1982 (1) TMI 13 - HC - Wealth-tax

Summary

Issues Involved:
1. Justification of partial relief by the Appellate Tribunal instead of quashing the penalty order.
2. Necessity of establishing mens rea by the Department in imposing penalty for late submission of returns.
3. Justification of penalty imposition without proper consideration of the press note dated 2nd June 1969.
4. Applicable law for penalty imposition and whether the default was a continuing wrong.

Issue-wise Detailed Analysis:

1. Justification of Partial Relief by the Appellate Tribunal:
The Tribunal concluded that the assessee was prevented by reasonable cause from filing the wealth-tax returns within the proper time until December 31, 1970, due to delays in obtaining the valuation report for the trust properties. However, for the period after January 1, 1971, the Tribunal found no reasonable cause for the delay. Consequently, the Tribunal modified the order of the Appellate Assistant Commissioner (AAC) and directed the Wealth Tax Officer (WTO) to recompute the penalties for the period after December 31, 1970. The High Court agreed with this partial relief, stating that the Tribunal had considered all relevant facts and circumstances.

2. Necessity of Establishing Mens Rea:
The High Court analyzed whether mens rea was necessary for imposing penalties under Section 18(1)(a) of the Wealth Tax Act. The court referred to various judgments, including the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, which emphasized that penalty proceedings are quasi-criminal in nature. The court concluded that the absence of reasonable cause must be established for imposing penalties, and the burden of proving reasonable cause lies with the assessee. The Tribunal had properly considered the explanation provided by the assessee and found sufficient cause for the delay up to December 31, 1970, but not beyond that date.

3. Justification of Penalty Imposition Without Proper Consideration of the Press Note:
The court examined the relevance of the press note dated June 2, 1969, issued by the Ministry of Finance. The Tribunal had considered the press note but concluded that it had no legal force in the context of the Wealth Tax Act. The High Court agreed, stating that the press note was not issued under the authority of the Wealth Tax Act and could not be taken into account for imposing or deciding penalties. Therefore, the Tribunal was justified in not giving significant weight to the press note.

4. Applicable Law for Penalty Imposition and Whether the Default was a Continuing Wrong:
The High Court referred to the Supreme Court's decision in CWT v. Suresh Seth, which held that the penalty must be computed based on the law in force on the last date the return had to be filed. The court emphasized that the default occurred on the last date allowed for filing the return and was not a continuing wrong. The Tribunal had erred in holding that the default was a continuing wrong and applying the amended law for the period after April 1, 1969. The High Court clarified that the law applicable was the one in force on the date of the default, which was the last date allowed for filing the return.

Conclusion:
The High Court answered both questions in favor of the Revenue. The Tribunal was justified in allowing partial relief instead of quashing the penalty order and in holding that mens rea was not required to be established by the Department for imposing penalties for late submission of returns. The Tribunal was also correct in considering the press note but concluding that it had no legal force. However, the Tribunal erred in holding that the default was a continuing wrong, and the applicable law was the one in force on the date of the default.