High Court Of Allahabad
Ratan Lal Agrawal vs. Commissioner Of Wealth Tax
Section WT 18(1)(a)
Asst. Years 1975-76, 1976-77, 1977-78, 1978-79, 1979-80, 1980-81, 1981-82, 1982-83
R.K. Agrawal & Rajes Kumar, JJ.
WT Ref. No. 28 of 1992
9th September, 2005
Counsel Appeared :
Shakeel Ahmed, for the Assessee : A.N. Mahajan, for the Revenue
JUDGMENT
Rajes Kumar, J. :
The Tribunal, Allahabad, has referred the following question under s. 27(1) of the WT Act, 1957 (hereinafter referred to as “the Act”), for opinion of this Court, which relates to the asst. yrs. 197576 to 1982-83 relating to the penalty under s. 18(1)(a) of the Act :
“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the ratio of the decision in the case of Ambika Cements Products (1987) SOT 1 was not applicable and that the penalty under s. 18(1)(a) of the Act was exigible ?”
2. The brief facts of the case are as follows : The applicant (hereinafter referred to as “the assessee”) was carrying on money-lending business. The business and residential premises of the assessee were searched on 29th July, 1975, during the emergency by the police and all account books, etc., were seized which were handed over to the Sales-tax Department and later on requisitioned by the IT Department. The applicant was also put under detention and was released in the year 1977. Thereafter, a second search was conducted by the IT Department on 10th Aug., 1983, when some more books, etc., were seized by the IT Department which adversely affected the business and this fact had been taken into account by the ITO while framing the income-tax assessment for the asst. yrs. 1976-77 to 1978-79. Due to these abnormal circumstances, the IT returns were also filed delayed and could be filed on 6th Jan., 1983.
3. The assessee filed WT return for the asst. yrs. 1975-76 to 1982-83 on 9th Nov., 1984. On the basis of the return the assessments were completed by consolidated order on 24th Oct., 1985. The WTO had also initiated the penalty proceedings under s. 18(1)(a) of the Act for late filing of return and subsequently, levied the penalty.
4. The assessee filed appeal before the Dy. CIT(A). The Dy. CIT(A) allowed the appeal in part for the asst. yr. 1975-76 and allowed the appeals for the asst. yrs. 1976-77 to 1982-83 and set aside the penalty. The Dy. CIT(A) held that the assessee was prevented by sufficient cause from filing the WT return up to 6th Jan., 1983, and accordingly, directed the assessing authority to take the default for the asst. yr. 1975-76 only for the period 1st Feb., 1983 to 31st Oct., 1984 for 21 months. Penalty for the asst. yrs. 1976-77 to 1982-83 was deleted following the decision of the Tribunal in the case of Ambika Cements Products (1987) SOT 1 there being overlapping period of delay. Against the order of the Dy. CIT(A) the assessee has not filed any appeal before the Tribunal
However, the Revenue filed an appeal before the Tribunal. The Tribunal allowed the appeal of the Revenue with certain directions. The Tribunal held as follows: “We have gone through these cases and we find that the facts of those cases relied on by learned counsel for the assessee are distinguishable from the facts available in the case before us. In the case before us, the hard fact is that but for the search carried out by the Department, the return of wealth which was admittedly taxable, would not have been filed. It cannot be said that the returns filed by the assessee on 9th Nov., 1984, were voluntary in the true sense of the term. Learned counsel for the assessee relied on the Madras High Court decision in Addl. CWT vs. Babulal K. Shah (1978) 114 ITR 370 (Mad), but in this very case, their Lordships have held that in certain circumstances the delay in finalising one’s IT returns might by itself be a just reason for delay in filing the same person’s WT return, but in this case before us, we are not convinced that there existed any just reason for delay in filing the IT or WT returns. Therefore, the facts of the case before us are distinguishable from the facts in Addl. CWT vs. Babulal K. Shah (supra). We also do not find any substance in the contention that interest reduced by the CIT should be construed to mean that there was reasonable or sufficient cause. At the end, it was argued by the learned Departmental Representative that the existence of sufficient or reasonable cause prevented the assessee from filing the WT returns in any of the eight years under consideration was not established by the assessee. On a perusal of all the case law and on an appraisal of the facts surrounding this case, we find force in the contention raised by the learned Departmental Representative before us. We set aside the orders of the learned Dy. CIT(A) and restore the order of the WTO, with the following variations : ‘Upto 31st March, 1976, penalty should be imposed with reference to the quantum of wealth at 4 per cent of the wealth and for the period after 1st April, 1976, penalty should be imposed with reference to the assessed tax at 2 per cent per month’.”
Heard Sri Shakeel Ahmed, learned counsel for the assessee, and Sri A.N. Mahajan, learned standing counsel appearing on behalf of the Revenue. Learned counsel for the assessee submitted that the question referred is in two parts. One relating to the applicability of the decision of the Tribunal in the case of Ambika Cements Products (supra) and the second part of the question is whether, on the facts and circumstances, penalty under s. 18(1)(a) of the Act is exigible. He submitted that so far as the first part of the question is concerned, he has not much to say in view of the decision of the Gujarat High Court in the case of CIT vs. J.L. Trivedi & Sons (1993) 115 CTR (Guj) 535 : (1994) 210 ITR 112 (Guj), in which it has been held that penalty imposable for the delay in filing the return cannot be equated with an offence. Penalty is in the nature of civil liability and not for the punishment of an offence. Thus, the principle of double jeopardy does not apply and second default is independent. However, he submitted that in the second part of the question referred, it has to be examined whether on the facts and circumstances there was a reasonable cause in filing the return beyond time. He submitted that the first appellate authority has held that the assessee was prevented by sufficient cause from filing the return of wealth upto 6th Jan., 1983, the date on which the return of income was filed and the penalty was held leviable for the period 1st Feb., 1983 to 31st Oct., 1984, for the period of 21 months. He submitted that the Tribunal without considering the finding recorded by the first appellate authority restored the order of penalty for all assessment years. He submitted that the books of account were finally returned as per the direction of this Court in Writ Petn. No. 433 of 1981 on 28th May, 1982, and the Tribunal has deleted the penalty for late filing of return under the IT Act vide order dt. 30th Aug., 1985, for all the assessment years treating the reasons given for filing the return beyond time as reasonable cause. He submitted that the aforesaid reasons for delay in filing the return under the Act is reasonable cause and, therefore, penalty could not be levied for the period upto 6th Jan., 1983. Learned standing counsel submitted that the Tribunal has recorded the finding that there existed no just reason for the delay in filing the income or wealth return and it is a finding of fact. He further submitted that the question which has been referred only relates to the applicability of the decision of the Tribunal in the case of Ambika Cements (supra) in which the penalty for the subsequent assessment years on account of overlapping period has been held to be illegal and in the question referred, the issue relating to reasonable cause cannot be considered.
We have given our anxious consideration to the submissions made by learned counsel for the parties. We find force in the submission of learned counsel for the assessee. A common question stated above has been referred for the asst. yrs. 1975-76 to 1982-83. In case the question referred relates to the applicability of the decision of the Tribunal in the case of Ambika Cements (supra) only the said question would not have been referred by the Tribunal for the asst. yr. 197576 because the issue relating to the overlapping of the period and the decision of the Tribunal in the case of Ambika Cements (supra) was only relevant for the asst. yr. 1976-77 onwards and not for the asst. yr. 1975-76. A perusal of the question referred shows that it is in two parts : (1) Whether, on the facts and circumstances of the case, the Tribunal was justified in law in holding that the ratio of the decision in the case of Ambika Cements (supra) was not applicable; and (2) Whether, on the facts and circumstances of the case, the Tribunal was justified in law in holding that the penalty under s. 18(1)(a) of the Act was exigible. So far as the first part is concerned, learned counsel for the assessee has very fairly submitted that the principle of double jeopardy does not apply to the penalty under s. 18(1)(a) of the Act. The liability under s. 18(1)(a) of the Act is a civil liability and not punishment for an offence. It cannot be equated with an offence nor can proceedings contemplated under the section be regarded as prosecution for an offence and, therefore, Art. 20 of the Constitution of India, is not applicable. Moreover, when a default which is a continuing default, is committed and again a similar default is committed, the subsequent default cannot be said to be the same default it being an independent default committed subsequently. Each year is an independent year and each order is an independent order. Thus, the ratio laid down by the Tribunal in the case of Ambika Cements (supra) does not lay down the correct law. The above view is also supported by the decision of the Gujarat High Court in the case of CIT vs. J.L. Trivedi & Sons (supra) and of the apex Court in the case of Gujarat Travancore Agency vs. CIT (1989) 77 CTR (SC) 174 : (1989) 177 ITR 455 (SC). The apex Court held that penalty under s. 271(1)(a) of the Act is a civil obligation. It held as follows : “In our opinion, there is nothing in s. 271(1) (a) which requires that mens rea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum, Vol. 85, p. 580, para 1023 : ‘A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws’.”
9. Now coming to the second part of the question, we are of the opinion that the view taken by the Tribunal cannot be sustained. A perusal of the order of the Tribunal shows that it has not examined the facts of the case in their entirety while coming to the conclusion that the late filing of the return under the IT Act cannot be a reasonable cause. In the present case, the business and residential premises of the assessee were searched on 29th July, 1975, when all the books of account were seized, which were handed over to the Sales-tax Department and later on requisitioned by the IT Department. The assessee was also put under detention and was released in the year 1977. Thereafter, a second search was conducted by the IT Department on 10th Aug., 1983, when some more books, etc., were seized. Thus, from 1975 onwards the account books were in the possession of the IT Department and this has adversely affected the business and due to these abnormal circumstances, the IT returns were also delayed and could be filed on 6th Jan., 1983. Unless the P&L a/c and balance sheet are prepared and the IT returns are finalised, the proper wealth cannot be worked out. Thus, we are of the opinion that the view of the first appellate authority that the assessee was prevented by reasonable cause from filing the return of wealth till the date of filing of the return of income-tax, i.e., 6th Jan., 1983, is justified. In the case of Addl. CWT vs. Babulal K. Shah (1978) 114 ITR 370 (Mad), the Division Bench of the Madras High Court has held the delay in furnishing of return of income as reasonable cause for furnishing the return for the wealth-tax.
10. In the case of CWT vs. S.L. Khunnah (1989) 79 CTR (All) 229 : (1989) 180 ITR 340 (All), the case of the assessee was that on account of death of the seniormost partner of the firm, serious disputes arose among the members of the family of the deceased partner which were referred to arbitration and the assessee was able to predicate his wealth only after the award of the arbitrator. This reason for the delay has been held to be reasonable cause by the first appellate authority and by the Tribunal. This Court upheld the order of the Tribunal. This Court further held as follows : “A thing is generally considered as reasonable if it is not actuated by bad faith, dishonesty or false grounds. If the conduct of an assessee could be that of a reasonable man, the AAC could not be held to have erred in believing the same and cancelling the penalty. No hard and fast rule can be laid down for governing or deciding as to when a certain ground would be considered as reasonable and when it would not be so held. There is no rigid method capable of being prescribed in this regard. Each case has to be decided on its own merits and facts by the authority. If the decision is based on relevant grounds by the authority which has power to condone the default, the appellate Court cannot interfere with the same. The power of the appellate Court to interfere arises when the exercise of discretion is arbitrary, perverse or capricious. In a matter of condonation, what an authority has to keep in mind is that it should not be based on unjustified sentiments and too vague and unregulated benevolence. The authority has to exercise the discretion informed by traditions, methodical by analogy and disciplined by system. Those who exercise discretion will remember that : ‘An appeal to a Judge’s discretion is an appeal to his judicial discretion. The discretion must be exercised not in opposition to, but in accordance with, established principles of law.’ Consequently, our view is that discretion must be exercised not in opposition to, but in accordance with, the established principles of law.” It may be mentioned here that since the assessee has not filed any appeal against the order of the Dy. CIT(A), therefore, reasonable cause before (sic-after) the period of 6th Jan., 1983, cannot be considered. In view of the foregoing discussions, we answer the question referred hereinabove partly in favour of the assessee and partly in favour of the Revenue. The Tribunal is directed to compute the penalty in the light of the view taken by us. There shall be no order as to costs.
[Citation : 280 ITR 573]
