2002 (12) TMI 51 - HC - Wealth-tax

This is a petition for quashing an order dated March 15 1982 (annexure P6) passed by the Commissioner of Wealth-tax Jullundar (respondent No. 1) declining the petitioner s prayer for waiver of penalty in terms of section 18B of the Wealth-tax Act 1957 - It is also not the case of the respondents that the petitioner had filed returns after issuance of notice under section 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. - the writ petition is allowed.

Issues Involved:
1. Waiver of penalty under Section 18B of the Wealth-tax Act, 1957.
2. Voluntary and good faith filing of wealth-tax returns.
3. Full and true disclosure of net wealth.
4. Failure to initiate penalty proceedings under Section 18(1)(c) of the Wealth-tax Act.
5. Legality of recovery proceedings initiated by the Income-tax Officer.

Issue-wise Detailed Analysis:

1. Waiver of Penalty under Section 18B of the Wealth-tax Act, 1957:
The petitioner sought the quashing of an order dated March 15, 1982, by the Commissioner of Wealth-tax, which declined the petitioner's prayer for waiver of penalty under Section 18B of the Wealth-tax Act, 1957. The Commissioner rejected the waiver application on the grounds that the petitioner failed to make full and true disclosure of his net wealth and did not disclose the particulars and nature of certain properties, such as the Ranjit Nagar property, in his returns.

2. Voluntary and Good Faith Filing of Wealth-tax Returns:
The petitioner argued that he had filed the returns voluntarily and in good faith, making full and true disclosure of assets. However, the Commissioner noted that the returns were filed after the due dates and following complaints and inquiries by the Department. The Commissioner held that the returns did not represent a voluntary and good faith disclosure as required under Section 18B.

3. Full and True Disclosure of Net Wealth:
The Commissioner found that the petitioner did not make full and true disclosure of his net wealth. The Ranjit Nagar property and other assets held in the names of the petitioner's sons and wife were not included in the net wealth disclosed. The Commissioner referenced judicial pronouncements that supported the view that incomplete disclosure disqualifies the petitioner from waiver benefits under Section 18B.

4. Failure to Initiate Penalty Proceedings under Section 18(1)(c) of the Wealth-tax Act:
The petitioner contended that the failure of the Wealth-tax Officer to initiate penalty proceedings under Section 18(1)(c) should entitle him to a waiver of penalty. The Commissioner rejected this argument, stating that the lapse in initiating penalty proceedings under Section 18(1)(c) does not imply that the petitioner made full and true disclosure of his net wealth. The Commissioner emphasized that the essential pre-conditions for waiver under Section 18B(1)(a) were not met.

5. Legality of Recovery Proceedings Initiated by the Income-tax Officer:
Following the rejection of the waiver application, the Income-tax Officer issued a notice to recover the outstanding demand. The petitioner challenged this notice, arguing that the proceedings initiated were illegal and should be quashed. The court examined the statutory provisions and judicial interpretations relevant to Section 18B and the conditions for waiver.

Judgment:
The court referred to several judicial precedents, including Smt. Parkash Devi v. CWT, Jagjiwan Kumar v. CIT/WT, and others, which elucidated the conditions under Section 18B for waiver of penalty. The court found that the Commissioner had erred in rejecting the waiver application by not properly considering the deeming provision in the Explanation to Section 18B(1). The court held that the Commissioner should have presumed full and true disclosure of assets since no penalty proceedings under Section 18(1)(c) were initiated.

The court concluded that the petitioner met the conditions for waiver, including voluntary filing, good faith, full disclosure, cooperation in assessment proceedings, and payment of tax. Consequently, the court quashed the Commissioner's order and directed a fresh decision on the waiver application, adhering to the legal principles established in relevant case law.

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