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Kanhiya Lal Vs. Commissioner of Income Tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B.Wealth Tax Reference No. 2 of 1977
Judge
Reported in1985(1)WLN646
AppellantKanhiya Lal
RespondentCommissioner of Income Tax
Cases ReferredBombay v. Shri R.N. Talcharkar
Excerpt:
.....of wealth before the due date without reasonable cause), 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.;(b) wealth tax act, 1957 - section 18(1 )(a)--continuing offence--connotation of.;the continuing wrong is that the law that is violated makes the wrong door continuously liable for penalty and that a wrong or default which is complete but whose effect may continue to be felt even after its completion is not a continuing wrong or default.;reference answered against revenue - - where the default complained is of one falling under section 18(1)(a) of the wt act, 1957 (e. , failure to file the return of wealth before the due date without reasonable cause), the penalty has to be computed in..........is that the law that is violated makes the wrong doer continuously liable for penalty and that a wrong or default which is completed but whose effect may continue to be felt even after its completion is not a continuing wrong or default. their lordships have expressed themselves in the following wrong:section 18 of the act, with which we are concerned in this case, however, 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 section 18(1)(a) of the act gives rise to single default and to a single penalty, the measure of which, however, is geared upto the time lag between the last date on which the return has to be filed and the date on which it is filed. the default, if any committed,.....
Judgment:

S.K. Mal Lodha, J.

1. The Income Tax Appellate Tribunal, Jaipur Bench, Jaipur ('the Tribunal' here in) has referred the following question for our decision:

Whether on the facts and in the circumstances of the case, the Tribunal is justified in directing the Wealth Tax Officer to compute the penalties in the manner as detailed in the order in question?

It is not necessary to recount the facts in detail which have given rise to this reference. The assessment years in question are 1965-66, 1967-68 and 1969-70 Suffice it to state that the Wealth Tax Officer (W.T.O.) imposed penalty under Section 18(1)(a) of the Wealth Tax Act, 1957 (Act No. XXVI of 1957) (for short 'the Act' here in). The assessee went in appeal and the Appellate Assistant Commissioner (A.A.C.) allowed the appeal in part and observed as under:

We doubt the default in these years occurred before 1-4-69 and continued thereafter. But (?) it does not mean if the scale of penalty is enhanced or changed subsequent to the asstt. year. It is the changed law which would be applicable for any asset. year commencing before the 1st April, 1969. No law can be retrospective unless specifically mentioned by the statute. The law relating to levy of penalty for late submission of return is different from the one which governs the levy of penalty for concealment. In the case of concealment the law which obtains on the day, the assessee filed the return or commits the concealment would be applicable for determining the penalty for concealment, whereas in the case of late submission of return, the law of penalty is the one which prevails on the opening day of the A.Y. concerned. The fact that the delay continued after 31-3-1969 is of no consequence. This is only important for calculating the period of default. Two types of substantive law cannot be made applicable for the same A.Y. This would also be against the law which provides that the penalty to be imposed should not be more than 1/2 of the tax imposed, whereas w.e.f. 1-4-1969, the maximum penalty to be imposed was 1/2 of the net wealth after excluding the initial exemption limit. Both these limits have been applied in these penalty orders.

On further appeal, before the Tribunal, it was contended that the AAC was wrong in computing the penalties, for, the penalty should be calculated in accordance with law which was in force prior to April 1, 1969 and for the period beginning from April 1, 1969 the provisions of the statute as amended with effect from April 1, 1969 would apply. The Tribunal in its order dated September 11, 1975 held as follows:

From the facts discussed above, it is clear that default for filing the returns for the assessment years (?) 1966-67,1967-68 took place on 30-6-1966, 30-6-67,30-6-68 respectively. The assessments were completed on 30-10-1971. It means that the default was committed prior to the amendment which came into with effect from 1-4-1969. This default continued even after coming into force of the said amendment.

The Tribunal relied on the decision of the Full Bench of the Income Tax Appellate Tribunal, Bombay Bench 'B' in Addl. 6th Wealth Tax Officer, A-1 Ward, Bombay v. Shri R.N. Talcharkar, Bombay, dated February 25, 1975 where in it was observed as under:

We have already held in paragraph 8 above that there was a continuing default by the assessee from the date when the time for filing the return expired till the date immediately preceding the day on which the return were filed. For a continuing default, the law that is to be applied is the one in force during the period the default continued. Thus, for the period prior to 1-4-1969, it is the law then in force that would apply while for the period beginning from 1-4-1969 the provisions of the statute as amended with effect from 1-4-1969 would apply.

2. Mr. K.C. Bhandari, learned Counsel for the petitioner-assessee submits that the case is squarely governed by CWT v. Suresh Seth : [1981]129ITR328(SC) where in an identical question arose for consideration before their Lordships of the Supreme Court and it was ruled as follows:

Where the default complained is of one falling Under Section 18(1)(a) of the WT Act, 1957 (e.g., failure to file the return of wealth before the due date without reasonable cause), 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 one made in 1969 to Clause (i) of Section 19(1) had retrospective effect.

The distinctive nature of the continuing wrong was noticed and it was stated that the continuing wrong is that the law that is violated makes the wrong doer continuously liable for penalty and that a wrong or default which is completed but whose effect may continue to be felt even after its completion is not a continuing wrong or default. Their Lordships have expressed themselves in the following wrong:

Section 18 of the Act, with which we are concerned in this case, however, 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 Section 18(1)(a) of the Act gives rise to single default and to a single penalty, the measure of which, however, is geared upto the time lag between the last 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. The words 'for every month during which the default continued' indicate only the multiplier to be adopted in determining the quantum of penalty and do not have the effect of making the default in question a continuing one. Nor do they make the amended provisions modifying the penalty applicable to earlier defaults in the absence of necessary provisions in the amending Act.

3. For the reasons mentioned in CWT's case : [1981]129ITR328(SC) , which is fully applicable to the case on hand, we hold that the Tribunal was not right and justified in directing the WTO to compute the penalties keeping in view the principles laid down in Addl. 6th Wealth Tax Officer, A-1 Ward, Bombay's case (supra), wherein it was opined that for the period prior to April 1, 1969, it is the law then in force that would apply while for the period beginning from April 1, 1969 the provisions of the Statute as amended with effect from April 1, 1969 would apply. The penalties in this case are to be computed in accordance with the principles laid down in CWT's case : [1981]129ITR328(SC) .

4. The question referred to us is answered in the negative i.e., in favour of the assessee and against the Revenue.

5. In the circumstances of the case, we leave the parties to bear their own costs of this reference.

6. Let the answer be returned to the Tribunal in accordance with the provisions of Section 27(6) of the Act.


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