2018 (3) TMI 1471 - HC - Wealth-tax

Levy of interest u/s 17B in respect of the period between the due date and the date of the notice u/s 17 - date of filling Wealth tax return - Held that - Considering the facts and circumstances of the present case, we are of the considered view that the assessment made for the assessment years 2007-08 and 2008-09 is made for the first time under Section 17, the same is a regular assessment and therefore attracts Section 17B(1) of the Act and not otherwise. Hence the Assessee is liable to pay interest u/s 17B(1) from the due date u/s 14(1) to the date of filing of the return u/s 17. We reject the argument advanced by the learned counsel for the assessee that the assessee could not be asked to do the impossible, as the due date for filing of the wealth tax returns expired and the assessee had not filed his return within the due date and there was no provision for the assessee to file his returns beyond the due date and the assessee had to await the issuance of notice u/s17 of the Act and therefore the assessee must be exempted from the levy of interest u/s 17B in respect of the period between the due date and the date of the notice u/s 17 of the Act.

Issues Involved:
1. Levy of interest under Section 17B(1) versus Section 17B(3) of the Wealth Tax Act.
2. Applicability of interest for defaults in furnishing the return of net wealth.
3. Interpretation of "regular assessment" under Section 17B.
4. Relevance of precedents and case laws in determining the levy of interest.

Detailed Analysis:

1. Levy of Interest under Section 17B(1) versus Section 17B(3) of the Wealth Tax Act:
The primary issue revolves around whether the interest for defaults in furnishing the return of net wealth should be levied under Section 17B(1) or Section 17B(3) of the Wealth Tax Act. The assessee argued that interest should be calculated under Section 17B(3), which applies when the return is filed in response to a notice under Section 17 after an original assessment. However, the Assessing Officer and the Tribunal held that Section 17B(1) applies, as the assessments for the years 2007-08 and 2008-09 were made for the first time and thus considered regular assessments.

2. Applicability of Interest for Defaults in Furnishing the Return of Net Wealth:
The Tribunal and the High Court emphasized that the filing of the return of wealth is a mandatory duty once the net wealth exceeds the prescribed limit. The interest under Section 17B is compensatory in nature, meant to compensate for the delay in revenue collection due to late filing. The Tribunal noted that merely because the due date for filing had expired, it does not exempt the assessee from the levy of interest for the period between the due date and the date of notice under Section 17.

3. Interpretation of "Regular Assessment" under Section 17B:
The High Court clarified that an assessment made for the first time under Section 17 is considered a regular assessment for the purpose of Section 17B. This interpretation aligns with Explanation 3 of Section 17B(1), which states that an assessment made for the first time under Section 17 shall be regarded as a regular assessment. Consequently, the interest is to be calculated from the due date under Section 14(1) to the date of filing the return under Section 17.

4. Relevance of Precedents and Case Laws in Determining the Levy of Interest:
The High Court and the Tribunal relied on several precedents to support their conclusions. The Tribunal referred to the case of Smt. M.R. Prabhavathy v. ACIT, 80 ITD 520 (Bang), which held that the levy of interest under Section 17B is compensatory. The High Court also cited the decision in Textile Dye-Chem Corporation v. Assistant Commissioner of Income Tax, which dealt with similar provisions under the Income Tax Act and concluded that interest should be levied under the corresponding section for regular assessments.

Conclusion:
The High Court upheld the Tribunal's decision that the assessee is liable to pay interest under Section 17B(1) of the Wealth Tax Act for the assessment years 2007-08 and 2008-09. The court dismissed the appeals, stating that the interest is compensatory and mandatory for the delay in filing returns, and the assessments made for the first time under Section 17 are considered regular assessments. The court found no substantial question of law warranting interference and dismissed the appeals accordingly.

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