High Court Of Madras
V.G. Paneerdas & Co. (P) Ltd. vs. Commissioner Of Wealth Tax
Sections WT 18(1)(a), WT 18(1)(c)
Asst. Years 1984-85, 1985-86, 1986-87, 1987-88
P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.
Tax Case (Ref.) Nos. 371 to 378 of 2001
6th February, 2006
Counsel Appeared
J. Balachandran for S. Sridhar, for the Appellant : Mrs. Pushya Sitaraman, for the Respondent
JUDGMENT
P.P.S. Janarthana Raja, J. :
The Tribunal referred the following questions of law for the opinion of this Court at the instance of the assessee :
Whether, on the facts and in the circumstances of the case, the Tribunal is justified in sustaining the action of the first appellate authority in approving the levy of penalty under s. 18(1)(a) of the Act ?
Whether, on the facts and in the circumstances of the case, the Tribunal is justified in sustaining the action of the first appellate authority in approving the levy of penalty under s. 18(1)(c) of the Act ?
Whether, on the facts and in the circumstances of the case, the Tribunal is justified in confirming the action of the lower authorities in invoking Expln. 4 to s. 18(1)(c) of the Act ?
2. The facts relating to the above questions of law are as under :
(i) The assessee is a company in which the public are not substantially interested. It was in possession of assets specified in s. 40(3) of the Finance Act, 1983, thereby rendering it liable to wealth-tax. A notice under s. 17 was issued on 17th April, 1981. Since there was no compliance with the above notice, a notice under s. 16(4) was issued on 31st Aug., 1990. The assessee filed a nil return of wealth on 11th Sept., 1990. After due consideration of the assessee’s submissions, assessments were completed on 28th Nov., 1991, bringing to tax, the value of 15.81 acres of vacant land held by the assessee at Injambakkam. On appeal, the CIT(A) by order dt. 27th Nov., 1997, upheld the assessment of the land for wealth- tax purposes. Penalty proceedings under s. 18 (1)(a) as well as s. 18(1)(c) were initiated simultaneously.
(ii) The assessee submitted that the penalty proceedings should be kept pending till the disposal of the appeal by the CWT(A). The assessee was given opportunity to explain the default in filing the WT returns. The assessee, in its reply dated “nil” which was received by the AO, on 19th Jan., 1993, submitted that in view of the construction of a building and the intended business use of the land, he was under the bona fide impression that the value of such lands would be exempt from the levy of wealth-tax. The assessee submitted, that “but when we came to know that our wealth was taxable, we immediately filed the returns” and further it was stated that it was under the bona fide, though erroneous impression which caused the delay and which may therefore be held to be a reasonable cause for the default.
(iii) The AO rejected the explanation and levied the penalty under s. 18(1)(a) of the Act. Aggrieved by this order, the assessee filed an appeal to the CWT(A). The CWT(A) confirmed the order of the AO, levied penalty and dismissed the appeal filed by the assessee. Aggrieved by the same, the assessee filed an appeal to the Tribunal and the Tribunal held that there was no reasonable cause for the delay in filing the returns and refused to interfere. In respect of levy of penalty under s. 18 (1)(c) of the Act, the plea of the assessee was that, the assessee had a bona fide impression that the value of the property was exempt from levy of wealth-tax. The said plea was not accepted by the AO. The CIT(A), held that in terms of Expln. 4 to s. 18(1)(c), the assessee was deemed to have furnished inaccurate particulars. On appeal, the Tribunal rejected the contention of the assessee and confirmed the levy of penalty under s. 18(1)(c) of the Act.
The learned counsel appearing for the assessee submitted that in view of the construction of a building and the intended business use of the land, the assessee was under the bona fide impression that the value of such land would be exempt from the levy of wealth-tax. It is further submitted that since the assessee came to know that wealth-tax was leviable, returns were filed on the same day for all the assessment years. More so, it was further submitted that the assessee was under the bona fide, though erroneous impression which caused the delay in filing the returns and also further submitted that the appellant was under erroneous impression about non-assessability of the land. Hence, levy of penalty under ss. 18(1)(a) and 18(1)(c) is not attracted. Learned counsel appearing for the Revenue submitted that all the authorities below had given a finding that there is no reasonable cause for not filing the returns in time and also the assessee had consciously concealed the wealth. We have heard the arguments of both the counsel. The appellant-assessee did not file the returns of net wealth for the assessment years under consideration. The AO issued notice under s. 17 of the WT Act and as there was no compliance, the AO proceeded to issue notices under s. 16 (4) of the WT Act. Thereafter, the assessee filed “nil” returns of wealth. Assessments were completed bringing to tax the value of property held by the assessee at Injambakkam. The assessee-company claimed that it was under a bona fide impression that the value of the land is exempt from levy of wealth-tax and it was submitted that as soon as the assessee came to know it was leviable, returns were filed. Even after receiving the notice under s. 17 for the assessment year under consideration, the appellant did not bother to file the returns or even for applying for extension of time. So, in view of the above conclusion, we are of the view that the assessee had no reasonable cause for the delay in filing the returns for these assessment years. Hence the penalty levied under s. 18(1)(a), in the facts and circumstances of the case, is rightly levied and justified.
5. As regards the levy of penalty under s. 18(1)(c), the plea of the assessee was that the assessee was under the bona fide impression that the value of the property was exempt from levy of wealth-tax. The only explanation of the assessee was that he was under the bona fide impression that the assets were not taxable for these years. What has to be decided therefore is the bona fide of this erroneous impression. Going beyond well known principle that the ignorance of law is no excuse, it has to be pointed out that the assessee could not point out any material fact showing that it was prevented from getting to know the relevant provisions of Finance Act, 1983. There is nothing to show that the assessee had been prevented in any way from either estimating the value of the land or in the preparation of return of wealth. It is also important to note that the provisions of Finance Act, 1983, bringing closely-held companies, into the ambit of the WT Act was a well published and a much discussed affair. Further it is also noted that the assessee was assisted in tax matters by well qualified professionals. In view of the clear and unambiguous nature of the provisions of s. 40 (3) of the Finance Act of 1983, it can be said that a patently wrong reading of the section cannot be camouflaged in terms of a bona fide mistake. It is therefore clear that the assessee had a taxable asset. In terms of Expln. 4 to s. 18(1) the assessee was deemed to have furnished inaccurate particulars. Furthermore, the assessee was not able to substantiate its contention that its belief in the nonassessability of non-agricultural land was a bona fide mistake. The findings recorded by the Tribunal are therefore based on the material and evidence on record and do not suffer from any legal infirmity.
6. In view of the foregoing conclusions, we answer the questions referred to above in favour of the Revenue, against the assessee. Accordingly, the above tax cases are dismissed. No costs.
[Citation : 284 ITR 444]
