1975 (1) TMI 17 - HC - Wealth-tax

Summary

Issues Involved:
1. Validity of the Commissioner's order under section 18(2A) of the Wealth-tax Act.
2. Whether the petitioner was entitled to waiver of penalty under section 18(2A).
3. The legality of the Wealth-tax Officer's penalty proceedings.
4. The requirement for a hearing before passing the order.
5. Whether the Commissioner acted within his jurisdiction and applied the correct legal principles.

Issue-wise Detailed Analysis:

1. Validity of the Commissioner's Order Under Section 18(2A):
The petitioner challenged the Commissioner's order dated November 8, 1971, on the grounds that it was passed without proper application of mind and did not satisfy the conditions for waiver of penalty as per section 18(2A) of the Wealth-tax Act. The court noted that the Commissioner's order was contradictory. While acknowledging that the conditions under section 18(2A) were fulfilled, the Commissioner still directed the levy of a 5% penalty, which was inconsistent with the statute's requirements.

2. Entitlement to Waiver of Penalty Under Section 18(2A):
The petitioner argued that she met all the conditions for waiver of penalty under section 18(2A). The court observed that the Commissioner acknowledged the fulfillment of these conditions, including voluntary filing of returns before any notice was issued by the department. The court emphasized that the Commissioner is bound to waive or reduce the penalty if the conditions under section 18(2A) are met, and the imposition of penalty should be judicially exercised, not based on whims.

3. Legality of the Wealth-tax Officer's Penalty Proceedings:
The penalty proceedings initiated by the Wealth-tax Officer were found to be influenced by the Commissioner's directive, which amounted to interference with the Wealth-tax Officer's discretion. The court highlighted that the proceedings under sections 18(1) and 18(2A) are distinct, with different criteria for imposing penalties. The Wealth-tax Officer's orders were non-speaking and did not reflect an independent application of mind, thus were quashed.

4. Requirement for a Hearing Before Passing the Order:
The petitioner was not given a proper hearing before the initial order was passed. Although a hearing was eventually afforded on the directive of the Central Board of Direct Taxes, the Commissioner reiterated his earlier order without providing substantial reasoning. The court held that the lack of an effective hearing initially and the non-speaking nature of the subsequent order rendered the Commissioner's actions invalid.

5. Jurisdiction and Application of Legal Principles by the Commissioner:
The court found that the Commissioner misjudged the scope of his jurisdiction under section 18(2A) and failed to apply the correct legal principles. The Supreme Court's principles in Hindustan Steel Ltd. v. State of Orissa were cited, emphasizing that penalties should not be imposed unless there is deliberate defiance of law or contumacious conduct. The Commissioner's directive to levy a penalty, despite acknowledging the fulfillment of section 18(2A) conditions, was deemed illegal and without jurisdiction.

Conclusion:
The court quashed the Commissioner's orders dated November 8, 1971, and the subsequent penalty orders passed by the Wealth-tax Officer. A mandamus was issued directing the Commissioner to hear the petitioner afresh and decide her application under section 18(2A) according to law. The Wealth-tax Officer was also instructed to decide the question of penalty levy afresh. The petition was allowed with costs awarded to the petitioner.