2006 (8) TMI 134 - HC - Wealth-tax

Imposition of penalty under section 18(1)(c) Concealment of Wealth - applying the strict construction of penalty provisions contained in clause (c) of sub-section (1) of section 18 of the Act, we find that prior to the amendment in Explanation 3 by the Director Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989, in a case where the person who has previously been assessed under the Act does not file any return in response to the notice or even where time for filing the return has expired has not filed any return there cannot be any concealment for which penalty provision can be imposed. - Held that in the present case the respondent-assessee has not concealed the particulars of his wealth for which no penalty under clause (c) of sub-section (1) of section 18 of the Act is exigible.

Issues Involved:
1. Imposition of penalty under section 18(1)(c) of the Wealth-tax Act, 1957.
2. Interpretation of "concealment" and "furnishing inaccurate particulars" under section 18(1)(c).
3. Applicability of Explanations to section 18(1)(c) in the context of non-filing of returns.
4. Interpretation of penalty provisions in tax statutes.

Issue-wise Detailed Analysis:

1. Imposition of penalty under section 18(1)(c) of the Wealth-tax Act, 1957:
The appeal concerns the imposition of a penalty on the respondent-assessee under section 18(1)(c) for the assessment year 1977-78. The respondent had not filed any return despite notices under section 17 and section 16(4), leading to an ex parte assessment and a penalty of Rs. 51,420. The Commissioner of Income-tax (Appeals) annulled the penalty, stating that no return was filed, hence no concealment or inaccurate particulars were provided. The Tribunal upheld this decision.

2. Interpretation of "concealment" and "furnishing inaccurate particulars" under section 18(1)(c):
The court emphasized that penalty under section 18(1)(c) applies only where a person has "concealed the particulars of any assets or furnished inaccurate particulars of any assets or debts." The court referred to various precedents, including the apex court's decision in Narain Das Suraj Bhan v. Commissioner, Sales Tax, which clarified that concealment or furnishing inaccurate particulars must be in the return filed. If no return is filed, the concealment clause does not apply.

3. Applicability of Explanations to section 18(1)(c) in the context of non-filing of returns:
The court examined Explanations 1 to 4 of section 18(1)(c). It concluded that none of these Explanations applied to the respondent's case, as the respondent had been previously assessed. Explanation 3, which deems non-filing of returns as concealment, was applicable only to those not previously assessed before its amendment in 1989. Hence, the court found no basis for applying penalty provisions under section 18(1)(c) for non-filing of returns in this case.

4. Interpretation of penalty provisions in tax statutes:
The court reiterated that penalty provisions must be strictly construed. It cited the apex court's ruling in CIT v. Vegetable Products Ltd., which favored interpretations that benefit the assessee in cases of ambiguity. The court also referred to J.K. Synthetics Ltd. v. CTO, emphasizing the strict construction of penalty statutes. Given this strict interpretation, the court concluded that the respondent-assessee had not concealed particulars of wealth, thus no penalty under section 18(1)(c) was exigible.

Conclusion:
The court dismissed the appeal, affirming that the respondent-assessee did not conceal particulars of wealth or furnish inaccurate particulars, as no return was filed. Consequently, no penalty under section 18(1)(c) of the Wealth-tax Act, 1957, was applicable.

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