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Commissioner of Wealth-tax (Central) Vs. Kumari Kavitha Goenka (Minor) (Represented by Father) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 191 of 1974 (Reference No. 67 of 1974)
Judge
Reported in[1979]119ITR974(Mad)
ActsWealth Tax Act, 1957 - Sections 18(1)
AppellantCommissioner of Wealth-tax (Central)
RespondentKumari Kavitha Goenka (Minor) (Represented by Father)
Appellant AdvocateA.N. Rangaswamy and ;Nalini Chidambaram, Advs.
Respondent AdvocateT.S. Viswanatha Rao, Adv.
Excerpt:
.....guilty of conscious disregard of her obligations - such deliberate conduct would naturally attract penalty - tribunal wrong in having cancelled penalty imposed by revenue - respondent did not disclose any reasonable cause for having delayed tax returns for 14 months - under such circumstances penalty was rightly imposed by revenue. - - raugaswamy, learned counsel for the appellant, fairly accepted that the law, in so far as this court is concerned, is well settled that the law applicable to the penalty proceedings is the law as it stood on the valuation date or at any rate on the date on which the default has occurred. if in a given set of circumstances, the statutory authorities are satisfied that there was reasonable cause for not filing the returns in time and that the offender..........the excuses given by the respondent were reasonable. the tribunal noticed that the respondent from time to time was reminded beginning from february, 1969, and ending with november, 1969, as to her statutory duty to file the returns which was already delayed by then. notwithstanding such a disclosure of facts from the records the tribunal was of the view that the delay of 14 months in the matter of the filing of the wealth-tax returns has been satisfactorily explained. we are totally unable to agree with the conclusion of the tribunal. the facts and circumstances do disclose that the assessee acted in defiance of law and was also guilty of conscious disregard of her obligation. such a deliberate conduct would naturally attract penalty. the tribunal was wrong in having cancelled the.....
Judgment:

Ramaprasada Rao, C.J.

1. The revenue sought under Section 27(1) of the W.T. Act, 1957, a reference from the Income-tax Appellate Tribunal, Madras Bench ' A ', to refer certain questions of law said to arise out of the Tribunal's order dated October 31, 1972, in W.T.A. No. 194 (Mds) 1971-72 to this court for its opinion. As in the opinion of the Tribunal, certain questions of law did arise out of their order, they drew up a statement of case and referred the following four questions for our decision :

' 1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the provisions of Section 18(1)(a) as amended by clause 24(c) of the Finance Act, 1969, would not apply to the assessee's case for the assessment year 1968-69

2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessment proceedings would include penalty proceedings and that the law applicable to the penalty proceedings is the law as it stood on the valuation date

3. Whether the Appellate Tribunal's finding that the assessee had reasonable cause for the entire period of default is based on valid materials and is a reasonable view to take on the facts of the case

4. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in cancelling the penalty levied under Section 18{1) of the Wealth-tax Act, 1957 ?'

2. The facts which led to the reference may briefly be stated. The subject arose on a penalty of Rs. 18,945 being imposed by the WTO on the respondent under Section 18(1)(c) of the Act for submission of returns beyond the prescribed time and without sufficient cause therefor. The details relating to the levy of penalty are as follows:

1.Date on which return under s, 14(1) was due30-6-19682.Date of issue of notice under s. 14(2)1-7-19683.Date of service of notice11-7-19684.Extended time allowed by the Wealth-tax Officer for filing the return31-8-19685.Date on which the return was filed27-11-19696.Delay in filing the return14 Months

3. The respondent's contention was that she took some time to get thenecessary particulars from M/s. Express Newspapers (P.) Ltd., and apartfrom it, the returns were not filed by oversight, though they were actuallyprepared in December, 1968, along with the returns of the sisters of therespondent. The discovery of non-filing was made only in November, 1969,and when they were filed on November 27, 1969, there was no delay at alland the delay, if any, caused before such filing was for sufficient cause. TheWTO would not agree with the respondent. He levied the penalty as statedabove, which was confirmed by the AAC. Before the Tribunal also, thesame contentions were repeated. In fact, the respondent furnished thedetails regarding the dates of filing the wealth-tax returns of her two sistersfor the preceding and the subsequent years as under :

Assessment years 1966-671967-681968-691969-70

Arti Goenka13-2-19671-2-6812-12-6827-11-69Ritu Goenka13-2-19671-2-6812-12-6827-11-69Kavitha Goenka13-2-19671-2-6827-11-6927-11-69

4. It was admitted before the Tribunal and even before us that though the wealth-tax returns of the respondent's two sisters were filed on December 12, 1968, for the assessment year 1968-69, yet the relevant return of the respondent could not be filed till November 27, 1969, and that their auditors were under the bona fide impression that the return of the respondent ought to have been filed in time. It is common ground that the respondent was reminded several times for filing the wealth-tax returns and such reminders were made on February 12, 1969, September 12, 1969, October 15, 1969, October 22, 1969, and November 5, 1969.

5. In spite of such incessant reminders, the returns were not filed till November 27, 1969. It has also been brought out that on October 17, 1969, the respondent's representative interviewed the WTO who directed him to file the return at once and the assessee was also warned that it should not be taken that the officer has given any extension of time for filing the returns. Here again, we find that a warning was administered by the WTO to the assessee even on October 17, 1969, The other contention of the assessee that she could not file the returns in time because she had to get particulars from Express Newspapers (P.) Ltd. was accepted by the Tribunal as a reasonable cause for the delayed submission of returns. The Tribunal was also of the view that the other pleas of the respondent were both probable and convincing and on the strength of such conclusions it was of the view that the respondent cannot be said to have deliberately acted in defiance of law, nor could it be said that she was guilty of contumacious or dishonest conduct. The Tribunal therefore, came to the conclusion that though there may be a technical breach of the provisions of the Act, the circumstances cannot constitute the basis for the levy of penalty. As regards the date on which such penalty should be levied, it came to the conclusion that it should be computed with reference to the law prevailing on the date of default. It was under those circumstances the Tribunal framed the above four questions for our answer.

6. Mr. Raugaswamy, learned counsel for the appellant, fairly accepted that the law, in so far as this court is concerned, is well settled that the law applicable to the penalty proceedings is the law as it stood on the valuation date or at any rate on the date on which the default has occurred. This principle has been first laid down in a case, CGT v. V. C. Muthukumaraswamy Mudaliar : [1975]98ITR540(Mad) , S. Loonkaran & Sons v. CIT : [1977]108ITR92(Mad) and the judgment in T.C. No. 246 of 1974 batch, CWT v. P.C. M. Sundarapandian : [1978]114ITR367(Mad) . Bound by the decisions of this court, we answer questions Nos. 1 and 2 against the department and in favour of the assessee and express our opinion that the law applicable tothe penalty proceedings is the law as it stood on the date when the default has been committed.

7. But, the substantial question argued before us by the counsel for the applicant is that the facts and circumstances of the case reveal that there was no reasonable cause for the period of default and that there are no valid materials to take a reasonable view that no penalty at all is leviable in the instant case. The challenge is against the cancellation of the penalty levied under Section 18(1)(a) of the W.T. Act, 1957. Penalty, not being an additional tax, but an addition to tax leviable under law under stated and prescribed circumstances, ought not to be levied as a matter of course and on pure speculation. Nor could it be said with any amount of reasonableness that the levy of penalty ought to be discouraged whatever may be the quality and the quantity of impunity of the assessee. A balance has to be struck and in order to invoke the penalty proceedings and ultimately levy penalty, the revenue should view the entire facts and circumstances with meticulous care and should impose such penalty on contumacious or fraudulent assessees. The discovery of fraud by itself will prompt a reasonable person to penalise the person, who commits fraud. But it is rather difficult to weigh with precision as to in what circumstances the conduct of an assessee would amount to contumacious conduct or a dishonest conduct. As exercise of such a power to impose penalty springs from a quasi-criminal jurisdiction vested in the revenue, a certain amount of deliberate-ness in the matter of the avoidance of the prescriptions both of the substantial and the procedural law prescribed ought to be noticed before a penalty is imposed. We have already referred that if the party is guilty of contumacious or dishonest conduct, it would be legitimate to invoke the penalty provision. If the totality of the facts and circumstances disclose sufficient cause or reflects a bona fide belief on the part of the offender in the matter of the commission of the breach of the provisions of the Act, then a liberal attitude towards the assessee is necessary. A mechanical imposition of the fine due to the passage of the calendar in the matter of the filing of the returns within time is not generally permissible. Ignorantia legis neminem excusat. But in a case where penalty is sought to be imposed, the statutory functionaries ought to be doubly careful in invoking their quasi-criminal jurisdiction for it is fundamental that a crime should be brought home fully to the concerned offender. If in a given set of circumstances, the statutory authorities are satisfied that there was reasonable cause for not filing the returns in time and that the offender is not guilty of a deliberate avoidance of law, nor could it be said that his conduct was contumacious, then the law has more or less become settled by now that penalty not being the product of guess work should be based on the substratum of reason and convincing material. With discerning eye,the conduct should be viewed and tested. If it is venial, then the authorities should be reasonably lenient. If it is deliberate obstinate disobedience of law and resistance to authority, then such conduct would cease to be a pardonable excuse.

8. In the instant case, the excuses given by the respondent are far from being convincing and much less probable. The representative who was dealing with the similar cases of the sisters of the respondent filed the wealth-tax returns of others on December 12, 1968, but filed that of the respondent on November 27, 1969. The excuse that certain particulars were to be obtained from M/s, Express Newspapers (P.) Ltd. stood only as a bare excuse without being substantiated. The other plea that the returns could not be filed in time because they were misplaced or otherwise and could not be brought to the revenue's threshold by the auditor of the respondent is again a contention which is bare and without any prop of acceptable material. It is rather strange as to how the Tribunal after quoting the law correctly could still hold that the excuses given by the respondent were reasonable. The Tribunal noticed that the respondent from time to time was reminded beginning from February, 1969, and ending with November, 1969, as to her statutory duty to file the returns which was already delayed by then. Notwithstanding such a disclosure of facts from the records the Tribunal was of the view that the delay of 14 months in the matter of the filing of the wealth-tax returns has been satisfactorily explained. We are totally unable to agree with the conclusion of the Tribunal. The facts and circumstances do disclose that the assessee acted in defiance of law and was also guilty of conscious disregard of her obligation. Such a deliberate conduct would naturally attract penalty. The Tribunal was wrong in having cancelled the penalty imposed by the revenue. According to us, the respondent did not disclose any reasonable or sufficient or justifiable cause for having delayed the wealth-tax returns for 14 months; when similar returns of her sisters handled by the same auditor were filed in time, no particular reason is assigned as to why her returns alone were kept back. In the absence of any acceptable explana-, tion, we are of the view that the penalty was rightly levied by the revenue and the Tribunal was wrong in having found that the assessee had reasonable cause for not filing the returns in time and that the entire period of default has to be excused as if there are valid materials for doing so.

9. In the light of this conclusion, we are also of the view that the Tribunal was not right in cancelling the penalty under Section 18(1)(a) of the W.T. Act, 1957.

10. In the result, questions Nos. 3 and 4 are answered in favour of the revenue and against the assessee with costs. Counsel's fee Rs. 250.


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