1977 (5) TMI 23 - AT - Wealth-tax

Issues Involved:
1. Validity of penalty proceedings initiation.
2. Opportunity of being heard.
3. Defects in penalty notices.
4. Justification for delay in filing Wealth Tax (WT) returns.
5. Applicability of penalties under different sections of the WT Act.

Detailed Analysis:

1. Validity of Penalty Proceedings Initiation:
The Department appealed against the AAC's decision to cancel penalties levied under s. 18(1)(a) of the WT Act for the assessment years 1967-68 to 1970-71. The AAC held that the penalty proceedings were invalid as the notices were issued long after the completion of the assessment proceedings. The Tribunal found that the initiation of penalty proceedings was valid. The WTO who completed the assessments had directed the issuance of penalty notices during the assessment proceedings, and the successor WTO's issuance of notices later did not invalidate the proceedings. The Tribunal cited the Supreme Court case of R.N. Manasvi (86 ITR 567) to support this view.

2. Opportunity of Being Heard:
The AAC had also canceled the penalties on the ground that the assessee was not given an opportunity of being heard. The Tribunal disagreed, noting that the penalty notices issued by the WTO required the assessee to appear or send a written reply, which the assessee did. The WTO considered the written replies before levying penalties. The Tribunal held that the requirement of law for giving an opportunity of being heard was fulfilled, and the penalties were not invalidated by the lack of a further personal hearing.

3. Defects in Penalty Notices:
The AAC found the penalty notices defective as they did not specify the exact default. The Tribunal held that while the notices did not indicate whether the penalties were for defaults under s. 14(1), s. 14(2), or s. 17, they clearly indicated that penalties were for delay in filing returns. The assessee understood the notices and provided detailed replies. Thus, the Tribunal concluded that the notices served their purpose and any defect did not invalidate the penalty proceedings.

4. Justification for Delay in Filing WT Returns:
The AAC accepted the assessee's contention that the delay in filing WT returns was due to the delay in finalizing the accounts of Nanhoomal Jyoti Pd., a firm in which the assessee was a partner. The Tribunal agreed, noting that the firm was dissolved on 31st Aug., 1966, and the accounts were finalized only in December 1971 due to disputes among partners. The Tribunal found no evidence to rebut this claim and noted that the IT returns for the subsequent years were also filed late due to the same reason, with no penalties levied under s. 271(1)(a) of the IT Act. The Tribunal upheld the AAC's finding that the delay was for a reasonable cause and penalties were not justified.

5. Applicability of Penalties Under Different Sections of the WT Act:
The AAC held that penalties under s. 18(1)(a) could not be levied for default under s. 14(1) after the issue of notice under s. 14(2). The Tribunal disagreed, citing decisions from the Delhi High Court (CIT vs. Hindustan Industrial Corpn., 85 ITR 657) and Andhra Pradesh High Court (Mullapudi Venkatarayulu vs. Union of India, 99 ITR 448) which support the view that default under s. 14(1) can still be penalized after a notice under s. 14(2). However, since the delay was found to be for a reasonable cause, the Tribunal upheld the AAC's decision to cancel the penalties.

Conclusion:
The Tribunal upheld the AAC's order canceling the penalties for the assessment years 1967-68 to 1970-71, agreeing that the delay in filing WT returns was for a reasonable cause due to the delay in finalizing the accounts of Nanhoomal Jyoti Pd. The appeals by the Department were dismissed.

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