1. The following question has been referred to this court under s. 27 of the W.T. Act, 1957 (hereafter referred to as 'the Act') :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that penalty was leviable in accordance with the provisions of section 18(1) of the Act, prior to its amendment on April 1, 1969, in so far as the returns filed by the assessee in respect of the assessment years 1964-65 to 1968-69 were concerned ?'
2. For the assessment years 1964-65 to 1967-68, the assessee filed returns of his wealth on October 3, 1969, and for the assessment years 1968-69 and 1969-70, he filed them on January 20, 1970. Really, he should have filed them on or before 30th June of each of those assessment years. The WTO notices these defaults during the assessment proceedings, and after they were over, he initiated penalty proceedings under s. 18(1) of the Act. The contention raised on behalf of the assessee was that the returns were filed voluntarily; and, therefore, no penalty should be levied. The WTO held that the returns were not filed voluntarily, but were filed only after enquiries regarding his total wealth were made during the income-tax assessment proceedings. He also held that the assessee had, without any reasonable cause, failed to file the returns within the prescribed time. He, therefore, passed orders on November 30, 1972, imposing penalty for each of those assessment years. Penalties were computed in accordance with the provisions of s. 18(1)(a) as they stood then. The assessee filed appeals before the Appellate Assistant Commissioner (hereafter referred to as 'the AAC'). It was urged before the AAC that the total wealth, though returned and assessed in the hands of the assessee in his 'individual' capacity, in fact, belonged to the HUF of which the assessee was the karta, and that the assessee in his individual capacity did not have any taxable wealth at all. This contention was raised for the first time before the AAC. For that reason and also because he did not find any merit in it, he rejected the same. He also agreed with the finding that the assessee had committed the defaults without a reasonable cause. He, therefore, confirmed the orders passed by the WTO. The assessee then preferred appeals to the Income-tax Appellate Tribunal (hereafter referred to as 'the Tribunal'). The Tribunal also confirmed the finding regarding the defaults committed by the assessee. However, it upheld the contention that so far as the assessment years 1964-65 to 1968-69 are concerned, penalty should have been computed in accordance with s. 18(1) as it stood before its amendment which came into force from April 1, 1969, and directed the WTO to recompute the penalty accordingly. Dissatisfied with this decision, the Department moved the Tribunal for making a reference to this court. In all, five applications were filed before the Tribunal. The question of law involved in all those applications being common, a common reference has been made by the Tribunal.
3. The contention of the Revenue is that for the purpose of the imposition of penalty, the law applicable is the law on the date when the officer decides to impose penalty and the Tribunal committed an error of law in holding that the law in force at the time when the default was committed should apply in such cases.
4. In respect of a similar default under the G.T. Act, 1958, the Madras High Court in CGT v. Muthukumaraswamy Mudaliar : 98ITR540(Mad) , following the judgments of the Punjab and Haryana High Court and the Madhya Pradesh High Court in CIT v. Bhan Singh Boota Singh and CIT v. Ramchand Kundanlal Saraf : 98ITR474(MP) , respectively, held that where the infringement is said to be the failure to furnish the return in time, the offence is complete when the return is not filed on the due date. Therefore, in such cases, the office having taken place on the date fixed for furnishing the return, the law as on that date has to govern the levy of penalty.
5. In Brij Mohan v. CIT : 120ITR1(SC) , the contention of the assessee was that an assessment proceeding for the determination of the total income and the computation of the tax liability must ordinarily be made on the basis of the law prevailing during the assessment year, and inasmuch as concealment of income was concerned with the income relevant for assessment during the assessment year, any penalty imposed in respect of concealment of such income should also be governed by the law pertaining to that assessment year. The Supreme Court rejected that contention, with the following observation (p. 4) :
'In our opinion, the assessment of the total income and the computation of tax liability is a proceedings which, for that purpose, is governed by entirely different considerations from a proceeding for penalty imposed for concealment of income. And this is so notwithstanding that the income concealed is the income assessed to tax. In the case of the assessment of income and the determination of the consequent tax liability, the relevant law is the law which rules during the assessment year in respect of which the total income is assessed and the tax liability determined. The rate of tax is determined by the relevant Finance Act. In the case of a penalty, however, we must remember that a penalty is imposed on account of the commission of a wrongful act, and plainly it is the law operating on the date on which the wrongful act, and plainly it is the law operating on the date on which the wrongful act is committed which determines the penalty. Where penalty is imposed for concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which is relevant. It is wholly immaterial that the income concealed was to be assessed in relation to an assessment year in the past.'
In CWT v. Suresh Seth : 129ITR328(SC) , the facts were similar to the facts of the present case. In that case, the assessee had filed his wealth-tax returns for the assessment years 1964-65 and 1965-66 on March 18, 1971. He was required by s. 14(1) of the Act to file the return for the assessment year 1964-65 on or before June 30, 1964, and the return for the assessment year 1965-66 on or before 30, 1965, and as the returns were filed late, penalty proceedings were initiated by the WTO. The contention raised on behalf of the Department was that the default or failure to file a return in time is a continuing default and, therefore, the penalty had to be computed in accordance with s. 18 of the Act as it stood prior to its amendment by the Wealth-tax (Amendment) Act, 1964, for the period prior to April 1, 1965, in accordance with s. 18 of the Act as amended by the Wealth-tax (Amendment) Act, 1964, for the period between April 1, 1965, and March 31, 1969, and in accordance with s. 18 of the Act as amended by the Finance Act, 1969, for the period between April 1, 1969, and March 18, 1971. The Supreme Court negatived this contention and observed as under (p. 335) :
'A liability in law ordinarily arises out of an act of commission or an act of omission. When a person does an act which law prohibits him from doing it and attaches a penalty for doing it, he is stated to have committed an act of commission which amounts to a wrong in the eye of law. Similarly when a person omits to do an act which is required by law to be performed by him and attaches a penalty for such omission, he is said to have committed an act of omission which is also a wrong in the eye of law. Ordinarily, a wrongful act or failure to perform an act required by law to be done becomes a completed act of commission or of omission, as the case may be, as soon as the wrongful act is committed in the former case and when the time prescribed by law to perform an act expires in the latter case and the liability arising therefrom gets fastened as soon as the act of commission or of omission is completed. The extent of that liability is ordinarily measured according to the law in force at the time of such completion.'
Construing s. 18 of the Act, it held that the section does not require the assessee to file a return during every month after the last day to file it is over. Non-performance of any of the acts mentioned in s. 18(1)(a) of the act gives rise to a single default and to a single penalty, the measure of which, however, is geared up to the time lag between the last date on which the return has to be filed and the date on which the return has to be filed and the date on which it is filed. The default, if any, committed, is committed on the last date allowed to file the return. The default cannot be one committed every month thereafter. Where the default complained of is one falling under s. 18(1)(a) of the Act, the penalty has to be computed in accordance with the law in force on the last day on which the return in question had to be filed. Neither the amendment made in 1964 nor the amendment made in 1969 has retrospective effect.
Following these decisions, we hold that the Tribunal was right in holding that the penalty is leviable in accordance with the provisions of s. 18(1) of the Act prior to its amendment on April 1, 1969, in so far as the returns filed by the assessee for the assessment years 1964-65 to 1968-69 are concerned.
Accordingly, we answer this reference in the affirmative, i.e., in favour of the assessee and against the Revenue. As the respondent has not appeared, we pass no order as to costs.