2012 (9) TMI 239 - HC - Wealth-tax

Penalty u/s 18(1)(c) of wealth tax act - concealment of wealth Held that - In the penalty order that the Assessing Officer passed, he did not give any clear findings as to for which breach such penalty was being imposed i.e. for concealment of the particulars of any asset or for furnishing inaccurate particulars of any asset. - AO erred in imposing the penalty without any clear findings as to whether there was concealment of particulars of any assets or providing of inaccurate particulars of any assets. His main thrust seemed to be on the ground of concealment of particulars which as we have noted was not a valid ground. - Decision in favour of assessee. Rebuttal of presumption u/s 18(1)(c) - For valuation of house property which is used wholly or mainly used for residential purposes, the formula provided under rule 1BB of the Rules is to be applied. The assessee instead, valued the property on the basis of its books of accounts. - Had the assessee been put to notice with respect to explanation(4) of section 18(1)(c) of the Act and consequently given opportunity to rebut the presumption, perhaps the situation would have been different.

Issues Involved:
1. Levy of penalty under Section 18(1)(c) of the Wealth Tax Act.
2. Concealment of particulars of assets or furnishing inaccurate particulars.
3. Application of Explanation (4) to Section 18(1)(c) of the Wealth Tax Act.
4. Bona fide difference of opinion regarding valuation of property.
5. Adequacy of show cause notice and opportunity to rebut presumption.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 18(1)(c) of the Wealth Tax Act:
The appeals arose from a common judgment by the Income Tax Appellate Tribunal. The core issue was whether the Tribunal was correct in sustaining the penalty under Section 18(1)(c) of the Wealth Tax Act. The assessee, an HUF, had not filed its wealth return despite exceeding the statutory limit. The Deputy Commissioner assessed the net wealth at Rs. 28,38,855/- against the disclosed Rs. 4,08,194/-, leading to a penalty of Rs. 30,522/- for alleged concealment of wealth.

2. Concealment of Particulars of Assets or Furnishing Inaccurate Particulars:
The Deputy Commissioner imposed the penalty under the premise that the assessee did not file the wealth return until after a search and subsequent notice. The Appellate Commissioner and the Tribunal upheld this penalty, citing Explanation (4) to Section 18(1)(c), which deems the furnishing of inaccurate particulars if the returned value is less than 70% of the assessed value unless proven otherwise by the assessee.

3. Application of Explanation (4) to Section 18(1)(c) of the Wealth Tax Act:
The Appellate Commissioner confirmed the penalty based on Explanation (4) to Section 18(1)(c), despite recognizing a bona fide difference in valuation methodology. The Tribunal upheld this decision, emphasizing the clear provisions of Explanation (4). However, the High Court noted that the Assessing Officer did not apply this explanation in the initial penalty order, nor was the assessee given an opportunity to rebut the presumption.

4. Bona Fide Difference of Opinion Regarding Valuation of Property:
The assessee argued that the difference in valuation arose from different methodologies and was bona fide. The Appellate Commissioner acknowledged this but still confirmed the penalty based on Explanation (4). The High Court highlighted that the Commissioner's reliance on Explanation (4) at the appellate stage without prior notice to the assessee was inappropriate.

5. Adequacy of Show Cause Notice and Opportunity to Rebut Presumption:
The High Court emphasized that penalty proceedings are quasi-criminal and require strict compliance with legal requirements. The assessee was not given a chance to prove the correctness of their valuation as the show cause notice did not mention the application of Explanation (4). The High Court found this procedural lapse significant, noting that the penalty could not be sustained without clear findings from the Assessing Officer on whether the penalty was for concealment or furnishing inaccurate particulars.

Conclusion:
The High Court concluded that the Assessing Officer erred in imposing the penalty without clear findings and that the Appellate Authority inappropriately applied Explanation (4) without giving the assessee a chance to rebut. The Tribunal's confirmation of the penalty was thus erroneous. The appeals were allowed, and the penalty orders were quashed.

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