1990 (7) TMI 46 - HC - Wealth-tax

Summary

Issues Involved
1. Imposition of penalties for late filing of wealth tax returns.
2. Application for relief under Section 18B of the Wealth-tax Act.
3. Interpretation of Section 18B(1) and Section 18B(4) of the Wealth-tax Act.
4. The scope of the Commissioner's powers under Section 18B(4).

Detailed Analysis

1. Imposition of Penalties for Late Filing of Wealth Tax Returns
The petitioner filed returns under the Wealth-tax Act, 1957, for the years 1970-71 to 1975-76 on January 21, 1976. The Wealth-tax Officer imposed penalties for late filing of returns for each of these years by order dated March 25, 1980. The petitioner argued that due regard was not given to the facts justifying the delay, such as the death of his father, a fire accident, his wife's illness, and delays caused by changes in legal counsel.

2. Application for Relief under Section 18B of the Wealth-tax Act
The petitioner made an application under Section 18B of the Act for relief from penalties for the years 1967-68 to 1969-70 and 1970-71 to 1975-76. The Commissioner of Wealth-tax, Patiala, granted partial relief, reducing the penalty to 1% for certain years but denied relief for the years 1970-71 and 1971-72. The petitioner then made another application under Section 18B(4) of the Act, citing financial hardship and full cooperation with the Department. The Commissioner rejected this application, stating that relief had already been granted for some years, and further consideration was precluded by Section 18B(3).

3. Interpretation of Section 18B(1) and Section 18B(4) of the Wealth-tax Act
Section 18B was inserted by the Taxation Laws (Amendment) Act, 1975, and allows the Commissioner to reduce or waive penalties under certain conditions. Subsection (1) provides the Commissioner with the power to reduce or waive penalties if the assessee has made a full and true disclosure of net wealth voluntarily and in good faith. Subsection (4) extends this power to include the stay or compounding of proceedings for the recovery of penalties if it would cause genuine hardship to the assessee and if the assessee has cooperated in the inquiry.

4. The Scope of the Commissioner's Powers under Section 18B(4)
The court observed that the power under Section 18B(4) is broader than that under Section 18B(1). Subsection (4) allows the Commissioner to grant relief even at the stage of penalty recovery, provided the conditions of genuine hardship and cooperation are met. The court held that the restriction in Section 18B(3) applies only to relief under Section 18B(1) and does not preclude the Commissioner from granting relief under Section 18B(4). The court emphasized that a literal interpretation of Section 18B(3) would render Section 18B(4) redundant, which was not the Legislature's intention.

The court also referred to the Central Board of Direct Taxes Circular No. 179, which interpreted similar provisions under the Income-tax Act, 1961, to support its view that the Legislature intended to enlarge the Commissioner's powers to grant relief.

Conclusion
The court allowed the petition, quashed the Commissioner's order dated August 5, 1988, and directed the Commissioner to reconsider the petitioner's application under Section 18B(4) on its merits. The court ruled that the petitioner is entitled to seek relief afresh under Section 18B(4), and the provisions of Section 18B(3) do not preclude the Commissioner from entertaining and considering the application. Costs were assigned to the parties.