1979 (12) TMI 8 - HC - Wealth-tax

Summary

Issues:
1. Application of section 18(1)(a) as amended by the Finance Act, 1969 for penalty calculation.
2. Bar on the levy of penalty by time under section 18(5) prior to its amendment.

Analysis:
1. The High Court of Madras addressed the issue of the application of section 18(1)(a) as amended by the Finance Act, 1969 for penalty calculation in the case of a cine-artist who filed a wealth-tax return for the year 1968-69 after the due date. The Wealth-tax Officer initiated penalty proceedings for the delay, and a penalty was levied. The Tribunal upheld the penalty assessment based on the law applicable at the time of the default in 1968. The High Court referred to a Supreme Court decision in Brij Mohan v. CIT [1979] 120 ITR 1, which established that the law in force at the time of default governs the penalty calculation. Therefore, the High Court affirmed the Tribunal's decision in favor of the assessee, concluding that the penalty should be determined based on the provisions in force at the time of default.

2. The High Court also examined the issue of whether the levy of penalty was barred by time under section 18(5) prior to its amendment. The assessee filed relevant returns for the assessment years 1968-69 and 1969-70 after the due dates, and penalty orders were passed after the prescribed time limit. However, an amendment to section 18(5) of the Wealth-tax Act came into effect from 1st April 1971, extending the time limit for passing penalty orders. The Tribunal confirmed the penalty orders, stating they were not barred by limitation. The High Court referred to the principle that if the limitation period is extended before it expires, the extended period applies. Citing precedents, the High Court held that the amendment to section 18(5) extended the limitation period, allowing the penalty orders to be validly passed. Therefore, the High Court answered the question in favor of the assessee, stating that the levy of penalty was not barred by time due to the amendment of section 18(5) of the Wealth-tax Act.

In conclusion, the High Court of Madras upheld the Tribunal's decisions in both issues, ruling in favor of the assessee regarding the application of penalty provisions and the time limitation for penalty imposition. The court made it clear that the penalty calculation should align with the law in force at the time of default and that the amendment to section 18(5) extended the time limit for passing penalty orders, ensuring the validity of the penalties imposed.