2004 (9) TMI 61 - HC - Wealth-tax

Penalty - Whether Tribunal was legally justified in cancelling the various penalties levied by the Wealth-tax Officer? - Respondent had filed the return of net wealth along with the declaration on which the assessment orders have been passed by the Wealth-tax Officer. Since she had not paid the tax she was not entitled to any immunity from the penalty. Thus the provisions of section 18(1)(a) of the Act were attracted as the return of net wealth had been filed beyond time. In this view of the matter we are of the opinion that the Tribunal was not justified in holding that the penalty for late filing of the return under section 18(1)(a) was not attracted. - held that the law does not provide that if the assessee made a voluntary disclosure of its concealed income it has to be absolved from penalty. - We answer the question of law referred to us in the negative i.e. in favour of the Revenue

Summary

Issues:
1. Legality of canceling penalties by the Income-tax Appellate Tribunal under the Wealth-tax Act.

Analysis:
The judgment pertains to a reference made by the Income-tax Appellate Tribunal, Allahabad, regarding the legality of canceling penalties levied by the Wealth-tax Officer. The respondent-assessee had voluntarily disclosed net wealth under the Voluntary Disclosure of Income and Wealth Ordinance, 1975, for assessment years 1967-68 to 1975-76. The Wealth-tax Officer, upon assessment, imposed penalties under section 18(1)(a) of the Act for late filing of the return and non-payment of taxes. The assessee contended that penalties should be dropped due to financial constraints. The Tribunal ruled in favor of the assessee, stating that penalties could not be imposed based on voluntarily disclosed wealth and that immunity from penalties should be determined separately from tax liability.

The key legal provision under consideration was section 15 of the Disclosure Act, which outlined the voluntary disclosure of wealth and conditions for immunity from penalties. The section specified that immunity is not available if taxes on the declared wealth are unpaid. The Wealth-tax Officer is mandated to consider declarations for assessment or reassessment purposes. As the respondent had not paid taxes or made required investments, immunity from penalties was not applicable. Thus, the Tribunal's decision to negate penalties under section 18(1)(a) was deemed unjustified.

The court cited precedents such as Banaras Chemical Factory and Jaswant Rai cases, which held that voluntary disclosure of income or wealth does not automatically absolve the assessee from penalties. Based on the analysis, the court ruled in favor of the Revenue, stating that penalties were rightfully imposed due to non-payment of taxes and late filing of returns. The question of law was answered in the negative, supporting the Revenue's position. No costs were awarded in this matter.