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A.N. Sarvaria Vs. Commissioner of Wealth-tax, Delhi I and Another - Court Judgment

LegalCrystal Citation
Subject Direct Taxation
CourtDelhi High Court
Decided On
Case NumberC.W.P. No. 358 of 1976
Judge
Reported in(1985)49CTR(Del)254; ILR1985Delhi805; [1986]158ITR803(Delhi)
ActsIncome Tax Act, 1961 - Sections 271(1) and 273A; Wealth Tax Act, 1957 - Sections 14(1) and (2), 15B, 17, 18, 18(1), 18(2A) and 25(2)
AppellantA.N. Sarvaria
RespondentCommissioner of Wealth-tax, Delhi I and Another
Advocates: B.B. Ahuja, Adv
Cases ReferredMadan Mohan v. District Excise and Taxation Officer
Excerpt:
.....under section 18(2a) of the act before the commissioner of wealth-tax and prayed that as he had filed his wealth-tax returns voluntarily and these had been accepted, penalty for late filing of the returns be not levied. the commissioner declined to waive the penalty on the ground that it was only after the survey had been carried out and the affairs of the assessed noticed that he came forward and filed these returns. these returns could not, thereforee, the said to be voluntary for any of these years. hence, the present petition. allowing the petition and remanding the matter to the commissioner for a fresh decision on the petitioner's application.;1. it cannot be held that merely because there was a survey of agricultural properties showing that the petitioner also owned..........department and certain books were seized. thereafter, the petitioner on october 7, 1974, filed returns of income for the assessment years 1966-67, 1967-68, 1968-69, 1969-70, 1972-73 and 1973-74. subsequently, on march 25, 1975, a notice under section 14 of the income-tax act, was served on the petitioner. in due course, the income-tax officer initiated penalty proceedings for delay in filing the returns and for not filing the estimate of advance tax under sections 271(1)(a) and 273 (b). thereupon, the petitioner applied to the commissioner under section 273a for waiver or reduction of he imposable penalty. i may note here that the provisions of section 18(2a) of the wealth-tax act are in pari materia with section 273a [271 (4a) before deletion with effect from october 1, 1975].....
Judgment:

Charanjit Talwar, J.

1. The petitioner, Shri A. N. Sarvaria (since expired), had challenged the legality of the order passed on December 30, 1974, by the Commissioner of Wealth-tax, New Delhi, refusing to reduce or waive the penalty imposed on the petitioner by the Wealth-tax Officer on the ground that the returns of wealth for the assessment years 1965-66 to 1971-72 had not been filed voluntarily.

2. The wealth-tax returns for the years 1965-66 to 1970-71 were filed by the petitioner on December 29, 1970. According to the petitioner, he had not received any notice under section 14(2) of the Wealth-tax Act, 1957 (hereinafter called 'the Act'). However, return in respect of the assessment year 1971-72, it is the case of the petitioner, was filed by him on July 8, 1971, after receipt of a notice dated June 16, 1971, under section 14(2) of the Act. It is averred that soon after the filing of the returns, the petitioner paid wealth-tax on the basis of those returns as per the provisions of section 15B of the Act. The net wealth as declared by the petitioner in the said returns, it is stated in the petition, was accepted by the Wealth-tax officer as per the assessment orders, copies of which are annexures A-1 to A-7 to the writ petition. The Wealth-tax Officer initiated proceedings under section 18(1)(a) of the Act for levying penalty for late filing of the returns in respect of the assessment years 1965-66, 1966-67 and 1968-69 to 1971-72 For the assessment year 1967-68, the Wealth-tax Officer initiated proceedings under section 18(1)(c) of the Act and issued a show-cause notice requiring the petitioner to state as to why penalty for concealing of wealth be not levied. This proceeding qua the assessment year 1967-68 was, however, dropped by the Inspecting Assistant Commissioner holding that there was no concealment on the part of the petitioner. Thereafter, the Commissioner of Wealth-tax acting under section 25(2) of the Act directed that penalty proceedings under section 18(1)(a) of the Act for late submission of the return for that year be initiated. Thereafter, the petitioner by an application dated December 29, 1973, under section 18(1A) of the Act filed before the Commissioner of Wealth-tax sought that as the wealth-tax returns had been filed by him voluntarily and had been accepted, penalty for late filing of those returns be not levied.

3. The finding of the Commissioner that the returns filed were not voluntary are contained in paragraphs 4 and 5 of the impugned order, annexure D-1 to the writ petition. It is useful to quote those paragraphs :

'4. A perusal of the records shows that the case of the assessed came, up for survey during the course of survey operations carried out by the Department in respect of wealth-tax on agricultural properties. A survey report is on record and this was received by the Wealth-tax Officer on December 22, 1970. This shows the land holdings of the assessed along with his other assets, like shares and commercial plots, etc. It is only after the survey had been carried out and the affairs of the assessed noticed that he came forward and filed these returns. These returns cannot, thereforee, be said to be voluntary for any of these years.

5. Shri Sadhu Ram Aggarwal, advocate, vehemently asserted that the filing of returns was before the issue of notices by the Wealth-tax officer. That is altogether a separate condition prescribed under section 18(1A) and if that condition was satisfied, the disclosure has still to be voluntary. In this particular case, the motivating factor for the assessed for making these returns was certainly nothing other than the initiative of the Department in locating him during the course of survey. Shri Sadhu Ram further stated that the assessed paid the taxes immediately after filing the returns and that he satisfies all the other conditions. As mentioned above, the assessed has to satisfy all the conditions and, in this case, he certainly does not qualify to be held as a person who came up voluntarily. As the assessed does not satisfy one of the conditions. the disclosure is rejected. In fact, there are other conditions also which the assessed does Dot satisfy for some of the years, like issue of notices, but it is not necessary to go into further details.'

4. I may notice here that in the writ petition, the petitioner is not challenging the levy of penalty for late filing of the return in respect of the assessment year 1971-72. It is his own case that that return was filed by him after the receipt of notice under section 18(2) of the Act.

5. I may note here another fact and that is that the respondents have chosen not to file any return to the rule nisi. However, Mr. Wazir Singh, learned counsel appearing for the Revenue, at the time of arguments took up a preliminary objection to the maintainability of the writ petition. According to him, although the Commissioner passed a common order rejecting the application of the petitioner seeking quashing of the levy of penalty for the various assessment years, yet the petitioner was obliged to file separate writ petition in respect of each assessment order and not a joint petition assailing the imposition of penalty in respect of all the assessment years in question. In support of his contention, Mr. Wazir Singh cited A. P. Vasudevan v. State of Madras [1978] Tax LR 97, wherein a single judge of the Madras High Court held that where 18 assessment orders were challenged in 18 revision petitions which were disposed of by the commissioner appointed under the Tamil Nadu Entertainment Tax Act by a common order, a single writ petition wag not maintainable challenging all those assessment orders. The reasons for arriving at this finding, however, have not been given in the reports. In my view, the objection taken at the time of argument is entirely misconceived. In the present case. as noticed above, the petitioner had filed a single application seeking waiver under section 18(2A) of the penalty imposable on the plea that the returns which he had filed were voluntary and that his case otherwise also fell within the purview of section 18(2A) of the Act. He was not challenging in that application the assessment orders passed. At that stage, as is clear from the facts noticed above, even the orders imposing penalty, copies, annexures C-1 to C-6, dated March 5, 1974, had yet to be passed. As noticed earlier, the application was made on December 29, 1973. However, even a petition assailing the assessment of more than one year, if admitted, cannot be justly dismissed as being incompetent, especially when the grounds of challenge are exactly similar. This has been held by a Division Bench of the Punjab High Court in Madan Mohan v. District Excise and Taxation Officer, Bhatinda [1964] 15 STC 648. In the present case, as noticed above, the respondents have not chosen to file a counter-affidavit. If they were so advised, they could have taken the preliminary objection in the return so that even if the principle propounded by the Madras High Court in A. V. Vasudevan's case [1976] Tax LR 97, was to be accepted for the sake of argument that the order amounts to refusal to waive penalty imposable under section 18 for different assessment years, the petitioner could have then had an opportunity to meet it or file separate petition in respect of each year. The writ petition was admitted on March 24, 1975. In my view it is not just to entertain the objection at this late stage even if it be assumed that such an objection can be taken by the respondents.

6. Now, adverting to the reasons given by the learned Commissioner for dismissing the application of the petitioner, according to the impugned order, after the survey had been carried out by the Department in respect of wealth-tax on agricultural properties, the returns filed by the petitioner on December 29, 1970, could not be treated to be voluntary as the affairs of the assessed had come to the notice of the authorities under the Act on December 22, 1970, i.e., the date of the survey report. Learned counsel for the respondents in support of the contention that the order passed by the Commissioner is correct and that the petitioner was under a 'constraint' to file the returns as he 'was likely to be caught' and hence those returns were not voluntary, relies on Hakam Singh v. CIT [190] 124 ITR 228 . The facts, in the said case, were that on November 22, 1973, the business premises of the petitioner in that case were searched by the Income-tax Department and certain books were seized. Thereafter, the petitioner on October 7, 1974, filed returns of income for the assessment years 1966-67, 1967-68, 1968-69, 1969-70, 1972-73 and 1973-74. Subsequently, on March 25, 1975, a notice under section 14 of the Income-tax Act, was served on the petitioner. In due course, the Income-tax Officer initiated penalty proceedings for delay in filing the returns and for not filing the estimate of advance tax under sections 271(1)(a) and 273 (b). Thereupon, the petitioner applied to the Commissioner under section 273A for waiver or reduction of he imposable penalty. I may note here that the provisions of section 18(2A) of the Wealth-tax Act are in pari materia with section 273A [271 (4A) before deletion with effect from October 1, 1975] of the Income-tax Act. The Commissioner dismissed the application on the finding that the filing of the return was not voluntary. He held that as admittedly the returns had been filed after the search, the provisions of section 273A [271 (4A) before deletion with effect from October 1, 1975] were not attracted. A Division Bench of the Allahabad High Court found that the petitioner knew that according to the books seized at the search, the income of the petitioner was above the taxable limit and it was only when those books came into the possession of the Department that the petitioner filed returns of income. It was held : 'The inference that the returns were filed because the petitioners were prompted to save themselves from the consequence of not filing the return and that they were prompted by a sense of fear does not appear to be unjustified.'

7. The question in the said case, thereforee, was whether a return filed out of sense of fear of levy of penalty or of prosecution is voluntary. Negativing the contention of the petitioner, it was held in the facts of that case that the returns filed were not voluntary.

8. Mr. Ahuja, learned counsel for the petitioner, however, has invited my attention to the decisions of various High Courts in support of his argument that, on the facts of the present case, the Commissioner failed to exercise his jurisdiction by holding that the returns were not voluntary. His plea is that the returns filed by the assessed even after the issuance of a notice under section 14(2) of the Act but prior to its service has been held to be voluntary [See Kundan Lal Behari Lal v. CWT : [1975]98ITR359(All) . In the said case, admittedly, the assessed had filed his returns for the assessment years 1964-65 to 1970-71 on December 2, 1971. On December 6, 1971, the assessed was served with a set of six notices under section 17 of the Act, all dated November 29, 1971, issued by the Wealth-tax officer calling on the assessed to file his returns for the years 1965-66 to 1970-71. The Commissioner passed the order on the assessed's application under section 18(2A) on September 7, 1972. He waived the penalty for the year 1964-65 as no notice under section 17 had been issued for that year, but for the subsequent years he held that as the notice under section 17 had been issued prior to the submission of the returns, these could not be held to be voluntary. It was held by a Division Bench of the Allahabad High Court that a notice cannot be said to have been issued to a person unless he is served with it. thereforee, an assessed who makes a full disclosure of his wealth before notice is served, is entitled to the benefit of section 18(2A). The order of the Commissioner was accordingly set aside on the ground that he failed to exercise his discretion under the provisions of the Act.

9. Another case cited by Mr. Ahuja is Madhukar Manilal Modi v. CWT [1978] 113 ITR 31 . The facts of that case were that the assessed filed his return of net wealth under section 14(1) of the Act on November 29, 1971, for the assessment year 1971-72. For the assessment years 1969-70 and 1970-71, the returns were filed by him on September 19, 1973, a few days before the assessment for 1971-72 was completed. It Was the admitted case of the parties that the returns for the said two years were filed only after the assessed was asked during the course of the assessment proceedings for the assessment year 1971-72 to file those returns. The application made by the assessed to the Commissioner under section 18(2A) praying that the minimum penalty imposable be waived, was rejected on the ground that those returns were not voluntary. A Division Bench of the Gujarat High Court has held that by the mere fact that a return has been filed under the advice, suggestion or even at the behest (otherwise than by a notice under section 14(2) of the Wealth-tax Act), it does not cease to be a voluntary return. In this judgment, it has been held that though section 18(2A)(a) uses the word 'voluntary', the said word has to be read with the expression 'made full disclosure of his net wealth'. It has been observed that 'the condition which the legislature has imposed is that in cases where an assessed has prior to the issue of notice to him under s. 14(2) filed a return but has not done so within the time limited by law, he must satisfy the Commissioner that he has made full disclosure of his net wealth voluntarily and in good faith. The word 'voluntary', thereforee, has not to be read in the context of the filing of the return.'

10. This judgment of the Gujarat High Court has been distinguished on facts by the Allahabad High Court in Hakam Singh's case : [1980]124ITR228(All) . It was observed that the advice or suggestion of the authorities concerned to file d return for the remaining years without there being any proof that that authority had given any inducement or assurance that the penalty would be waived could be held to be anything but voluntary.

11. In the facts and circumstances of the present case, it cannot be held that merely because there was a survey of agricultural properties showing that the petitioner also owned agricultural land, he was under a 'constraint' to make full disclosure of his net wealth. Further, the survey report cannot, in my view, be equated with seizure of books of account of the assessed from search of his premises. The returns for the years 1965-66 to 1970-71 were filed without notice. The petitioner had made full disclosure of his net wealth. The authorities did not detect any concealment therein and, thereforee, it has to be held that the returns for the said assessment years were voluntary.

12. The result of the above discussion is that the petition is allowed and the impugned order of the learned Commissioner passed on December 30, 1974, relating to the assessment years 1965-66 to 1970-71 is set aside. The matter is set back to the Commissioner of Wealth-tax for decision afresh of the application dated December 29, 1973, copy, annexure 'D', made by the assessed in so far as it relates to the assessment years 1965-66 to 1970-71.

13. No order as to costs.


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