1982 (6) TMI 106 - AT - Wealth-tax

Summary

Issues Involved:

1. Validity of the returns signed by the general power of attorney holder.
2. Timeliness of the penalty orders imposed by the Wealth Tax Officer (WTO).
3. Reasonable cause for delay in filing returns.
4. Power of the Appellate Assistant Commissioner (AAC) to extend the period of limitation for penalty orders.

Issue-wise Detailed Analysis:

1. Validity of the Returns Signed by the General Power of Attorney Holder:

The returns of net wealth for the assessment years 1970-71 to 1972-73 were filed by Shri Dalip Singh, the general power of attorney holder for the Karta, Shri Gurbax Singh Grewal. According to section 15A(b) of the Wealth-tax Act, the returns should have been signed and verified by the Karta or, under certain conditions, by another adult member of the family. The Karta was neither mentally incapacitated nor out of India at the relevant times. Therefore, the returns signed by Dalip Singh were invalid. Despite this, the assessment proceedings commenced without contesting this issue initially.

2. Timeliness of the Penalty Orders Imposed by the WTO:

According to section 18(5) of the Wealth-tax Act, the original penalty orders for the assessment year 1970-71 could be passed only by 23rd October, 1975, and for the assessment years 1971-72 and 1972-73 by 31st March, 1976. The WTO initially imposed penalties on 25th March, 1976, but these were set aside by the AAC with directions to re-pass the orders according to law. The WTO then issued fresh penalty orders on 28th March, 1979. The learned counsel for the assessee argued that these orders were barred by time as they exceeded the statutory limitation period. The Tribunal agreed, citing precedents that an appellate authority cannot extend the period of limitation through its directions.

3. Reasonable Cause for Delay in Filing Returns:

The assessee contended that the delay in filing returns was due to the Karta's chronic illness and the fluid legal position regarding the wealth-tax on agricultural lands. The CBDT had issued a circular recognizing the unsettled legal position and extended the filing deadline. The Tribunal accepted that the Karta's illness and the unsettled legal position constituted reasonable cause for the delay, thus negating the penalties.

4. Power of the AAC to Extend the Period of Limitation for Penalty Orders:

The AAC had set aside the original penalty orders and directed the WTO to re-pass the orders according to law. The Tribunal held that the AAC could not extend the statutory limitation period through its directions. Citing various judgments, the Tribunal concluded that the penalty orders issued by the WTO on 28th March, 1979, were barred by limitation and thus invalid.

Conclusion:

The Tribunal allowed the appeals, holding that the penalty orders were invalid on two grounds: they were based on invalid returns and were issued beyond the statutory limitation period. Additionally, the Tribunal accepted that there was reasonable cause for the delay in filing the returns due to the Karta's illness and the unsettled legal position regarding wealth-tax on agricultural lands. Consequently, the penalties were canceled.