1985 (5) TMI 3 - HC - Wealth-tax

Summary

Issues: Interpretation of penalty provisions under the Wealth-tax Act for the assessment year 1967-68.

The judgment pertains to a reference under section 27(1) of the Wealth-tax Act, 1957, initiated by the Commissioner of Wealth-tax, Bihar. The assessment year in question is 1967-68, with the return filed on July 24, 1968, showing assets valued at Rs. 1,20,430. The Wealth-tax Officer assessed immovable properties at Rs. 3,37,000 and initiated penalty proceedings under section 18(1)(c) on the same date as the assessment. The Inspecting Assistant Commissioner issued a notice under section 18(3) on October 17, 1970, which was served on the assessee, requiring a response by October 24, 1970. The assessee requested an extension, which was denied, leading to the imposition of a penalty.

The Tribunal, on appeal, acknowledged the applicability of penal provisions but reduced the penalty to 50% of the tax avoided. The Tribunal held that the penalty should have been imposed according to the law in force on July 24, 1968, the date of filing the return for the assessment year 1967-68, rather than the amended law effective from April 1, 1968. Disagreeing with the Tribunal's interpretation, the Commissioner of Wealth-tax sought a reference to the High Court.

The question referred to the High Court was whether the Tribunal was correct in applying the law in force on the first day of the assessment year, 1967-68, instead of the amended law effective from April 1, 1968, for determining the penalty. The High Court, relying on the Supreme Court decision in Brij Mohan v. CIT, held that penalty is imposed based on the law prevailing at the time of the wrongful act. As the return was filed on July 24, 1968, the law applicable on that date governed the penalty imposition, even though the law had changed on April 1, 1968. Therefore, the Tribunal erred in not applying the law in force on the date of the wrongful act.

In conclusion, the High Court ruled in favor of the Revenue, stating that the Tribunal's decision on the penalty imposition was incorrect. The judgment emphasizes that penalty provisions are determined by the law in force at the time of the wrongful act, as established by the Supreme Court precedent.