1975 (9) TMI 61 - AT - Wealth-tax

Summary

Issues Involved:
1. Alleged concealment of wealth and furnishing inaccurate particulars of wealth.
2. Validity of initiation and commencement of penalty proceedings.
3. Trustees' liability as representative assessees.
4. Applicability of penalty provisions under the Wealth Tax Act, 1957, to trustees in a representative capacity.

Issue-wise Detailed Analysis:

1. Alleged Concealment of Wealth and Furnishing Inaccurate Particulars of Wealth:
The trustees of H.E.H. The Nizam's Family Trust were penalized under Section 18(1)(c) of the Wealth Tax Act, 1957, for allegedly concealing wealth and furnishing inaccurate particulars for the assessment years 1964-65 to 1972-73. The trustees argued that they were under a bona fide belief that only life interest had to be declared, not the corpus. The Income-tax Appellate Tribunal (ITAT) found that the trustees had consistently filed returns based on this belief and had disclosed the existence of the corpus. The ITAT noted that the trustees had sought legal advice and had cooperated with the Department once the correct legal position was clarified. The ITAT concluded that there was no wilful or deliberate intention to conceal wealth, and thus, the penalties were unjustified.

2. Validity of Initiation and Commencement of Penalty Proceedings:
The assessee argued that the penalty proceedings were invalid as there was no proper initiation. The ITAT observed that the Wealth Tax Officer (WTO) had recorded satisfaction for the issue of penalty notices on January 2, 1973, before the returns were filed on January 29, 1973. The ITAT found that the satisfaction recorded on January 2, 1973, was related to a different trust (Housing Accommodation Trust) and not to the Nizam's Family Trust. The ITAT held that the penalty proceedings were invalid as the satisfaction for initiating penalty proceedings was not linked to the correct trust.

3. Trustees' Liability as Representative Assessees:
The trustees contended that they were not liable as representative assessees for the corpus under consideration. The ITAT noted that the trustees had been filing returns in their representative capacity for several years, and the Department had accepted these returns. The ITAT held that the trustees were indeed liable as representative assessees, but their bona fide belief and consistent practice of declaring life interest only negated any gross neglect on their part.

4. Applicability of Penalty Provisions under the Wealth Tax Act, 1957, to Trustees in a Representative Capacity:
The trustees argued that the Wealth Tax Act, 1957, did not empower the WTO to levy penalties on trustees in a representative capacity. The ITAT examined Section 21 of the Act, which deals with the assessment of trustees. The ITAT found that the section provides for the levy of wealth tax but does not explicitly mention penalties. The ITAT referred to the Andhra Pradesh High Court's decision, which supported the view that penalties could not be levied on trustees in a representative capacity. Consequently, the ITAT held that the penalties imposed were not legally sustainable.

Conclusion:
The ITAT concluded that the trustees had acted in good faith and had no intention to conceal wealth. The penalties imposed under Section 18(1)(c) of the Wealth Tax Act, 1957, were unjustified and were therefore canceled. The appeals were allowed in favor of the trustees.