High Court Of Punjab & Harayana
Amar Nath vs. Commissioner Of Wealth Tax & Anr.
Sections WT 18(1)(a), WT 18(2A), WT 18B
Asst. Year 1967-68, 1968-69, 1969-70, 1970-71, 1971-72, 1972-73, 1973-74, 1974-75
G.S. Singhvi, J.
Civil Writ Petn. No. 2135 of 1982
10th December, 2002
Counsel Appeared
Sanjay Bansal, for the Applicant : Dr. N.L. Sharda, for the Respondents
JUDGMENT
G.S. SINGHVI, J. :
This is a petition for quashing order dt. 15th March, 1982 (Annexure P6), passed by CWT, Jullundur (respondent No. 1) declining the petitioner’s prayer for waiver of penalty in terms of s. 18B of the WT Act, 1957 (for short,‘the Act’), and to restrain the ITO, Special Circle-I, Jullundur (respondent No. 2), from taking recovery proceedings in pursuance of notice dt. 1st March, 1982 (Annexure P7)
2. The petitioner is a wealth-tax assessee. He filed returns for the asst. yrs. 1967-68 to 1974-75 under s. 14(2) of the Act after due dates. The WTO made assessment and created demands varying from Rs. 520 to Rs. 33,739 for different years. He also levied penalty under s. 18(1)(a) of the Act. The details of the returns filed by the petitioner and the assessment made by the WTO for different years are as under: Asst. Due Date of Delay Wealth Wealth Tax Penalty yr. date of filing the in returned assessed demand under filing return months s. 18 the (1)(a) return 6768 30-6-67 28-2-75 91 1,58,918 2,03,900 520 297 68-69 30-6-68 28-2-75 79 90,118 2,44,382 720 360 69-70 30-6-69 28-2-75 67 48,929 1,30,600 153 16,917 70-71 29-2-72 28-2-75 36 59,121 3,58,853 4,682 46,593 71-72 29-2-72 28-2-75 36 67,045 4,74,302 3,743 67,374 During the pendency of the penalty proceedings, the petitioner filed application dt. 10th April, 1981, under s. 18(2A) (now 18B of the Act) for waiver of penalty by asserting that he had filed returns voluntarily in good faith and made full and true disclosure of the assets. Respondent No. 1 rejected the said application vide order Annexure P6 and held that failure of the WTO to initiate proceedings under s. 18(1)(c) of the Act cannot lead to the presumption that the assessee had made full and true disclosure of his net wealth within the meaning of s. 18(1)(a) of the Act. The reasons recorded by respondent No. 1 for rejecting the application of the petitioner read as under : “In the facts and circumstances of the instant case, as discussed hereinbefore, there is no doubt whatever that the assessee failed to make, in good faith full and true disclosure of his net wealth for various years involved. The particulars and nature of Ranjit Nagar property was not disclosed in the returns for the asst. yrs. 1967-68 to 1969-70, In the computation of statement of wealth enclosed with the respective returns, it is merely stated “Agrl. land (not an asset) Nil”. It is not as if the particulars and nature of the land had been disclosed then exemption was. claimed on the plea of the land being agricultural land. In any case the exclusion of Ranjit Nagar property was not bona fide, as the assessee knew that land was neither agricultural nor used for agricultural purposes. In other years involved also, as discussed hereinbefore, agricultural land and other property held by the assessee in the names of his sons and wife, has not been included in the net wealth disclosed in the return(s). I may add that the various judicial pronouncements relied upon by Shri Vijh do not help the assessee. In the case of Hasan Ahmed Khan, decided by Allahabad High Court and reported in 99 ITR the CWT had rejected the application under s. 18(2A) (now 18B) on the ground that, as the value of the assets shown by the assessee was much less than their assessed value. the case did not fall under s. 18(2A). In the instant case, as mentioned earlier. some of the assets belongs to the assessee had not been included in the net wealth and the dispute does not relate to the valuation only.” Respondent No. 1 also rejected the petitioner’s plea that on account of failure of the WTO to initiate penalty proceedings under s. 18(1)(c), he is entitled to waiver of penalty and observed as under : “It is no doubt true that the WTO has failed to initiate penalty proceedings under s. 18(1)(c) of the WT Act but because of that lapse, it cannot legitimately be held that the assessee had made full and true disclosure of his net wealth within the meaning of s. 18(1)(a) of the WT Act. The failure to initiate penalty proceedings under s. 18(1)(c) cannot alter the fact that in the instant case the assessee failed to make full and true disclosure of his net wealth for the various years involved. Since one of the essential preconditions set forth in s. 18B(1)(a) has not been satisfied, I hold that the assessee is not entitled to the benefit of waiver/reduction of penalty imposed/imposable under s. 18(1)(a) of the WT Act for any of the asst. yrs. 1967-68 to 1974-75.” Immediately thereafter, respondent No. 2 issued notice Annexure P7 to the petitioner to show, cause why action may not be taken to recover the outstanding demand by one of the modes prescribed in the Second Schedule to the IT Act, 1961 (for short, ‘the 1961 Act’).
The petitioner has challenged order Annexure P6 mainly on the ground that respondent No. 1 has erred in rejecting his application for waiver ignoring the fact that WTO had not initiated proceedings under s. 18(1)(c) of the Act. In the written statement filed on behalf of respondent No. 1, it has been admitted that the petitioner had filed returns voluntarily without any notice from the Department. At the same time, it has been averred that he had done so after receipt of complaints by the Department and initiation of enquiries to know his tax liability. It has been further averred that the findings recorded by the WTO that the petitioner had not given full and complete particulars of his properties situated in Ranjit Nagar were upheld by the Tribunal and, therefore, he is not entitled to claim waiver under s. 18B of the Act.
5. Shri Sanjay Bansal assailed order Annexure P6 by arguing that respondent No. 1 committed a serious illegality by declining the petitioner’s prayer for waiver of penalty notwithstanding the fact that WTO had not taken action under s. 18(1)(c) of the Act. He referred to the Explanation appearing below s. 18B(1) of the Act and argued that the petitioner is entitled to the benefit of deeming provision contained therein because the WTO had not initiated penalty proceedings under s. 18(1)(c). Shri Bansal then argued that the proceedings initiated by respondent No. 2 in furtherance of order Annexure P6 may also be declared illegal and quashed. In support of his arguments, Shri Bansal relied on the following decisions : (1) Seetha Mahalakshmi Rice and Groundnut Oil Mill Contractors Co. vs. CIT (1980) 14 CTR (AP) 330 : (1981) 127 ITR 579 (AP); (2) Smt. Parkash Devi vs. CWT (1982) 27 CTR (P&H) 1 : (1983) 141 ITR 122 (P&H); (3) Laxman vs. CIT (1989) 75 CTR (Bom) 76 : (1988) 174 ITR 465 (Bom); (4) Tarlok Nath Avinash Chander (HUF) vs. CIT & Anr. (1993) 110 CTR (P&H) 34 : (1993) 203 ITR 266 (P&H); (5) Jagjiwan Kumar vs. CIT & Ors. (1997) 139 CTR (P&H) 299 : (1997) 228 ITR 229 (P&H); and (6) Sureshchandra Babulal Mittal vs. Asstt. CIT (Inv.) & Ors. (2001) 169 CTR (MP) 29 : (2001) 249 ITR 603 (MP). Dr. N.L. Sharda, counsel for the Revenue, supported the impugned order and argued that the petitioner cannot take benefit of the Explanation appearing below s. 18B(1) of the Act because the returns filed by him were not voluntary. He pointed out that the petitioner had filed returns only after receipt of complaints by the Department and initiation of enquiries about his true wealth. Dr. Sharda further argued that the statementfurnished by the petitioner along with the returns did not represent the true and full disclosure of his wealth and, therefore, respondent No. 1 did not commit any error by refusing to invoke the deeming clause in his favour. I have given serious thought to the respective arguments. For the purpose of deciding the issues raised in the petition, it will be useful to notice s. 18B(1) of the Act which reads as under : “18B (1) Notwithstanding anything contained in this Act, the CWT may, in his discretion, whether on his own motion or otherwise, (i) xxxx (ii) reduce or waive the amount of penalty imposed or imposable on a person under cl. (iii) of subs. (1) of s. 18, if he is satisfied that such person : (a) xxxx (b) in the case referred to in cl. (ii), has, prior to the detection by the AO, of the concealment of particulars of assets or of the inaccuracy of particulars furnished in respect of any asset or debt in respect of which the penalty is imposable, voluntarily and in good faith made full and true disclosure of such particulars, and also has co-operated in any inquiry relating to the assessment of his net and wealth and has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year. Explanation : For the purposes of this sub-section, a person shall be deemed to have made full and true disclosure of the particulars of his assets or debts in any case where the excess of net wealth assessed over the net wealth returned is of such a nature as not to attract the provisions of cl. (c) of sub-s. (1) of s.18.”
8. In Smt. Parkash Devi vs. CWT (supra), a Division Bench of this Court interpreted s. 18B of the Act and observed as under : “It is plain therefrom that in the instant case we are concerned with sub-cl. (i) pertaining to the discretion of the CWT and sub-cl. (a) pertaining to the CWT’s satisfaction, as warranted by the facts of the present case. The CWT has, in so many words, in the impugned order stated that he was satisfied that the conditions set forth in s. 18B are satisfied in this case. To enumerate them, these are : (1) that the returns were filed by the petitioner prior to the issuance of a notice to her under sub-s. (2) of s. 14 of the Act; (2) that these were filed voluntarily and in good faith; (3) that the petitioner had made full and true disclosure of her net wealth; (4) that she had co-operated in the inquiry relating to the assessment of her net wealth; and (5) that she had paid or made satisfactory arrangements for the payment of the tax or interest payable in consequence of an order passed under the Act in respect of the relevant assessment years. There is no gainsaying the fact that the aforesaid five conditions culled out from the reading of s. 18B of the Act are foundational to the exercise of discretion under sub-cl. (i) of sub-s. (1) of s. 18. That in the manner of arriving at that milestone of satisfaction in relation to these five particulars, the CWT has to remain uninfluenced by extraneous factors is a matter well settled.”
9. In Jagjiwan Kumar vs. CIT & Ors. (supra), a learned Single Judge referred to the judgment of the Division Bench in Smt. Parkash Devi’s case (supra) and held that once five conditions enshrined in s. 18B(1) of the Act are satisfied, there could be no justification to refuse the prayer for waiver of penalty. The relevant portion of the judgment of the Single Judge is reproduced below : “In the case of the petitioners, no notice had been issued for any of the years and the returns were filed by the petitioners prior to the issuance of the notice, voluntarily and in good faith. There is also no dispute to the net wealth disclosed by the petitioners. No proceedings for concealment of wealth were initiated in any year under s. 18(1)(c) of the Act. There is also no challenge to the petitioners’ pleas that they had co-operated in the enquiry relating to the assessment and had paid the tax as assessed. In these circumstances, the decision of the Division Bench of this Court in Smt. Parkash Devi vs. CWT (1982) 27 CTR (P&H) 1 : (1983) 141 ITR 122 (P&H) is found to be applicable. If the five conditions, which are fundamental to the recording of satisfaction by the CWT are found to have been fulfilled, then the satisfaction of the CWT is to be recorded and has, in fact been recorded in the present cases. Therefore, there are found to be no sufficient and valid reasons to impose penalty in any of the years. The mere fact that the returns are filed late would not invite the levy of penalty. The provisions contained in s. 18B of the Act do make an assessee entitled to claim waiver once the assessee is able to show that he fulfilled all the conditions and the Commissioner has recorded his satisfaction in his order dt. 9th Feb., 1983, passed under s. 18B of the Act, there is no reason to refuse the benefit of waiver of penalty to the petitioners.”
10. Sec. 273A of the 1961 Act which is pari materia to s. 18B of the Act was interpreted by a Division Bench of Andhra Pradesh High Court in Seetha Mahalakshmi Rice and Groundnut Oil Mill Contractors Co. vs. CIT (supra) and it was held as under : “The CIT has a statutory duty and obligation to examine the facts and circumstances of each case and exercise his discretion fairly and objectively and arrive at a correct conclusion. This objective examination and satisfaction are necessary because it is a statutory discretion. A careful reading of the requirements or ingredients of this provision shows that Parliament enacted this provision to show some equitable consideration to honest assessees who have not only co-operated in any enquiry relating to the assessment of his income, but also either paid or made satisfactory arrangements for payment of any tax or interest payable by them in respect of the relevant assessment year. He must have, voluntarily and in good faith, made full and true disclosure of his income. The expressions ‘good faith’ and ‘full and true disclosure of his income’ used in s. 273A(1) (a) reveal that the assessee, in the circumstances, must have felt that he has filed the return voluntarily and in good faith and, according to him, has made a full and true disclosure of his income. The mere fact that what has been disclosed by him in the return is not accepted by the ITO subsequently, in the order of assessment, would not in anyway disentitle him straightaway for the relief enshrined in s. 273A(1). What is determined by the ITO in the assessment order cannot be taken to be the yardstick to measure ‘good faith’ and ‘full and true disclosure of his income’ in every case. We may now turn to the Explanation which requires that in any case where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of cl. (c) of sub-s. (1) of s. 271, it must be deemed that the assessee has made full and true disclosure of his income or of the particulars relating thereto. The Explanation supports our view that s. 273A(1) which provides for the exercise of discretion by the CIT can be availed of by the assessees who are not liable to be proceeded against for levy of penalty under s. 271(1)(c), which would come into play only when the officer in the course of any proceedings under the Act is satisfied that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. The concealment of income and furnishing of any inaccurate particulars of such income would take the case of any party out of the purview of s. 273A(1)(a). In the present case, admittedly, there are no proceedings taken under s. 271(1)(c). Consequently, it must be taken for granted that the assessee has not committed an offence so as to be proceeded against for levy of penalty under s. 271(1)(c) for concealing the particulars of its income or for furnishing inaccurate particulars of such income for the assessment year in question. In this view and in view of the Explanation to s. 273A(1), the assessee shall be deemed to have made full and true disclosure of his income.”
11. In Tarloki Nath Avinash Chander (HUF) vs. CIT & Anr. (supra), a learned Single Judge of this Court considered the case involving prayer for waiver of interest and penalty under s. 273A of the 1961 Act and held as under : “Under s. 273A all that the CIT had to see was whether the returns submitted by the petitioner without notice could be treated as voluntary and whether such disclosure made was in good faith. Both these aspects had escaped the notice of the CIT. The CIT had taken into consideration irrelevant matters like the petitioner being a habitual defaulter. The mere fact that the petitioner was an assessee to income-tax and advance tax had been paid by him or that the ITO knew that the petitioner had earned taxable income would not be sufficient to hold that the returns filed and the disclosure made by him were not voluntary. If the Department’s interpretation was accepted, an existing assessee could not avail of the concession provided under s. 273A. Therefore, the order of the CIT was liable to be set aside.”
12. In Laxman vs. CIT (supra), a Division Bench of Bombay High Court held that CIT had committed a serious illegality by refusing to waive the penalty on the ground that the return had been filed after Inspector of Incometax had made enquiries regarding assessee’s funds.
13. In Sureshchandra Babulal Mittal vs. Asstt. CIT (Inv.) & Ors. (supra), a learned Single Judge of Madhya Pradesh High Court held that the benefit of deeming fiction cannot be denied to the assessee unless the CIT is satisfied that the conditions precedent for invoking the deeming fiction had not been satisfied. Some of the observations made in that judgment, which have bearing on the case in hand are extracted below : “Sec. 273A of the IT Act, 1961, empowers the CIT to reduce or waive the amount of penalty imposed or imposable provided he is satisfied that the assessee had, prior to detection by the AO of any concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith made full and true disclosure of such particulars. The section further provides that the assessee should have further co-operated in any inquiry relating to the assessment of his income and should have either paid or made satisfactoryarrangements for the payment of tax or interest which had become payable in consequence of an order passed under the Act in respect of the relevant assessment year. The Explanation appended to the section defines the meaning of the words “full and true disclosure of income”. By a deeming fiction, if it is found that the excess of income assessed over the income returned is of such a nature as not to attract the provisions of cl. (c) of s. 271(1) then it is deemed that the assessee had made a full and true disclosure of his income or particulars relating thereto. By this deeming fiction, the legislature has given certain benefits to the assessee which if proved would result in reduction or waiver of penalty.”
14. In the light of the propositions laid down in the aforementioned cases, it is to be seen whether the reasons assigned by respondent No. 1 for rejecting the application of the petitioners are Legally correct. A perusal of the portions of the order passed by respondent No. 1 which have been extracted hereinabove shows that he denied the benefit of the fiction contained in Explanation appearing below s. 18B(1) by presuming that even though the penalty proceedings had not been initiated by the WTO under s. 18(1)(c), the petitioner was required to prove that the returns filed by him contained full and true disclosure of his net wealth. This is clearly against the plain language of the Explanation which provides that the assessee shall be deemed to have made full and truedisclosure of the particulars of his assets where the excess of the net wealth assessed does not attract s. 18(1)(c). It is not in dispute that the WTO did not initiate proceedings against the petitioner under s. 18(1)(c). Therefore, respondent
No. 1 was bound to decide the application of the petitioner by presuming that the petitioner had made full and true disclosure of the particulars of his assets and his failure to do so has the effect of rendering order Annexure P6 illegal.
15. It is also not the case of the respondents that the petitioner had filed returns after issuance of notice under s. 14(2) of the Act or that the same had not been filed voluntarily and in good faith or that he had not co-operated in the assessment proceedings or that he had not paid or made satisfactory arrangement for payment of tax and/or interest in pursuance of the assessment order. Therefore, it must be held that there was no legal justification to reject the application of the petitioner.
16. For the reasons mentioned above, the writ petition is allowed. Order Annexure P6 is quashed with the direction to respondent No. 1 to decide the petitioner’s application for waiver afresh keeping in view the proposition laid down in Smt. Parkash Devi’s case (supra) and Jagjiwan Kumar’s case (supra) and the observations made in this order.
[Citation : 261 ITR 247]
