1980 (1) TMI 86 - HC - Wealth-tax

Summary

Issues Involved:
1. Whether action can be initiated and penalty levied on the legal representative of a deceased assessee for the belated filing of the return by the latter for any assessment year under section 18(1)(a) of the Wealth-tax Act, 1957.

Detailed Analysis:

Issue 1: Initiation of Action and Levy of Penalty on Legal Representative

Context and Background:
The case revolves around the late filing of wealth-tax returns by Venkateswara Iyer for the assessment years 1963-64 to 1968-69. Notices were issued under sections 17 and 14(2) of the Wealth-tax Act, and returns were eventually filed on March 31, 1969. The Wealth-tax Officer (WTO) initiated penalty proceedings for the delay and required the legal representative to show cause. The legal representative petitioned for waiver under section 18(2A), which was rejected by the Commissioner. Penalties were levied, and the legal representative appealed.

Appeal and Tribunal's Findings:
The Appellate Assistant Commissioner (AAC) held that there was no provision in the Wealth-tax Act to levy penalties on a legal representative for defaults committed by the deceased, leading to the cancellation of penalties. The Tribunal upheld this decision, noting the absence of a provision similar to section 159(2) of the Income-tax Act, 1961.

Legal Provisions Considered:
- Section 18: Contemplates the levy of penalty for failure to furnish returns.
- Section 19: Deals with the liabilities of the legal representative upon the death of the assessee.

Section 19 Analysis:
- Sub-section (1): Imposes liability on the legal representative to pay wealth-tax assessed as payable by the deceased or any sum which would have been payable by him if he had not died. This includes penalties levied but unpaid during the deceased's lifetime.
- Sub-section (2): Applies when a person dies without furnishing a return or furnishes an incorrect/incomplete return. The WTO can assess the net wealth and determine the tax payable, serving notices to the legal representative.
- Sub-section (3): Applies sections 14, 15, and 17 to the legal representative as they apply to any person referred to in those sections.

Court's Interpretation:
- Section 19(1): Not applicable here as no assessment was completed on the deceased before his death.
- Section 19(2): Relevant as Venkateswara Iyer died before completing the assessment, making the legal representative liable for assessment but not for penalties due to the absence of a specific provision.
- Section 19(3): Does not improve the department's position to levy penalties on the legal representative for defaults committed by the deceased.

Comparison with Income-tax Act:
- Section 24B of the 1922 Act and Section 159 of the 1961 Act: These sections include legal fictions to treat the legal representative as the assessee, allowing for the continuation of proceedings against the deceased. The Wealth-tax Act lacks such provisions.

Supreme Court Precedents:
- CIT v. Bhikaji Dadabhai & Co. [1961] 42 ITR 123 (SC): Penalty is considered additional tax but is not a continuation of assessment proceedings.
- Jain Brothers v. Union of India [1970] 77 ITR 107 (SC): Penalty proceedings are separate from assessment proceedings.

High Court Decisions:
- Smt. Yawarunnissa Begum v. WTO [1975] 100 ITR 645 (AP): Legal representative not liable for penalty for deceased's defaults.
- A & F. Harvey Ltd. v. CWT [1977] 107 ITR 326 (Mad): No analogy between Wealth-tax Act and Income-tax Act due to fundamental differences.

Conclusion:
The court concluded that penalty cannot be levied on the legal representative of a deceased assessee for the belated filing of the return by the deceased. The absence of a provision similar to section 159(2) of the Income-tax Act in the Wealth-tax Act indicates no legislative intent to penalize the legal representative for defaults committed by the deceased.

Costs:
The assessee is entitled to costs, with counsel's fee set at Rs. 500 (one set).

Summary:
The High Court of Madras held that penalties under section 18(1)(a) of the Wealth-tax Act, 1957, cannot be levied on the legal representative for the defaults committed by the deceased assessee. The court emphasized the absence of specific provisions in the Wealth-tax Act similar to those in the Income-tax Act, which would allow for such penalties. The judgment clarified that the legal representative's liability is limited to the tax assessed and does not extend to penalties for defaults by the deceased.