2015 (6) TMI 256 - AT - Wealth-tax

Penalty u/s 18(1)(c) of W.T.Act, 1957 - Held that - The penalty is leviable on the date on which the concealment of wealth is committed i.e. the date of offering the return of wealth. Therefore in the present case it will not be justified to refer to the returned wealth u/s 14(1) of the Act for the initiation of penalty u/s 18(1)(c) of the Act. Therefore when there is no concealment there is no question of penalty u/s 18(1)(c) of the Act. - The concealment of income is to be determined with regard to the return of income in response to notice u/s 153A of the Act. Therefore in the present circumstances and facts of the case once the returned wealth is accepted by the AO u/s 153A of the Act then there cannot be a case of concealment of income or furnishing inaccurate particulars of income. In the circumstances and facts of the case the decision in the case of Prem Arora vs DCIT (2012 (6) TMI 480 - ITAT DELHI) is squarely applicable in the present case, since in the present case the assessee has disclosed gold and diamond in the statement recorded u/s 132(4) of the Act during the search operation itself, in the wealth tax return the Tribunal has approved the findings in quantum with regard to the genuineness of the declaration of gold and diamonds. Accordingly the assessee is not liable to have penalty u/s 271(1)(c) of the Act. - Decided against Revenue.

Issues Involved:
1. Deletion of penalty imposed under Section 18(1)(c) of the Wealth Tax Act, 1957 for the assessment years 2002-03 to 2008-09.
2. Application of Explanation 3 versus Explanation 5 to Section 18(1)(c) of the Wealth Tax Act, 1957.
3. Satisfaction of the Assessing Officer (AO) regarding the initiation of penalty proceedings.
4. Quantum of penalty to be imposed.

Detailed Analysis:

1. Deletion of Penalty Imposed under Section 18(1)(c) of the Wealth Tax Act, 1957:
The primary issue in these appeals was whether the penalty imposed on the assessee under Section 18(1)(c) of the Wealth Tax Act, 1957 was justified. The Revenue challenged the deletion of the penalty by the Commissioner of Wealth Tax (Appeals) [CWT(A)] for the assessment years 2002-03 to 2008-09. The penalty was initially imposed due to the assessee's failure to file wealth tax returns despite having taxable net wealth, which was discovered during a search and seizure operation.

2. Application of Explanation 3 versus Explanation 5 to Section 18(1)(c) of the Wealth Tax Act, 1957:
The assessee argued that Explanation 5, rather than Explanation 3, to Section 18(1)(c) should apply in their case. Explanation 5 pertains to cases where assets are disclosed during a search operation and subsequently included in the return of wealth. The assessee contended that since the gold and diamonds were disclosed during the search and included in the return of wealth, Explanation 5 should apply, which provides certain protections against penalty if specific conditions are met.

The AO, however, invoked Explanation 3, which deals with the failure to furnish a return of wealth in the ordinary course and the subsequent discovery of assessable net wealth. The AO imposed a maximum penalty of 500% of the tax sought to be evaded, arguing that the assessee had concealed particulars of wealth.

3. Satisfaction of the Assessing Officer (AO) Regarding the Initiation of Penalty Proceedings:
The AO's satisfaction regarding the initiation of penalty proceedings was another critical issue. The AO must be satisfied that there is a prima facie case for initiating penalty proceedings. The AO in this case was satisfied that the assessee had concealed particulars of wealth, as evidenced by the seized documents and the assessee's admissions during the search operation.

The Tribunal noted that the AO had recorded satisfaction for initiating penalty proceedings in the assessment order itself, which indicated a prima facie satisfaction.

4. Quantum of Penalty to be Imposed:
The quantum of penalty under Section 18(1)(c) ranges from 100% to 500% of the tax sought to be evaded. The AO imposed the maximum penalty of 500%, citing the assessee's deliberate concealment of wealth and lack of regard for the law.

The Tribunal, however, found that the AO was not justified in invoking Explanation 3, as the conditions for its application were not fully met. Specifically, the AO did not believe the existence and ownership of the gold and diamonds, yet included them in the net wealth because the assessee had disclosed them in the return of wealth. If the value of the gold and diamonds were excluded, the net wealth would be below the taxable limit, indicating that the AO was not satisfied that the assessee had taxable wealth.

The Tribunal concluded that Explanation 5 was more appropriate, given the circumstances of the case. The assessee had disclosed the assets during the search and included them in the return of wealth, meeting the conditions of Explanation 5.

Conclusion:
The Tribunal upheld the CWT(A)'s decision to delete the penalty imposed under Section 18(1)(c) of the Wealth Tax Act, 1957. The Tribunal found that Explanation 5 to Section 18(1)(c) was applicable, and the AO was not justified in invoking Explanation 3. Consequently, the appeals of the Revenue were dismissed, and the deletion of the penalty was affirmed.

Order:
The appeals of the Revenue in WTA Nos. 2 to 08/Kol/2013 were dismissed. The Tribunal pronounced the order on 15.05.2015.

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