Bombay H.C : The wealth-tax returns of the assessee for the assessment years 1965-66 and 1966-67 were due on 30th June, 1965, and 30th june, 1966, respectively.

Counsel Appeared

G. S. Jetly with s. V. Naik, for the revenue : v. Rajgopal with p. R. Asher, for the assessee

Bharucha, J.:

The wealth-tax returns of the assessee for the assessment years 1965-66 and 1966-67 were due on 30th June, 1965, and 30th june, 1966, respectively. The assessee filed the returns for both the assessment years only on 31st july, 1970. The assessee was called upon to show cause why penalty should not be imposed upon him for the delay. The assessee’s explanation was rejected by the wto and he imposed upon the assessee a penalty in the sum of rs. 1,620 For the asst. Yr. 1965-66 And in the sum of rs. 1,649 For the asst. Yr. 1966-67. In so doing, the wto applied, for the period of default up to 31st march, 1969, the provisions of s. 18(1)(A) of the wt. Act, 1957, as they stood before the amendment thereof, effective on and from 1st april, 1969, made by s. 24(2) (C) of the finance act, 1969, and, for the period of default subsequent to 1st april, 1969, the amended provision. On appeal, the aac rejected the assessee’s contentions. The tribunal, however, in further appeal, found no words in s. 24(2)(C) of the finance act, 1969, or in the amended s. 18(1)(A) to indicate that this amendment had retrospective operation. The tribunal held that the amended provision did not apply to defaults which had taken place before 1st april, 1969. It held that the penalty for the entire period of the delay had to be computed under the provisions operative on the day on which the defaults occurred. The defaults had, it said, occurred once and for all on the last day prescribed for filing the returns. Accordingly, the tribunal allowed the assessee’s appeal.

The question that is posed to us arises out of the tribunal’s order. It reads thus : ” whether penalty under s. 18(1)(A) of the wt act, 1957, was imposable in the case, as per the said provision as it existed on 1st april, 1965, and 1st april, 1966, or whether it was imposable under the provision as it existed on 31st july, 1970, or whether it was imposable for the period of delay prior to 1st april, 1969, under the unamended s. 18(1)(A) and for the period of delay subsequent to 1st april, 1969, under the amended s. 18(1)(A) ?” Prior to 1969, the penalty leviable was, in addition to the amount of wealth-tax payable by the assessee, a sum equal to 2 per cent of the tax for every month during which the default continued but not more than 50 per cent of the tax. After the amendment of s. 18(1)(A) in 1969, the penalty leviable became, in addition to the amount of wealth-tax payable by the assessee, a sum, for every month during which the default continued, equal to one-half per cent of- ” (a) the net wealth assessed under s. 16 As reduced by the amount of net wealth on which, in accordance with the rates of wealth-tax specified in paragraph a of part i of the schedule or part ii of the schedule, the wealth-tax chargeable is nil, or (b) the net wealth assessed under s. 17, Where assessment has been made under that section, as reduced by— (1) the net wealth, if any, assessed previously under s. 16 Or s. 17, Or (2) the amount of net wealth on which, in accordance with the rates of wealth-tax specified in paragraph a of part i of the schedule or part ii of the schedule, the wealth-tax chargeable is nil, whichever is greater, but not exceeding, in the aggregate, an amount equal to the net wealth assessed under s. 16, Or, as the case may be, the net wealth assessed under s. 17, As reduced in either case in the manner aforesaid.”

Mr. Jetly, learned counsel for the revenue, invited our attention to the judgment of the supreme court in maya rani punj vs. Cit (1986) 157 itr 330. This was a case of penalty under the it act, 1961. The assessee’s return of income for the asst. Yr. 1961-62 Had to be filed by 28th sept., 1961. It was filed only on 3rd may, 1962, after the it act, 1961, had come, into force. The ito initiated proceedings under s. 271(1)(A) of the 1961 act and, ultimately, imposed a penalty of rs. 4,060. The tribunal held that the penalty ought to have been quantified under the provisions of s. 28 Of the indian it act, 1922, and reduced the penalty to rs. 400. The supreme court held that though default had occurred in september, 1961, the date relevant for the purpose of initiating proceedings for imposition of penalty was the date upon which the ito decided to impose it and that the proper provision to apply was s. 271(1)(A) of the 1961 act. The supreme court considered the earlier judgment in cwt vs. Suresh seth (1981) 129 itr 328, and held that the conclusion reached therein was contrary to law. It noted that the case of jain bros. Vs. Union of india (1970) 77 itr 107 (sc) had not been referred to in suresh seth’s case (1981) 129 itr 328 (sc). As had been pointed out in jain bros.’ Case (supra), the question of imposition of penalty would arise only after the assessment of tax was made and, therefore, in suresh seth’s case (supra), on the analogy of the ratio accepted in jain bros.’ Case (supra), the amended provisions for the imposition of penalty would have become applicable. The imposition of penalty not confined to the first default but with reference to the continued default was on the footing that noncompliance with the obligation of making a return was an infraction as long as the default continued. The position that penalty was imposable not only for the first default but as long as the default continued and such penalty was to be calculated at a prescribed rate on monthly basis was indicative of the legislative intention in unmistakable terms and, as long as the assessee did not comply with the requirements of law, he continued to be guilty of the infraction and exposed himself to the penalty provided by law.

Having regard to the judgment of the supreme court in maya rani punj’s case (supra), the tribunal appears to have been, in the instant case, in error.

Mr. Rajgopal, learned counsel for the assessee, however, pointed out that the case of maya rani putsj (1986) 157 itr 330 (sc) was under the it act, 1961, while the case of suresh seth (1981) 129 itr 328 (sc) was under the wt act, 1957. It was his submission that the case of suresh seth (supra) had not been properly dealt with in the case of maya rani puny (supra). The case of jain bros. (Supra), he said, was rightly not cited in the case of suresh seth (supra), because the latter was under the wt act. Without reference to jain bros.’ Case (supra), he averred that the case of suresh seth (supra) is rightly decided.

As far as we are concerned, the law laid down by the supreme court in the case of maya rani punj (supra) is binding and it holds that the case of suresh seth (supra) was contrary to law. Following the case of maya rani punj (supra), the ratio of which applies to s. 18(1)(A) of the wt act, 1957, we must hold that penalty was imposable upon the assessee under the unamended s. 18(1)(A) for the period of delay prior to 1st april, 1969, and under the amended s. 18(1)(A) for the period of delay subsequent thereto. The question is answered accordingly.

No order as to costs.

[Citation : 170 ITR 569]