Rajendra Nath Mittal, J.
1. The Wealth-tax Appellate Tribunal, Chandigarh Bench, has referred the following two questions for the opinion of this court:
'(1) Whether, on the facts of the case, the Tribunal was right in law in holding that in the face of the second revised return, the assessee could not be held guilty of an offence under Section 18(1)(c) of the Wealth-tax Act?
(2) Whether the Tribunal had any material before it for deleting the penalty of Rs. 50,000 which had been levied by the Inspecting Assistant Commissioner under Section 18(1)(c) of the Wealth-tax Act ?'
2. Briefly, the facts are that the respondent, an HUF, filed three returns in the case--one original and two revised. The original return was filed on 16th August, 1971, declaring a net wealth of Rs. 7,96,167, the first revised return on 6th September, 1971, declaring a net wealth of Rs. 5,82,625, and the second revised return on 18th May, 1972, declaring a net wealth of Rs. 6,87,726. The WTO completed the assessment on the net wealth of Rs. 6,87,726 as declared in the second revised return. There being a difference to the tune of Rs. 1,05,101 in the first revised return and the second revised return, the WTO initiated penalty proceedings under Section 18(1)(c) of the W.T. Act. The difference of Rs. 2,13,542 between the wealth as declared in the original return and as declared in the first revised return was partly due to the assessee's claim for exemption of the value of its shares in different companies under Section 5(1)(xxiii) (to the extent of Rs. 1,50,000) and partly due to the difference in value of its one-half share in the Modi Card Board Factory (shown at Rs. 1,16,035 in the original return and Rs. 52,493 in the first revised return). The value of Rs. 1,16,035 was being shown by the assessee regularly from the assessment year 1968-69.
3. In the second revised return, the assessee disclosed his wealth at Rs. 6,87,726. The difference of Rs. 1,05,100 between the wealth as declared in the first revised return and the second revised return was mainly due to the following reasons :
(1) The assessee, in the second revised return, showed the value of his half share in the Modi Card Board Factory at Rs. 1,03,451 whereas it had shown its value at Rs. 52,493 in the first revised return,
(2) In the original return and in the first revised return, the assessee had shown the value of 7,342 shares held by him in the Modi Spinning and Weaving Mills Co. Ltd. at the rate of Rs. 10.69 per share at Rs. 78,486 whereas in the second revised return, it showed the value of these shares at Rs. 1,14,682 valuing each share at the rate of Rs. 15.62. And
(3) In the original and in the first revised returns, the assessee had shown his holding in M/s. Modi Textile Trading Corporation at 1,940 equity shares and 100 preference shares and had claimed their value as exempt, whereas in the second revised return, the assessee disclosed its holding in the said company at 2,440 equity shares and 100 preference shares and offered their value at Rs. 13,420 and Rs. 10,000, respectively, for assessment.
4. During the course of penalty proceedings before the IAC, the assessee contended that there was no conscious concealment on its part nor was there the mens rea or wilful neglect involved, that for the purpose of levy of penalty, comparison should be made between the original returnand the last return and that the first revised return need not be looked into for that purpose. The IAC held that all the returns were valid returns, that the assessee was liable for penalty for a conscious effort of concealment or for gross or wilful neglect in furnishing the correct particulars of wealth in the first revised return and that the assessee had deliberately valued its shares of M/s. Modi Spinning and Weaving Mills Ltd. at Rs. 10.69 per share on the basis of a quotation dated 30th May, 1970, whereas the value of these shares had, in the meanwhile, appreciated to Rs. 15.62 per share as on 31st March, 1971. The assessee knew well that these shares were quoted on the stock exchange and in the past their value was returned by the assessee on the basis of the latest quotation, and that it had incorrectly shown its holding of equity shares in Modi Textile Corporation at 1,940 shares whereas its actual holding in that company was 2,440 shares as shown in the second revised return. The conduct of the assessee in not claiming exemption of its shareholding in M/s. Modi Textile Trading Corporation Ltd. without any legal authority could not be treated as innocent. He also held the assessee guilty of gross neglect in not disclosing its share in the development rebate reserve account in the card board factory amounting to Rs. 21,725 in the original as well as in the first revised return. He consequently worked out the total concealed wealth as Rs. 49,934 and imposed a penalty of Rs. 50,000.
5. On appeal, the Tribunal deleted the entire penalty by giving six reasons :
(a) First, that the second revised return was clearly a return filed under Section 15 and as there was no difference between the declared wealth and the assessed wealth, penalty imposable was 'nil'.
(b) Secondly, that in view of the provisions contained in Expln. 2 to Section 18(1), the assessee could file a revised return before completion of the assessment whether before or after the detection of the inaccuracies in the original return,
(c) Thirdly, that the value of interest of an HUF in the firm was not taxable.
(d) Fourthly, that though the assessee was guilty of gross neglect in evaluating the shares of M/s. Modi Spinning and Weaving Mills at the last year's rate, yet the valuation of the asset was a matter of estimation and there was no element of an offence in it.
(e) Fifthly, that the equity shares of M/s. Modi Textile Corporation Ltd. had been incorrectly shown as taxable in the second revised return and, therefore, it was immaterial that these were shown incorrectly in the earlier returns and claimed as exempt, and
(f) Sixthly, that it was not guilty of any offence under Section 18(1)(c) regarding preference shares.
6. In order to determine the questions, it will be necessary to refer to the relevant Section s of the Act. Section 14 relates to return of wealth, Section 15 to return after due date and amendment of return and Section 18 to penalty for failure to furnish returns, to comply with notices and concealment of assets, etc. Under Section 14, every person, if his net wealth is assessable under the Act, is liable to furnish to the WTO a return in the prescribed form. Under Section 15, in case a person having furnished a return under Section 14 discovers any omission or a wrong statement therein, he can at any time furnish a revised return before an assessment is made. Relevant portion of Section 18 reads as under:
'Penalty Joy failure to furnish returns, to comply with notices and concealment of assets, etc.--(1) If the Wealth-tax Officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person--......
(c) has concealed the particulars of any assets or furnished inaccurate particulars of any assets or debts;
he or it may, by order in writing, direct that such person shall pay by way of penalty--......
(iii) in the cases referred to in Clause (c), in addition to any wealth-tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount representing the value of any assets in respect of which the particulars have been concealed or any assets or debts in respect of which inaccurate particulars have been furnished. Explanation 1.--Where,--
(i) the value of any assets returned by any person is less than seventy-five per cent. of the value of such asset as determined in an assessment under Section 16 or Section 17 (the value so assessed being referred to hereafter in this Explanation as the correct value of the asset), or...... then, such person shall, unless he proves that the failure to return the correct value of the asset or, as the case may be, the correct value of the debt or the correct net wealth did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of assets or furnished inaccurate particulars of assets or debts for the purposes of Clause (c) of this Sub-section.
Explanation 2.--For the purposes of Clause (iii)- (a) the amount representing the value of any assets in respect of which the particulars have been concealed or any assets in respect ofwhich inaccurate particulars have been furnished, shall be the value of such assets determined for the purposes of this Act as reduced by the value thereof, if any, declared in the return made under Section 14 or Section 15 ;.....'
7. Explanation 1 in essence relates to a rule of evidence. Its plain reading shows that if the value of any assets returned by an assessee is less than the value of such an asset as determined by 75%, then a presumption arises that he concealed the particulars of assets or furnished inaccurate particulars of assets but the presumption is rebuttable and can be rebutted by the assessee by proving that the incorrect return was not due to any fraud or any gross or wilful neglect on his part. The burden on the assessee is not like the one which lies on the Department in establishing that the assessee had concealed the particulars of any assets or furnished incorrect particulars of any assets but is similar to that in a civil case, where the matter is decided on preponderance of probabilities. The material on the record can be relied upon by the assessee for the purpose of discharging the burden. It can be held on the preponderance of probabilities that failure to return the correct valuation of assets has not arisen due to any fraud or any gross or wilful neglect on the part of the assessee. Once such like conclusion is reached, then the burden shifts to the Department to show that concealment of the value of the assets was dishonest or contumacious. If that is not established, penalty cannot be imposed merely because the law provides so. In case the breach is due to a bona fide mistake, benefit will go to the assessee. While imposing the penalty the entirety of circumstances are to be taken into consideration. No penalty can be imposed in cases of mere inadvertence or innocent mistake.
8. It is useful to notice the observations of their Lordships of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa : 83ITR26(SC) . It was observed therein that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed the authority competent to impose the penalty will be justified in refusing to impose penalty when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that theoffender is not liable to act in the manner prescribed by the statute. It is also useful to notice the observation of a Division Bench of this court in CIT v. Dev Raj . There the assessee's profit and loss account disclosed items like income-tax, wealth-tax, household expenses, etc. These items were not included in his return of total income. The ITO, therefore, initiated penalty proceedings. The Appellate Tribunal took the view that there was inadvertent mistake but no gross negligence or wilful default as the items had been shown in the profit and loss account and deleted the penalty. On reference, the Bench observed as follows (p. 77):
'As a matter of fact, about the two additions, namely, wealth-tax and income-tax, even the counsel present in court were ignorant that they are not permissible deductions. If this is the case with the legal profession, how can one expect a different standard from a layman more particularly, when the assessee can only read and write Urdu. In this view of the matter, no fault can be found with the decision of the Tribunal.'
9. Adverting to the facts of this case, it is evident that in the original return the assessee gave the value of its assets as Rs. 7,96,167 and in the first and second revised returns Rs. 5,82,625 and Rs. 6,87,726 respectively. According to the second revised return, there is no difference between the declared wealth and the assessed wealth and thus the penalty imposable is 'nil'. In all the returns the share of the HUF in the Modi Card Board Factory had been shown as taxable which admittedly was not so. In the second revised return the assessee had also shown an amount of Rs. 13,420, which was the price of the shares in Modi Textile Trading Corporation Ltd. as taxable, whereas it had claimed the price of these shares as exempt in the original and first revised return. He actually paid tax on these assets. A mention of the former asset in all the returns and that of the latter in the second revised return shows that he had no intention to conceal the assets. Otherwise there was no point in showing these assets as taxable. Therefore, it can be inferred that he had no animus to give incorrect figures in the returns. It is true that he evaluated the shares of Modi Spinning and Weaving Mills in the first revised return at a lesser rate. However, it cannot be overlooked that the evaluation is a matter of estimation. It is also true that he had wrongly shown the number of equity shares in the Modi Textile Trading Corporation Ltd. in the first revised return as 1,940 instead of 2,440. At the same time he had shown the number of preference shares as 600 instead of 100. In the second revised return it entered the number of equity shares as 2,440 and that of preference shares as 100. Thus, the total number of shares in the first and second revised returns was the same. It may be highlighted again that the equity shares in Modi Tex-tile Trading Corporation Ltd. in the second revised return were incorrectly shown as taxable though these were not so. Therefore, in our view, there is no element of offence in making the abovesaid incorrect entries in the first revised return. It is also not out of place to mention that according to Expln. 2 to Section 18(1)(c), the assesses could file a revised return before the completion of the assessment whether before or after the detection of the inaccuracies in the original return. After taking into consideration the abovesaid circumstances we are of the opinion that the assessee has established that the failure to return the correct value of some of the assets did not arise from any fraud or any gross or wilful neglect on the part of the assessee. Consequently, the burden shifted to the Department to prove that the assessee intentionally made these entries and thus it was guilty of an offence under Section 18(1)(c). In our view, it has failed to discharge the same.
10. Mr. Ashok Bhan made a reference to CIT v. J.K.A. Subramania Chettiar : 110ITR602(Mad) and F.C. Agarwal v. CIT . Both the cases are under the I.T. Act, in which there is no provision like Expln. 2. These are also distinguishable. In our view, he cannot derive any benefit from the observations therein.
11. We, therefore, answer question No. 1 in the affirmative, i.e., in favour of the assessee and against the Department. In view of the answer to question No. 1, question No. 2 does not arise and need not be answered. No order as to costs.
Surtnder Singh, J.
12. I agree.