2006 (2) TMI 109 - HC - Wealth-tax

Penalty furnishing of inaccurate particulars - Whether, Tribunal is justified in sustaining the action of the first appellate authority in approving the levy of penalty under section 18(1)(a) and 18(1)(c) of the Act? - Whether, on the facts and in the circumstances of the case, the Tribunal is justified in confirming the action of the lower authorities in invoking Explanation 4 to section 18(1)(c) of the Act? - only explanation of the assessee was that he was under the bona fide impression that the assets were not taxable for these years - In view of the clear and unambiguous nature of the provisions of section 40(3) of the Finance Act of 1983, it can be said that a patently wrong reading of the section cannot be camouflaged in terms of a bona fide mistake. It is therefore clear that the assessee had a taxable asset. In terms of Explanation 4 to section 18(1)(c) the assessee was deemed to have furnished inaccurate particulars. Furthermore, the assessee was not able to substantiate its contention that its belief in the non-assessability of non-agricultural land was a bona fide mistake. The findings recorded by the Tribunal do not suffer from any legal infirmity

Summary

Issues:
1. Justification of sustaining penalty under section 18(1)(a) by the Tribunal.
2. Justification of sustaining penalty under section 18(1)(c) by the Tribunal.
3. Confirmation of invoking Explanation 4 to section 18(1)(c) by the Tribunal.

Analysis:

Issue 1 - Penalty under Section 18(1)(a):
The case involved an assessee, a company not substantially owned by the public, liable for wealth-tax due to assets specified in section 40(3) of the Finance Act, 1983. Despite notices and delays, the assessee claimed a bona fide impression that the land was exempt from wealth-tax. The Assessing Officer, upheld by the Commissioner of Wealth-tax (Appeals), imposed penalties under section 18(1)(a). The Tribunal found no reasonable cause for the delay in filing returns and refused to interfere. The High Court agreed, stating the assessee had no justifiable reason for the delay, thereby upholding the penalty under section 18(1)(a).

Issue 2 - Penalty under Section 18(1)(c):
Regarding penalty under section 18(1)(c), the assessee contended a bona fide belief that the property was exempt from wealth-tax. However, the Assessing Officer, supported by the Commissioner of Income-tax (Appeals) and the Tribunal, deemed the assessee to have furnished inaccurate particulars under Explanation 4 to section 18(1)(c). The High Court noted the assessee's failure to substantiate the belief as a bona fide mistake, emphasizing the clear provisions of the Finance Act, 1983, and the assistance of qualified professionals. The Court upheld the Tribunal's decision, stating the findings were based on evidence and did not contain any legal flaws.

Issue 3 - Invocation of Explanation 4 to Section 18(1)(c):
The Tribunal's confirmation of invoking Explanation 4 to section 18(1)(c) was based on the assessee's failure to demonstrate a bona fide mistake regarding the assessability of the property. The High Court concurred, highlighting the lack of evidence preventing the assessee from understanding the relevant provisions and emphasizing the clear nature of the law. The Court upheld the Tribunal's decision, stating the findings were supported by the evidence on record.

In conclusion, the High Court ruled in favor of the Revenue, dismissing the tax cases and upholding the penalties imposed under sections 18(1)(a) and 18(1)(c) against the assessee.