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Issues:
1. Interpretation of penalty provisions under section 18(1)(a) of the W.T. Act, 1957. 2. Application of penalty rates before and after the amendment of April 1, 1969. Analysis: The High Court of Madhya Pradesh addressed a reference made by the Income-tax Appellate Tribunal concerning penalty proceedings under the Wealth Tax Act for the assessment years 1961-62, 1962-63, and 1963-64. The Tribunal had to decide whether the pre-amendment penalty provisions under section 18(1)(a) would apply for these years and if the penalty should be reduced to 50% of the tax payable by the assessee. The default in filing returns by the assessee led to penalty proceedings initiated by the Wealth Tax Officer, resulting in penalties imposed for each year. The Tribunal held that the amendment increasing the penalty rate could not be applied retroactively to the default dates in 1961, 1962, and 1963. The Tribunal reduced the penalties based on the pre-amendment provisions limiting the penalty to 2% of the tax for each month of default, not exceeding 50% in total. The court considered various decisions from different High Courts, including the Allahabad High Court and the Madras High Court, which emphasized applying the law as it stood on the date of default for penalty proceedings. The court highlighted that the law applicable to penalty defaults is the one in force at the time of the default, not the one in effect during the assessment year or when the penalty proceedings were initiated. This principle was reiterated in judgments from the Madras High Court and the Karnataka High Court. The court also noted a decision by the Andhra Pradesh High Court, emphasizing that the penalty provisions should align with the law in force at the time of the default, not with subsequent amendments. In conclusion, the High Court of Madhya Pradesh affirmed that the penalty provisions applicable to the assessee's defaults in filing returns on 30th June of the relevant years were those in force at the time of the defaults, not the amended provisions effective from April 1, 1969. Therefore, the court upheld the Tribunal's decision to reduce the penalties based on the pre-amendment penalty rates. The court answered both reference questions in the affirmative, directing each party to bear their own costs.
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