1981 (7) TMI 44 - HC - Wealth-tax

Summary

Issues:
Late filing of wealth tax returns leading to penalty imposition under section 18(1)(a) of the Wealth-tax Act, 1957. Petitioner's request for waiver of penalty under section 18(2A) based on voluntary disclosure of net wealth. Commissioner's decision to reduce penalty to 25% without providing reasons for the reduction.

Analysis:
The petitioner, a wealth-tax assessee, was late in filing returns for the assessment years 1964-65 to 1969-70, prompting the issuance of a show-cause notice by respondent No. 2 for imposing a penalty under section 18(1)(a) of the Wealth-tax Act, 1957. In response, the petitioner sought a waiver of the penalty under section 18(2A) by approaching the Commissioner of Wealth-tax (respondent No. 1), emphasizing the voluntary and good faith disclosure of net wealth. The Commissioner, after reviewing the case, acknowledged that the conditions under section 18(2A) were met and decided to reduce the penalty to 25% without providing any reasons for the reduction.

The petitioner's grievance centered on the Commissioner's refusal to fully waive the penalty as allowed under section 18(2A) without offering any justification for the decision. The court emphasized that the mere delay in filing the return should not automatically preclude the assessee from seeking a complete waiver of the penalty. While the statute lacks specific guidelines on when and to what extent penalties should be reduced or waived, it is established that the power of waiver granted to the Commissioner must be exercised in suitable cases.

Citing the case of Julius v. Bishop of Oxford, the court reiterated that when a power is coupled with a duty, it must be exercised when necessary. In this context, factors such as the gravity of the offense, revenue loss due to late filing, tax withholding, and the duration of the delay should be considered. The court found fault with the Commissioner's decision to reduce the penalty to 25% without providing any rationale, emphasizing that even though the statute does not mandate the recording of reasons, the exercise of such power should be transparent to prevent arbitrary use.

Consequently, the court set aside the impugned orders and directed the Commissioner to reconsider the case, evaluate the facts, and make a reasoned decision regarding the petitioner's request for a penalty waiver. This decision aimed to ensure a fair and lawful assessment of the penalty imposition in alignment with the provisions of the Wealth-tax Act, 1957.

In conclusion, the court allowed the petitions, emphasizing the importance of reasoned orders in matters involving penalty imposition and waiver, thereby safeguarding the rights of the assessee and promoting transparency in administrative actions under the relevant legal framework.