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Commissioner of Wealth-tax, Madras Vs. P. C. M. Sundarapandian and Others. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Cases Nos. 246, 247 and 259 of 1974 (References Nos. 122, 123 and 135 of 1974)
Reported in[1978]114ITR367(Mad)
AppellantCommissioner of Wealth-tax, Madras
RespondentP. C. M. Sundarapandian and Others.
Cases ReferredContinental Commercial Corporation v. Income
Excerpt:
a. n. rangaswami and mrs. nalini chidambaram for the commissioner. k. r. ramamani and s. v. subramaniam for the respondents in t. c. nos. 246 and 247 of 1974. k. n. balasubramaniam for t. s. viswanatha rao and t. n. seetharaman for the respondent in t.c. no. 259 of 1974. - .....case, the appellate tribunal was right in holding that the assessment proceedings would include penalty proceedings and that the law as it stood on the valuation date for the assessment year 1968-69 would apply in the assessees case ?(3) whether, having regard to the provisions of section 18(1)(a), the appellate tribunal was right in holding that the law applicable on the date of default should govern the levy of penalty for the entire period of default though the default continued even after april 1, 1969 ?'t.c. no. 247 of 1974.'(1) whether, on the facts and in the circumstances of the case, the appellate tribunal was right in holding that section 18(1)(a) as amended by clause 24 (c) of the finance act, 1969, should not be applied to reckon the penalty for the period of default after.....
Judgment:

ISMAIL J. - All these references are under section 27 (1) of the Wealth-tax Act of 1957, the questions referred being :

T.C. No. 246 of 1974.

'(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that section 18(1)(a), as amended by clause 24(c) of the Finance Act, 1969, should not be applied to reckon the penalty for the period of default after April 1, 1969, 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 as it stood on the valuation date for the assessment year 1968-69 would apply in the assessees case ?

(3) Whether, having regard to the provisions of section 18(1)(a), the Appellate Tribunal was right in holding that the law applicable on the date of default should govern the levy of penalty for the entire period of default though the default continued even after April 1, 1969 ?'

T.C. No. 247 of 1974.

'(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that section 18(1)(a) as amended by clause 24 (c) of the Finance Act, 1969, should not be applied to reckon the penalty for the period of default after April 1, 1969, 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 as it stood on the valuation date for the assessment year 1968-69 would apply in the assessees case ?

(3) Whether, having regard to the provisions of section 18(1)(a), the Appellate Tribunal was right in holding that the law applicable on the date of default should govern the levy of penalty for the entire period of default though the default continued even after April 1, 1969 ?'

T.C. No. 259 of 1974.

'(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that section 18(1)(a) as amended by clause 24 (c) of the Finance Act, 1969, should not be applied to reckon the penalty for the period of default after April 1, 1969, for the assessment years 1967-68 and 1968-69 ?

(2) Whether, on the facts and in the circumstances of the case, the Appellant 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 dates for the assessment years 1967-68 and 1968-69 in the assessees case ?

(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)(a) should be computed only with reference to the actual amount due or payable by the assessee on the date of imposition of a penalty ?'

Thus, it will be seen that the questions are mostly common and relate to the proceedings for the levy of penalty, the controversy being which is the law to be applied - whether the law which was in force on the date of the default or on the date of passing the order levying the penalty. The Tribunal has taken the view that the law that was in force on the date of the commission of the default alone will be applicable. In view of the decisions of this court as well as a decision of the Allahabad High Court, the view of the Tribunal is correct. The decision in Commissioner of Gift-tax v. C. Muthukumaraswamy Mudaliar : [1975]98ITR540(Mad) dealt with a similar question arising under the corresponding provisions of the Gift-tax Act and held that the law to be applied is not the law that was in force on the date of the passing of the order levying penalty. Another Bench of this court, to which one of us was a party, held in Continental Commercial Corporation v. Income-tax Officer : [1975]100ITR170(Mad) to the same effect while dealing with the corresponding provision of the Income-tax Act, 1961, and in doing so, it followed the decision of the Bench in Commissioner of Gift-tax v. C. Muthukumaraswamy Mudaliar : [1975]98ITR540(Mad) referred to already. A Bench of the Allahabad High Court in Commissioner of Wealth-tax v. Ram Narain Agrawal : [1977]106ITR965(All) took the same view with regard to the corresponding provisions of the Wealth-tax Act, 1957, with which we are concerned in these references and for that purpose relied on the two decisions of this court which we have mentioned already. The combined effect of these three decisions is clear to hold that the law that is to be applied in penalty proceedings is the law as it stood on the date of the commissioner of the default and consequently the three questions referred to this court in Tax Case Nos. 246 and 247 of 1974, and the first two questions in T.C. No. 259/74 are answered in the affirmative and against the revenue.

There remains the third question in Tax Case No. 259/74. That question covers the point, namely, whether there should be any tax remaining unpaid by the assessee for imposition of penalty on the date when the order imposing the penalty was passed. Following the judgment of the Calcutta High Court in Commissioner of Income-tax v. Vegetable Products Ltd. : [1971]80ITR14(Cal) , the Tribunal held that the penalty has to be worked out on the basis of the tax remaining unpaid on the date of the order of the officer levying the penalty. However, the conclusion of the Tribunal in this behalf has become erroneous in view of the subsequent amendment of the relevant statutory provisions with retrospective effect. Section 23 of the Direct Taxes (Amendment) Act, 1974 (Central Act 26 of 1974), has provided as follows :

'Clause (i) of sub-section (1) of section 18 of the Wealth-tax Act, as it stood during the period commencing on the 1st day of April, 1965, and ending with the 31st day of March, 1969, shall have and be deemed always to have effect as if the words the tax occurring therein, at both the places, mean the wealth-tax chargeable under the provisions of that Act.' The said provision was made virtually to get over the decision referred to already by the Tribunal. In view of this section, the third question in T.C. No. 259/74 has to be answered in the negative and against the assessee and we accordingly do so. There will be no order as to costs in any of these tax cases.


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