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Mulkraj Huria Vs. Wealth-tax Officer. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Indore
Decided On
Reported in(1986)17ITD425Indore
AppellantMulkraj Huria
RespondentWealth-tax Officer.
Excerpt:
.....return might by itself be a just reason for the delay in filing the same persons wealth-tax return. wealth-tax assessee are required to make returns of their net wealth on given valuation dates and in order to do so, it is essential that they should correctly represent their debts and liabilities as they subsist as on the said valuation dates. if the wealth-tax assessees are also income-tax assessees, their liability towards income-tax would be a necessary ingredient in arriving at the correct net wealth which has to be disclosed in their wealth-tax returns. the correct ascertainment of particulars of table income of a person would, therefore, be a necessary step in ascertaining the position of the net wealth of the same person on the relevant valuation date. it follows from these.....
Judgment:
Per Shri M. C. Agarwal, Judicial Member - There are two appeals, by the assessee against the levy of penalty under section 18(1) (a) of the Wealth-tax Act, 1957 (the Act) for the delayed filing of wealth-tax returns for the assessment years 1976-77 and 1977-78.

2. The wealth-tax return for the assessment year 1976-77 was due on 30-7-1976 but was actually filed on 27-10-1979 and, there was thus, a delay of 38 months. The wealth-tax return for the assessment year 1977-78 was due on 30-7-1977 and was filed on 27-10-1979 and there was a delaty of 26 months. The WTO initiated penalty proceedings and in his reply the assessee stated that the return could not be filed in time as the assesse was sick being a chronic patient of heart trouble. This contention was not accepted by the learned WTO as the assessee did not produce any evidence to substantiate the allegation. The WTO levied a penalty of Rs. 2,560 and Rs. 1,110 respectively for the two years.

Aggrieved, the assessee preferred appeals to the AAC and contended that since the returns for the income-tax were delayed having been filed on 11-4-1978 and 25-7-1978 for the two years, the assessee could not file his wealth-tax returns earlier and, therefore, as observed by the Honble Madras High Court in Addl. CWT v. Babulal K. Shah [1978] 114 ITR 370 up to those dates the assessee had a reasonable cause for not filing the wealth-tax returns. This contention was negatived by the learned AAC who upheld the penalties.

3. We have heard the learned counsel for the assessee and the learned departmental representative. The contention that the returns could not be filed because of illness was negatived by the WTO for want of evidence and was not pressed further before the learned AAC. At the hearing of the present appeals also, no such argument was raised nor is there any specific ground on the point in the memorandums of the two appeals. The learned counsel for the assessee contended that the assessee is an income-tax as well as the wealth-tax assessee and, therefore, the particulars of his assets and liabilities and the income-tax liabilities are relevant fore furnishing his wealth-tax returns and that since the income-tax returns were filed on 11-4-1978 and 25-7-1978 for the two years respectively the assessee could not file his wealth-tax returns earlier and the delay in the submission of the income-tax returns is a reasonable cause for the delay in the submission of the wealth-tax returns irrespective of whether there was any reasonable cause for the delay, in the submission of the income-tax returns. For this proposition, he relied upon the Madras High Court judgment referred to above.

4. We find that this contention is based on a misreading of the judgment and the misreading results from the summary given below the head-note. The observations of the Honble Madras High Court are as below : "..... We are of the view that in certain circumstances the delay in finalising ones income-tax return might by itself be a just reason for the delay in filing the same persons wealth-tax return. Wealth-tax assessee are required to make returns of their net wealth on given valuation dates and in order to do so, it is essential that they should correctly represent their debts and liabilities as they subsist as on the said valuation dates. If the wealth-tax assessees are also income-tax assessees, their liability towards income-tax would be a necessary ingredient in arriving at the correct net wealth which has to be disclosed in their wealth-tax returns. The correct ascertainment of particulars of table income of a person would, therefore, be a necessary step in ascertaining the position of the net wealth of the same person on the relevant valuation date. It follows from these premises therefore, that any reasonable delay in the preparation of particulars of the assessees income for purpose of income-tax cannot be brushed aside as irrelevant, while considering whether any consequential delays in the filing of the same assessees wealth-tax return was for reasonable cause or not....." (p. 374) In the head note the word reasonable has been omitted by the editor of the report, and, therefore, any one who bases his opinion only on the head-note without going through the text of the report could agree to the contention raised by the learned counsel for the assessee that any delay in the preparation of the particulars of the assessees income can be a reasonable cause for delay in the submission of the wealth-tax returns. The learned counsel for the assessee brought to out notice an order of this Bench in the case of Smt. Chanandevi v. WTO [WT Appeals Nos. 271 and 272 of 1982, dated 25-8-1983] in which the learned counsel appears to have got a decision in his favour by the Bench relying on the head-note alone. The order in the case of Smt. Chanandevi (supra) is patently the result of a misreading of the judgment of the Honble Madras High Court and is no good precedent. The Honble Madras High Court has held that any reasonable delay in the preparation of the particulars of the assessees income for purposes of income can be considered while considering whether there was any reasonable cause for the delay in the submission of the wealth-tax returns. This means that the reasonability of the cause for delay in the submission of the returns of income-tax has to be made out which leads to the result that the reasonability of the cause has to be shown in the wealth-tax proceedings as well and delay in the submission of the income-tax returns cannot be mechanically accepted as a reasonable cause for the delayed submission of wealth-tax returns as canvassed by the learned counsel for the assessee. In a later judgment in the assessees own case in WT Appeal No. 310 of 1982 for the assessment year 1975-76, we had negatived a similar contention raised by the learned counsel for the assessee.

5. An argument of a similar nature is often raised in connection with the delayed income-tax returns by persons who are partners in a firm.

It is usually contended that if the income-tax return of the partnership firm is delayed, the delay in the filing of the return of the partner up to the date of the filing of the income-tax return by the firm must automatically be held to arise out of the reasonable cause because unless the income of the firm is determined, the partners share cannot be worked. The Honble Delhi High Court in the case of Madan Lamba v. CIT [1983] 139 ITR 849 negatived such a meehanical approach and held that the cause for the delay of the return of the partner has to be independently looked into and where the firms return is also delayed, it will have to be found out how far the partner concerned is responsible for the delay in the submission of the firms return. The Honble High Court observed as under : "..... On the other hand, it is equally possible that there may be a case in which the partner in question is substantially controlling the affairs of the firm and that he holds up the finalisation of the accounts and the filing of the firms return to suit his convenience and only with a view to postpone the payment of tax on his share income or on his other income. To the extent such delay is caused by him and is instrumental in delaying the payment of tax in his individual assessment there is no reason why penalty should not be imposed on him merely because there was some delay in the firms case. These illustrations show that it may not be equitable, just or necessary to assume always that a partner cannot be held responsible for the firms delay. we are, therefore, unable to agree with with the attempts of the counsel before us to evolve, from the Mysore, the Orissa and the Punjab and Haryana High Courts on the one hand and the Punjab and the Allahabad High Courts on the other (which are based on the facts of the cases before them), certain general principles universally applicable to all cases. It seems to us that a conclusion has to be reached in each case on a consideration of all the circumstances including the two grounds indicated above and that it would be unsafe and incorrect to enunciate any principle of general application to all situations.

Confining ourselves for the time being to section 271(1) (a) we think that the imposibility of penalty on a partner should depend upon a consideration of the following circumstances : (a) whether he is a partner of a registered firm or unregistered firm; (b) whether he had income other than the share income or not, and if so, the nature and extent of such income; (c) whether he is one of several partners to whom any contumacious conduct on the part of the firm could not be attributed or whether he is for all practical purposes the brain behind the firm or able to control its affairs, and so, responsible for its delays and defaults; (d) whether any penalty has been or can be imposed on the firm and if so, the extent and nature thereof; and (e) whether the partner has any independent reason for the delay in the filing of the return apart from that urged in the case of the firm". (p. 861) 6. The result of the two rulings is the same, i.e., an assessee has to show independently in each case that he had a reasonable cause for not furnishing the income-tax or the wealth-tax return in time. The delay in the submission of one return cannot mechanically be accepted to be a reasonable cause for the delayed submission of the other return. As is evident from the facts of the present case the assessee did not lead any evidence to establish the cause why the wealth-tax return could not be submitted in time. At the first stage, he took up the stand that he was ill. No evidence was produced to substantiate the alleged illness and that contention was later on abandoned. Therefore, the assessee failed to established the existence of a reasonable cause for the delay in the filing of the two returns and, therefore, he was liable to penalty.

7. At the hearing the counsel for the assesse pointed out that for the assessment year 1976-77 the assessee was allowed an extension of time to file his return of income up to 31-12-1976, and, therefore, in terms of the proviso to sub-section (1) of section 14 of the Act, the assessee could file his return of wealth-tax for the assessment year 1976-77 up to 31-12-1976 as the assessees wealth include the assets held in the assessees transport business. He has placed before us a copy of the income-tax assessment order for 1976-77 which mentions that extension for filing of return was allowed up to 31-12-1976. The learned departmental representative, therefore, conceded that the wealth-tax return could also be filed by that date in terms of the aforesaid proviso. The result would, therefore, be that the delay would commence from 1-1-1976 and as the wealth-tax return would be due on 31-12-1976 as against 31-7-1976 mentioned by the WTO. The delay in the assessment year 1976-77, is, therefore, of 33 months and not 38 months as calculated by the learned WTO. The penalty before this year, therefore, deserves to be reduced accordingly.

8. In view of the above discussion the assessees appeal for the assessment year 1976-77 has to be allowed in part while the appeal for the assessment year 1977-78 has to be disallowed in toto.

9. In the result, the WT Appeals No. 255 of 1983 is partly allowed and the period of delay in filing of the wealth-tax return for the assessment year 1976-77 is held to be 33 months as against 38 months adopted by the WTO and the WTO is directed to recalculate the penalty leviable and reduce the amount of penalty accordingly. The WT Appeal No. 256 of 1983 is dismissed.


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