1987 (6) TMI 80 - AT - Wealth-tax

Summary

Issues:
- Appeals against cancellation of penalties under sections 18(1)(c) and 18(1)(a) of the WT Act, 1957.
- Interpretation of agreement between assessee and Department regarding filing returns and penalty proceedings.

Analysis:
The appeals before the Appellate Tribunal ITAT CALCUTTA-C were directed against the cancellation of penalties under sections 18(1)(c) and 18(1)(a) of the WT Act, 1957. The assessee had initially filed returns showing nil wealth for assessment years due in 1971 and 1972, but later agreed to revised amounts based on discussions with tax authorities. The assessments were reopened, and the assessee filed returns as per the agreement, albeit claiming relief under section 5(1A) of the Act. The WTO did not grant the exemption, leading to penalty proceedings under sections 18(1)(a) and 18(1)(c) for not honoring the agreement by filing appeals. The AAC and CIT(A) subsequently canceled the penalties, prompting the Department to appeal. The key contention was whether the assessee undertook not to file appeals as part of the agreement.

The Department argued that the assessee violated the agreement by appealing, releasing them from the obligation not to initiate penalties. They contended that penalties should have been imposed as fresh assessments were made after the AAC's order, which was not challenged earlier. In contrast, the assessee's representative asserted there was no agreement barring appeals and that penalties were rightly canceled as the returns were filed as agreed. The Tribunal examined the agreement and found no clause restricting appeals; it only required filing returns for specified amounts. Since the assessee complied with this aspect, the Department was obligated not to initiate penalties. The Tribunal held that the Department's failure to fulfill its obligation under the agreement precluded penalty imposition, affirming the cancellation of penalties by the appellate authorities.

In conclusion, the Tribunal dismissed all appeals, emphasizing that the Department's obligation not to initiate penalties, as per the agreement, was contingent on the assessee filing returns as agreed, without any prohibition on appealing. The failure to include an anti-appeal clause in the agreement meant the Department could not penalize the assessee for exercising their right to appeal, thereby upholding the cancellation of penalties.