1996 (4) TMI 101 - HC - Wealth-tax

Summary

Issues Involved:
1. Maintainability of appeals after rejection of the application under section 18(2A) of the Wealth-tax Act, 1957.

Detailed Analysis:

1. Maintainability of Appeals After Rejection of Application Under Section 18(2A):

The references under section 27(1) of the Wealth-tax Act, 1957, were heard together concerning the same assessee and the same question of law. The primary issue was whether appeals filed by the assessee before the Appellate Assistant Commissioner were maintainable after the rejection of the assessee's petition under section 18(2A) by the Commissioner of Wealth-tax.

The facts are that the assessee filed returns of net wealth for various assessment years and faced penalty proceedings initiated by the Wealth-tax Officer under section 18(1)(a) of the Act. The assessee's plea of reasonable cause was rejected, and penalties were imposed. The assessee's application for waiver/reduction of penalty under section 18(2A) was also rejected. Subsequently, the assessee appealed against the penalties, which the Appellate Assistant Commissioner dismissed as not maintainable. The Income-tax Appellate Tribunal, however, held that the appeals were maintainable and remanded the case for a decision on merits.

The Tribunal referred the question of law to the High Court: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal misdirected itself in holding that even after the rejection of the assessee's petition under section 18(2A) by the Commissioner of Wealth-tax the appeals filed by the assessee before the Appellate Assistant Commissioner are maintainable?"

The High Court observed that a significant period had passed, and in the absence of a stay order, the appeals should have been disposed of on merits. The court noted that substantial amendments were made to section 18, including the omission of sub-section (2A) and its replacement by section 18B by the Taxation Laws (Amendment) Act, 1975.

The court examined the provisions of sections 18(2A) and 18(2B) of the Act. Section 18(2A) allowed the Commissioner to reduce or waive the minimum penalty under certain conditions, while section 18(2B) stated that the Commissioner's order under section 18(2A) was final and not subject to appeal. However, the court clarified that the appeals filed by the assessee were against the imposition of penalty under section 18(1), not against the Commissioner's order under section 18(2A).

The court emphasized that section 23(1)(d) of the Act conferred a statutory right upon the assessee to appeal against any penalty imposed by the Wealth-tax Officer. This right was independent and not affected by the assessee's application under section 18(2A). The powers of the Commissioner under section 18(2A) and the appellate authorities under section 23(1)(d) operated in different fields.

The court further elucidated that the Commissioner's power under section 18(2A) to reduce or waive the minimum penalty was distinct from the appellate authority's power to confirm or reduce the penalty. The appellate authority could set aside the penalty order if a reasonable cause was shown, a power not available to the Commissioner under section 18(2A).

The court rejected the argument that the assessee's statutory right of appeal was lost by applying to the Commissioner under section 18(2A). It likened the situation to a civil suit compromise, where the plaintiff/defendant does not lose their rights if the compromise fails.

The court distinguished the exercise of the Commissioner's power under section 25 from that under section 18(2A). An appeal under section 23 was not maintainable against the same order of the Wealth-tax Officer if the Commissioner had already exercised his power under section 25.

The court disagreed with the Calcutta High Court's view in Smt. Ichhabai Panchal's case, which held that an assessee could not appeal against the penalty after seeking waiver/reduction under section 18(2A). The court endorsed the contrary views of the Karnataka and Andhra Pradesh High Courts, concluding that the assessee's right to appeal was not lost by applying under section 18(2A).

The High Court answered the question in the affirmative, in favor of the assessee and against the Revenue, holding that the appeals were maintainable. No order as to costs was made since the assessee was not represented at the hearing.