1986 (7) TMI 67 - HC - Wealth-tax

Summary

Issues Involved:
1. Whether the penalty amount could not exceed 50% of the tax.
2. Whether the Wealth-tax Officer provided sufficient opportunity to the assessee to explain the delay in filing returns.
3. Whether prior approval of the Inspecting Assistant Commissioner was necessary before imposing penalties.
4. Whether the computation of penalties should be under the amended law effective from April 1, 1969, or the law at the time of default.

Issue-Wise Detailed Analysis:

1. Penalty Amount Exceeding 50% of Tax:
The core issue was whether the penalty amount could exceed 50% of the tax. The Tribunal initially held that penalties could not exceed 50% of the tax for each year, based on the law before the amendment effective from April 1, 1969. The Tribunal reasoned that the offence of default in filing returns was a continuous one, but the maximum penalty under the pre-amended law was 50% of the tax payable. This was computed at the rate of 2% for each month's default, with a maximum period for penalty being 25 months. Thus, the offence exhausted itself before the amended law came into effect.

However, the Supreme Court decision in Maya Rani Punj v. CIT [1986] 157 ITR 330 (SC) contradicted this view. The Supreme Court held that the relevant date for penalty imposition is when the return was finally filed, making the amended law applicable. Thus, the penalty should be imposed according to the amended provisions effective from April 1, 1969.

2. Opportunity to Explain Delay:
The Tribunal found that the Wealth-tax Officer had issued two notices to the assessee requiring an explanation for the delays in filing returns. The assessee did not respond to these notices. The Tribunal held that the Wealth-tax Officer had provided sufficient opportunity to the assessee, and it was erroneous to claim otherwise. The Tribunal emphasized that the assessee should have provided an explanation at that stage rather than reserving it for the appeals.

3. Prior Approval of Inspecting Assistant Commissioner:
The Tribunal clarified that the requirement for prior approval of the Inspecting Assistant Commissioner ceased to be operative from April 1, 1965. Since the penalty proceedings were initiated long after 1970, there was no legal requirement for such approval at that time. The Tribunal concluded that the Wealth-tax Officer was correct in proceeding without the need for prior approval.

4. Computation of Penalties Under Amended Law:
The Tribunal initially computed penalties under the pre-amended law, but this was challenged by the Revenue. The Supreme Court's decision in Maya Rani Punj's case clarified that the penalty provisions applicable at the time of filing the revised return should be used. Therefore, the penalties should be computed under the amended law effective from April 1, 1969.

Conclusion:
The High Court, following the Supreme Court's decision in Maya Rani Punj's case, held that the penalty should be imposed according to the amended provisions effective from April 1, 1969. The Tribunal's initial decision that penalties could not exceed 50% of the tax was overruled. The question was answered in the negative, against the assessee, and in favor of the Revenue. The parties were left to bear their own costs.