1984 (2) TMI 86 - HC - Wealth-tax

Summary

Issues Involved:
1. Applicability of section 18 of the Wealth-tax Act for assessment years prior to April 1, 1969, in relation to continued defaults.
2. Levy of penalty on the assessee for not filing returns of wealth.

Detailed Analysis:

Issue 1: Applicability of Section 18 of the Wealth-tax Act

The primary question addressed was whether the penalty for not filing returns under the Wealth-tax Act for assessment years before April 1, 1969, should be governed by the original section 18 or the amended section effective from April 1, 1969, if the defaults continued beyond this date.

The court observed that the assessee did not file any return of his wealth for the assessment years 1965-66, 1967-68, and 1968-69. According to section 14(1) of the Act, the returns were due on June 30 of the respective years. The Wealth-tax Officer (WTO) issued notices under section 14(2), but the assessee failed to respond, leading to assessments being completed on November 29, 1969.

The original section 18(1) stipulated a penalty of 2% of the tax for every month of default, capped at 50% of the tax. The amended section 18(1), effective from April 1, 1969, changed the penalty to 1/2% of the net wealth for each month of default, without a specified cap.

The Appellate Tribunal ruled that the default was a continuing wrong, and thus, the penalty should be calculated using both the pre- and post-amendment provisions. However, the Supreme Court in CWT v. Suresh Seth [1981] 129 ITR 328 clarified that the omission to file a return was not a continuing offence. The penalty should be based on the law in force at the time the return was due. Therefore, the court held that the penalty for defaults before April 1, 1969, should be governed by the original section 18(1), and the amended section would not apply to these defaults.

Issue 2: Levy of Penalty for Not Filing Returns

The second question was whether the Tribunal was correct in holding that penalty is leviable even if the assessee did not file any return at all.

The court noted that failure to file a return by the due date under section 14(1) incurs penalty under section 18(1)(a). The default is committed on the last date specified for filing the return, and the penalty is computed based on the law in force on that date. The Supreme Court in Suresh Seth's case confirmed that the default is complete when the return is not filed by the due date, and subsequent non-filing does not negate the initial default.

The court agreed with the Tribunal that the provisions of section 18(1)(a) cannot be nullified by not filing the return at all. An assessee who never files a return cannot be in a better position than one who files late. The liability for penalty arises from the failure to file by the due date, and the penalty is calculated accordingly.

Conclusion

The court ruled:
1. Penalty for not filing returns for assessment years prior to April 1, 1969, is governed by the original section 18(1) of the Wealth-tax Act.
2. Penalty is leviable even if the assessee does not file the return at all, and the Tribunal was correct in its decision.

The parties were left to bear their own costs.