1987 (4) TMI 128 - AT - Wealth-tax

Issues Involved:
1. Misinterpretation and misapplication of the Supreme Court decision in Maya Rani Punj v. CIT.
2. Computation of penalties under section 18(1)(a) of the Wealth-tax Act.
3. Application of amended law for penalty computation.
4. Consistency in penalty computation for similar defaults.

Detailed Analysis:

1. Misinterpretation and Misapplication of the Supreme Court Decision in Maya Rani Punj v. CIT:
The revenue contended that the Appellate Assistant Commissioner (AAC) misinterpreted the Supreme Court's decision in Maya Rani Punj v. CIT [1986] 157 ITR 330. The Supreme Court held that the default under section 271(1)(a) of the IT Act or section 18(1)(a) of the WT Act in not submitting the return in time is a "continuing default." Therefore, the penalty for the default should be computed for each month with reference to the law as it existed in the month in which the default occurred. The revenue argued that penalties for defaults up to 31-3-1976 should be computed at 1/2% of the net wealth, not at 2% of the assessed tax.

2. Computation of Penalties under Section 18(1)(a) of the Wealth-tax Act:
The Wealth-tax Officer (WTO) computed penalties for the seven assessment years at various amounts based on the provisions before the amendment, which was 1/2% of the net wealth for each month of default. The AAC, however, reduced the penalties significantly by applying the amended law, which imposed a penalty at 2% of the assessed tax for each month of default. The AAC's decision was based on the interpretation that the amended provisions should apply for the computation of penalties.

3. Application of Amended Law for Penalty Computation:
The AAC held that the amended law, effective from 1-4-1976, should be applied for computing the penalties. This interpretation was supported by the Delhi High Court in CWT v. Amolak Singh Jain [1987] 163 ITR 825. The Tribunal upheld this view, stating that when two views are possible, the one favoring the assessee should be preferred, as per the Supreme Court's decision in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192.

4. Consistency in Penalty Computation for Similar Defaults:
The revenue argued that applying the amended law for defaults prior to 31-3-1976 would lead to absurd and discriminatory results. They pointed out that for identical defaults of the same period, different amounts of penalties would be justified depending on the dates of submission of return and assessment orders. The Tribunal, however, noted that the legislature's wisdom in providing different quantum of penalties for similar defaults from time to time should not be questioned by the courts. The Tribunal emphasized that the penalty proceedings are initiated when the authorities record satisfaction that a default has been committed, and the law applicable on the date of such satisfaction should be applied.

Conclusion:
The Tribunal concluded that the penalties for defaults under section 18(1)(a) of the Wealth-tax Act should be computed based on the amended provisions effective from 1-4-1976. The Tribunal dismissed the revenue's appeals, upholding the AAC's order that the penalties were to be recomputed according to the amended law. The Tribunal emphasized that the default is a continuing one and the amended provisions should apply for the entire period of default. The Tribunal also rejected the revenue's argument for applying different provisions for different periods, stating that such an approach would lead to an impermissible re-writing of the statute.

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