furnished late. fortunately the aac cancelled these uncalled for impositions. hence, the department appeals.2. the facts are well stated in the orders of the wealth-tax authorities. therefore, we need not, except to the extent necessary to set out our viewpoint, repeat those. the business of the assessee is money-lending. he was already an income-tax assessee but not a wealth-tax assessee. there was a search in his premises on 9-10-1973.therefore, he availed of the benefits of voluntary disclosure provided under the voluntary disclosure of income and wealth ordinance, 1975.because of the search in the premises, it is section 14 (disclosure.....
Judgment:
1. Heavy penalties in the aggregate Rs. 88,373 for the five assessment years 1970-71 to 1974-75 (both inclusive) were levied on an assessee, who had only a petty wealth-tax liability of Rs. 7,121 in the aggregate for the said five years, for the reason that the wealth-tax returns to be voluntarily furnished were furnished late. Fortunately the AAC cancelled these uncalled for impositions. Hence, the department appeals.

2. The facts are well stated in the orders of the wealth-tax authorities. Therefore, we need not, except to the extent necessary to set out our viewpoint, repeat those. The business of the assessee is money-lending. He was already an income-tax assessee but not a wealth-tax assessee. There was a search in his premises on 9-10-1973.

Therefore, he availed of the benefits of voluntary disclosure provided under the Voluntary Disclosure of Income and Wealth Ordinance, 1975.

Because of the search in the premises, it is Section 14 (disclosure of income in case of search and seizure) of that Ordinance that applied to the assessee. On 27-12-1975, the assessee disclosed Rs. 1,92,000 for income-tax assessments as representing concealed income for the assessment years 1967-68 to 1974-75. As a consequence to such disclosure, he became liable to wealth-tax. So the wealth-tax returns were furnished on 14-12-1977. In penalty proceedings the WTO stated that if the assessee wanted immunity, he should have made a separate disclosure under Section 15 of the VDO. The AAC found reasonable cause for the failure. That is why the penalties were cancelled.

3. The assessee-respondent submitted before us that there is no need to make a separate disclosure under Section 15 and that Section 14 itself provided absolute immunity from penalty under the Wealth-tax Act, 1957, also and that this position is also made clear in the Press Note for the public issued with the Voluntrary Disclosure of Income and Wealth Ordinance and printed at [1975] 101 ITR (St.) 84, particularly at page 95. What the assessee argues is absolutely right. The expression 'said Acts' in the context means all the legislations specified in Sub-section (1) of Section 8 of the VDO and also of the Wealth-tax Act.

The penalties provided in the 'said Acts', notwithstanding what is contained in those 'said Acts', is prohibited. Therefore, 'the said Acts' should necessarily refer to the Acts specified in the non-obstante clause which includes the Wealth-tax Act also. It is so simple an interpretation. It must also be noted that Section 14 is a provision common to cases where searches under the Income-tax Act, 1961 or of the 1957 Act had taken place. The reference to value of the asset which is applicable only to wealth-tax in Section 14 also supports that view that the 'said Acts' refer to the Wealth-tax Act also. This is a case where disclosure has been accepted without any modification. So the assessee became liable to wealth-tax only because of the assets representing the disclosed income. So there is immunity from penalty proceedings for not filing the wealth-tax returns. So penalty cannot be levied for failure to file wealth-tax returns.

4. However, we would not like to rest our decision on the immunity alone. This is a case where reasonable cause is writ large on the face of it. The assessee became liable to wealth-tax only because of disclosure. The wealth-tax assessments are, therefore, only consequential. The Press Note has held in para 21, [1975] 101 ITR (St.) 95 that when under Section 14 where there is a search under the Income-tax Act or the Wealth-tax Act, the assessee is immuned from penalty in respect of disclosed income or assets representing such disclosed income. So if an assessee is under the belief that all what he need do in a case where there was a search under the Income-tax Act or the Wealth-tax Act, is to make a disclosure of income and that the rest like assessment to wealth-tax are only consequential and will take care of themselves and that, therefore, there is no need or hurry to file consequential wealth-tax returns, such belief is only a reasonable belief and such reasonable belief does constitute reasonable cause for failure to file the wealth-tax returns. So there is reasonable cause also in this case, apart from the reasonable cause of erroneous advice found by the AAC. We also agree with the reasonings and conclusion of the AAC. So for these reasons, these five departmental appeals are dismissed.


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