2010 (10) TMI 719 - AT - Wealth-tax

Penalty u/s 18(1)(c) - Tax evasion - Ignorance of law - it will be seen that there is no concealment vis- vis wealth assessed and wealth returned and only the concealment is confined to non-filing of the return of wealth for the first time as mentioned in explanation 3 of section 18(1) of the Wealth Tax Act - in the light of the provisions contained in Explanation 3 to sec. 18(1)(c) the assessee shall for the purpose of sec. 18(1)(c) of the Act be deemed to have concealed the particulars of his assets or furnished inaccurate particulars of any assets or debts in respect of the assessment yeas under consideration - It was further submitted by the assessee that it is only with effect from 1.04.1993 that the word company was added in sec. 3(1) for bringing charge of levy of the wealth-tax on the companies under the Wealth-tax Act 1957 itself - it is thus clear that the assessee has not been above to prove and establish that the assessee has acted bonafidely and it was under bona fide belief that it was not required to pay tax in the Assessment Years 1991-92 and 1992-93 - Appeal is allowed

Issues Involved:
1. Deletion of penalty under Section 18(1)(c) of the Wealth-tax Act, 1957.
2. Reasonable cause for non-filing of wealth tax returns.
3. Ignorance of law as a defense.
4. Bona fide belief regarding non-liability to wealth tax.
5. Applicability of Explanation 3 to Section 18(1)(c) of the Wealth-tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Penalty under Section 18(1)(c) of the Wealth-tax Act, 1957:

The revenue appealed against the Commissioner of Wealth-tax (Appeals) [CWT(A)]'s order which deleted the penalties of Rs. 1,00,000/- and Rs. 6,00,000/- levied by the Assessing Officer (AO) under Section 18(1)(c) of the Wealth-tax Act for the Assessment Years 1991-92 and 1992-93. The AO had imposed the penalties on the grounds that the assessee had concealed the particulars of its assets by not filing the wealth tax returns voluntarily and within the stipulated time, despite having taxable wealth.

2. Reasonable Cause for Non-filing of Wealth Tax Returns:

The assessee argued that the delay in filing the returns was due to a bona fide belief that no wealth tax was leviable on companies, as the wealth tax on companies was withdrawn by the Finance Act, 1960, and was only revived in a limited manner by Section 40 of the Finance Act, 1983. The assessee claimed that it was unaware of this revival and thus did not file the returns within the prescribed time.

3. Ignorance of Law as a Defense:

The AO rejected the assessee's plea of ignorance of law, stating that ignorance of law cannot be a defense against the consequences of its violation. The AO argued that the assessee, being part of a prominent group with access to professional tax advisors, should have been aware of the legal requirements.

4. Bona Fide Belief Regarding Non-liability to Wealth Tax:

The CWT(A) accepted the assessee's explanation, stating that the assessee was under a bona fide belief that it was not liable for wealth tax due to the historical withdrawal of wealth tax on companies and the limited revival under the Finance Act, 1983. The CWT(A) found that the non-filing of returns was due to unawareness and not deliberate concealment, and thus constituted a reasonable cause under Explanation 3 of Section 18(1) of the Wealth-tax Act.

5. Applicability of Explanation 3 to Section 18(1)(c) of the Wealth-tax Act:

The Tribunal examined whether the assessee's failure to file the returns within the specified time was without reasonable cause. It was noted that the assessee was aware of the revival of wealth tax on companies by the Finance Act, 1983, and the subsequent amendment by the Finance Act, 1992, which included companies in the Wealth-tax Act, 1957. The Tribunal found that the assessee's conduct did not demonstrate bona fide ignorance, as the returns were filed only after repeated reminders from the AO. The Tribunal concluded that the assessee's plea of ignorance was not credible and that the penalties were rightly imposed by the AO.

Conclusion:

The Tribunal set aside the CWT(A)'s order and restored the AO's order, confirming the penalties levied under Section 18(1)(c) of the Wealth-tax Act. The Tribunal held that the assessee did not have a reasonable cause for the delay in filing the returns and that the plea of ignorance of law was not acceptable. The appeals filed by the revenue were allowed, and the penalties were upheld.

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