1982 (2) TMI 7 - HC - Wealth-tax

Delay In Filing Return, Delay In Filing Wealth Tax Return, Penalty, Period Of Limitation For Imposition Of Penalty, Wealth Tax

Issues Involved:
1. Whether the Tribunal was justified in holding that default under Section 14(1) of the Wealth-tax Act, 1957, still continued and penalty could be levied even if notice under Section 14(2) was issued.
2. Whether the Tribunal was justified in cancelling the penalty instead of remanding the case back to the Wealth-tax Officer (WTO) for further consideration.

Issue-Wise Detailed Analysis:

Issue 1: Continuation of Default under Section 14(1)
The first issue revolves around whether the default under Section 14(1) of the Wealth-tax Act, 1957, continues even after the issuance of a notice under Section 14(2) and whether penalty can be levied for such default.

The Tribunal held that there was no proper service of notices issued under Section 14(2) of the Act upon the assessee. The Tribunal further considered whether, in the absence of service of notice under Section 14(2), penalty could still be levied for failure to furnish returns as required by Section 14(1). The assessee argued that the issuance of notice under Section 14(2) nullified the operation of Section 14(1), thus preventing any penalty for default under Section 14(1).

However, the court found no provision in the Act suggesting that the issuance of a notice under Section 14(2) ends the operation of Section 14(1). The court emphasized that a penalty is imposed for the commission of a wrongful act, and failure to furnish a return under Section 14(1) without reasonable cause constitutes such a wrongful act. This wrongful act does not cease to be wrongful by the mere issuance of a notice under Section 14(2). Therefore, the Tribunal was justified in holding that the default under Section 14(1) continued and penalty could be levied in respect of that default. The court answered the first question in the affirmative and against the assessee.

Issue 2: Cancellation of Penalty Instead of Remanding the Case
The second issue concerns whether the Tribunal was justified in cancelling the penalty instead of remanding the case back to the WTO for further consideration.

The Tribunal had initially considered remanding the case to the WTO to give another opportunity to the assessee to show cause against the imposition of penalty. However, it held that due to the provisions of Section 18(5) of the Act, the WTO could not impose a penalty as the order would be barred by limitation.

The court examined the relevant provisions of Section 18(5) and noted that the statute of limitation applied to the initial order of penalty imposed by the WTO. The court referred to various judgments, including the Supreme Court's decision in CIT v. National Taj Traders, which supported the view that the bar of limitation for imposition of penalty applies to the first or initial order passed by the WTO.

The court disagreed with the Tribunal's decision to cancel the penalty instead of remanding the case. It emphasized that appellate authorities have the power to remand the matter for fresh consideration, and the bar of limitation under Section 18(5) would not be operative in such cases. Consequently, the court held that the Tribunal was not justified in cancelling the penalty and should have remanded the case to the WTO. The court answered the second question in the negative and against the assessee.

Conclusion:
The court concluded that the Tribunal was justified in holding that the default under Section 14(1) continued and penalty could be levied even if notice under Section 14(2) was issued. However, the Tribunal was not justified in cancelling the penalty instead of remanding the case back to the WTO. The reference was answered accordingly, with each party bearing its own costs.

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