2005 (9) TMI 33 - HC - Wealth-tax

Whether Tribunal was justified in holding that the ratio of the decision in the case of Ambika Cements was not applicable and that the penalty under section 18(1)(a) of the Act was exigible? - since the assessee has not filed any appeal against the order of the Deputy Commissioner of Income-tax (Appeals), therefore, reasonable cause before the period of January 6, 1983, cannot be considered. We answer the question referred hereinabove partly in favour of the assessee and partly in favour of the Revenue

Summary

Issues Involved:
1. Applicability of the decision in the case of Ambika Cements.
2. Justification of penalty under section 18(1)(a) of the Wealth-tax Act, 1957.

Issue-wise Detailed Analysis:

1. Applicability of the Decision in the Case of Ambika Cements:
The Tribunal had to decide whether the decision in the case of Ambika Cements was applicable to the assessee's case. The Tribunal held that the facts of the assessee's case were distinguishable from those in Ambika Cements. It stated, "In the case before us, the hard fact is that but for the search carried out by the Department, the return of wealth which was admittedly taxable, would not have been filed." The Tribunal concluded that the returns filed on November 9, 1984, were not voluntary in the true sense. The Tribunal also noted that the principle of double jeopardy does not apply to the penalty under section 18(1)(a) of the Act, as it is a civil liability and not a punishment for an offense. This view is supported by the Gujarat High Court in CIT v. J.L. Trivedi and Sons and the Supreme Court in Gujarat Travancore Agency v. CIT, where it was held that penalty under section 271(1)(a) is a civil obligation and does not require mens rea.

2. Justification of Penalty under Section 18(1)(a):
The Tribunal's decision to restore the penalty imposed by the Wealth-tax Officer was challenged on the grounds that the assessee was prevented by reasonable cause from filing the returns on time. The first appellate authority had accepted the assessee's reasons for delay, including the seizure of account books during searches and the detention of the assessee, which adversely affected the business. The Tribunal, however, did not consider these findings and reinstated the penalty for all assessment years. The High Court found that the Tribunal did not examine the facts in their entirety, noting that the account books were seized and not returned until May 28, 1982, which delayed the filing of income-tax returns until January 6, 1983. The High Court cited the case of Addl. CWT v. Babulal K. Shah, where the delay in filing income-tax returns was considered a reasonable cause for the delay in filing wealth-tax returns. The court also referred to CWT v. S.L. Khunnah, where delays due to disputes among family members were accepted as reasonable causes. The High Court concluded that the first appellate authority's view that the assessee was prevented by reasonable cause from filing the returns until January 6, 1983, was justified.

Conclusion:
The High Court held that the principle of double jeopardy does not apply to penalties under section 18(1)(a) of the Wealth-tax Act, and the Tribunal's decision in Ambika Cements was not applicable. However, the High Court found that the Tribunal did not adequately consider the reasonable cause for the delay in filing returns. The court directed the Tribunal to compute the penalty in light of its findings, partially favoring both the assessee and the Revenue.