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Commissioner of Wealth-tax Vs. P. Krishnaswamy Mudaliar - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case Petition Nos. 99 to 102 of 1976
Judge
Reported in[1977]110ITR301(Mad)
ActsIncome Tax Act, 1961 - Sections 256(1) and 256(2); Wealth Tax Act, 1957 - Sections 18(3)
AppellantCommissioner of Wealth-tax
RespondentP. Krishnaswamy Mudaliar
Appellant AdvocateJ. Jayaraman and ;Nalini Chidambaram, Advs.
Respondent AdvocateS.V. Subramaniam, Adv. for Subbaraya Ayyar, ;Padmanabhan and ;Ramamani, Advs.
Excerpt:
- - 4. we are clearly of the opinion that no question of law arises on the facts of this case......same subject to any accretion or disposal and if a penalty equivalent to the value-of the total wealth is levied, the penalty for the four years will be four times the total wealth itself and such a thing could not have been in the contemplation of the parties. the petitions filed before this court refer to the total wealth declared for four years as under :s. no.assessment yeartotal wealth declaredrs.1.1966-671,61,6692.1967-681,77,1633.1968-692,62,9904.1969-701,54,001thus, it will be seen that from 1966-67 to 1967-68, there is a small increasein the wealth, that from 1967-68 to 1968-69, there is a further increase inthe wealth, and in the year 1969-70, the wealth has come down tors. 1,54,001. if the penalty for all these four years is to be levied equivalent to the value of the.....
Judgment:

Ismail, J.

1. By these petitions under Section 27(3) of the Wealth-tax Act, 1957, the Commissioner of Wealth-tax, Tamil Nadu-II, Madras, requests the court to direct the Income-tax Appellate Tribunal, Madras Bench, to refer the following questions of law for the opinion of this court:

' 1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in cancelling the penalties levied under Section 18(1)(c) of the Wealth-tax Act for the assessment years 1966-67 to 1969-70?

2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding and had valid materials to hold that the assessee cannot be charged with the concealment of wealth ?

3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that penalty under Section 18(1)(c) of the Wealth-tax Act should not be levied on the assessee because penalty for concealment of income was not levied on him ?

4. Whether a liability to penalty under Section 18(1)(c) of the Wealth-tax Act and the liability under Section 271(1)(c) of the Income-tax Act are not different and whether penalty under section, 18(1)(c) of the Wealth-tax Act should not be levied independently ?

5. Whether the Appellate Tribunal's view is reasonable one and based on valid and relevant considerations '

2. The facts that give rise to these question are as follows : The respondent herein is a partner of the firm, M/s. P. Krishnaswamy and Company, Madras. In respect of the assessment years 1964-65 and 1965-66 of the firm, dealing with income-tax, certain peak credits of the hundi loans as a result of settlement arrived at between the firm and the department, were agreed to be spread over for the assessment years 1966-67 to 1969-70 as the income from the firm and the same to be capitalised. This was effected pursuant to a settlement entered into between the firm and the department, and one of the terms of the settlement was that minimum penalty should be levied for all the years and that the wealth-tax assessment of the partners should be modified. It is the common case that no penalty under the Income-tax Act was levied. Subsequently, action was taken under Section 18(1)(c) read with Section 18(3) of the Wealth-tax Act, 1957, for levy of penalty for all these years, viz., 1966-67 to 1969-70. The Inspecting Assistant Commissioner passed orders levying penalty in a hurried manner in view of the fact that the time limit for passing the order was about to expire. The Tribunal has extracted the relevant part of the order of the Inspecting Assistant Commissioner in its order. The same is as follows ;

' The matter is simple. There is no dispute on facts. Section 18(2A) application is pending. Limitation for penalty expires on March 31, 1973. That the assessee had not admitted the peak in the original wealth-tax return renders him liable for penalty. The concealment is Rs. 79,348. In the circumstances, I direct that the assessee shall pay by way of penalty under Section 18(1)(c) for the assessment year 1966-67 a sum of Rs. 79,348 (rupees seventy nine thousand three hundred arid forty-eight only). The Wealth-tax Officer will issue the demand notice and chalan accordingly.'

3. We must point out that this order was passed after the assessee had filed a revised wealth-tax return showing his share in the capitalised amount of the firm referred to already as part of his wealth. The assessee contended that he was not liable to any penalty under the Wealth-tax Act, because the necessity for filing the wealth-tax return arose as a result of the settlement arrived at between the firm and the department, in respect of the income-tax of the assessee, and but for that, there would have been no occasion for him to file a revised return showing a larger wealth, and, therefore, no penalty whatever can be levied. The Tribunal set aside the order of penalty pointing out the summary manner in which the Inspecting Assistant Commissioner had dealt with the question of penalty with reference to the statutory provision concerned and also the fact that there was settlement between the firm and the department and the extra wealth had to be shownonly as a result of the settlement. It is thereafter the Commissioner requested the Tribunal to refer to this court the questions of law extracted already. On the Tribunal rejecting the applications, the Commissioner has come up to this court.

4. We are clearly of the opinion that no question of law arises on the facts of this case. It is admitted that there was a settlement between the department and the firm in respect of the income-tax assessment proceedings. In these proceedings, one of the terms of the settlement was that minimum penalty was leviable in respect of the income-tax and the wealth-tax assessment will have to be modified. There is no specific reference to any penalty leviable under the Wealth-tax Act. We are of the opinion that, having regard to the terms of the settlement, it was the intention of the parties that no penalty should be levied under the Wealth-tax Act. We are referring to this aspect of the matter because the wealth for the four successive years, unlike income, which accrues or arises, year after year, will be practically the same subject to any accretion or disposal and if a penalty equivalent to the value-of the total wealth is levied, the penalty for the four years will be four times the total wealth itself and such a thing could not have been in the contemplation of the parties. The petitions filed before this court refer to the total wealth declared for four years as under :

S. No.Assessment yearTotal wealth declared

Rs.

1.1966-671,61,6692.1967-681,77,1633.1968-692,62,9904.1969-701,54,001

Thus, it will be seen that from 1966-67 to 1967-68, there is a small increasein the wealth, that from 1967-68 to 1968-69, there is a further increase inthe wealth, and in the year 1969-70, the wealth has come down toRs. 1,54,001. If the penalty for all these four years is to be levied equivalent to the value of the wealth declared for each year, certainly, it will beseveral times more than the value of the wealth itself, and that is one of thereasons why we are of the view that when the settlement was effected, itwas the intention of the parties that no penalty under the Wealth-tax Actshould be levied, and that a minimum penalty under the Income-tax Actshould be levied. As we have already pointed out, even this minimumpenalty under the Income-tax Act had not been levied. Under thesecircumstances, having regard to the fact that the entire thing took placeas a result of the settlement arrived at between the department and thefirm, the levy of penalty was not called for, and the Tribunal was right insetting aside the order of the Inspecting Assistant Commissioner. Havingregard to these facts, no question of law can be said to arise out of the order of the Tribunal.

5. Accordingly, these petitions are dismissed. There will be no order asto costs.


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