Section 18 - Penalty for failure to furnish returns, to comply with notices and concealment of assets, etc. - Wealth Tax Act, 1957

1 [ Penalty for failure to furnish returns, to comply with notices and concealment of assets, etc. 2 18. (1) If the 3 [Assessing Officer], 4 [Deputy Commissioner (Appeals)], 5 [Commissioner (Appeals),] 6 [Chief Commissioner or Commissioner] or Appellate Tribunal in the course of any proceed ings under this Act is satisfied that any person (a) 7 [***] (b) has 8 [***] failed to comply with a notice under sub-section (2) or sub-section (4) of section 16 ; or (c) has concealed the particulars of any assets or fur nished inaccurate particulars of any assets or debts, he or it may, by order in writing, direct that such person shall pay by way of penalty (i) 9 [***] 10 [(ii) in the cases referred to in clause (b), in addi tion to the amount of wealth-tax payable by him, a sum which shall not be less than one thousand rupees but which may extend to twenty-five thousand rupees for each such failure ;] 11 [(iii) in the cases referred to in clause (c), in addition to any wealth-tax payable by him, a sum which shall not be less than, but which shall not exceed five times, the amount of tax sought to be evaded by reason of the concealment of particu lars of any assets or the furnishing of inaccurate particulars in respect of any assets or debts : 12 [ Provided that in the cases referred to in clause (b), no penalty shall be imposable if the person proves that there was a reasonable cause for the failure referred to in that clause.] Explanation 1. For the purposes of clause (iii) of this sub-section, the expression "the amount of tax sought to be evaded" (a) in a case to which Explanation 3 applies, means the tax on the net wealth assessed ; (b) in any other case, means the difference between the tax on the net wealth assessed and the tax that would have been chargeable had the net wealth assessed been reduced by the amount which represents the value of any assets in respect of which particulars have been concealed or inaccurate particulars have been furnished and of any debts in respect of which inaccurate particulars have been furnished. Explanation 2. Where in respect of any facts material to the computation of the net wealth of any person under this Act, (A) such person fails to offer an explanation or offers an explanation which is found by the 13 [Assessing Officer] or the 14 [Deputy Commissioner (Appeals)] 15 [or the Commissioner (Ap peals)] 16 [or the Commissioner] to be false, or (B) such person offers an explanation which he is not able to substantiate 17 [and fails to prove that such explanation is bona fide and that all the facts relating to the same and materi al to the computation of his net wealth have been disclosed by him], then, the amount added or disallowed in computing the net wealth of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the value of the assets in respect of which particulars have been con cealed. 18 [***]] 19 [ Explanation 3. Where any person 20 [***] fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 17A, a return of his net wealth which he is required to furnish under section 14 in respect of any assessment year commencing on or after the 1st day of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub-section (4) of section 16 or sub-section (1) of sec tion 17 and the Assessing Officer or the Deputy Commissioner (Appeals) or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has assessable net wealth, then, such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his assets or furnished inaccurate particulars of any assets or debts in respect of such assessment year, notwithstanding that such person furnishes a return of his net wealth at any time after the expiry of either of the periods aforesaid applicable to him in pursuance of a notice under section 17.] Explanation 4. Where the value of any asset returned by any person is less than seventy per cent of the value of such asset as determined in an assessment under section 16 or section 17, such person shall be deemed to have furnished inaccurate particu lars of such asset within the meaning of clause (c) of this sub-section, unless he proves that the value of the asset as returned by him is the correct value.] 21 [ Explanation 5. Where in the course of a search under section 37A, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets represent or form part of his net wealth, (a) on any valuation date falling before the date of the search, but the return in respect of the net wealth on such date has not been furnished before the date of the search or, where such return has been furnished before the said date, such assets have not been declared in such return ; or ( b) on any valuation date falling on or after the date of the search, then, notwithstanding that such assets are declared by him in any return of net wealth furnished on or after the date of the search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of such assets or fur nished inaccurate particulars of such assets, 22 [unless (1) such assets are recorded, (i) in a case falling under clause (a), before the date of the search ; and (ii) in a case falling under clause (b), on or before such date, in the books of account, if any, maintained by him or such assets are otherwise disclosed to the 23 [Chief Commissioner or Commis sioner] before the said date ; or (2) he, in the course of the search, makes a statement under sub-section (4) of section 37A that any money, bullion, jewellery or other valuable article or thing found in his pos session or under his control, forms part of his net wealth which has not been disclosed so far in his return of net wealth to be furnished before the expiry of the time specified in sub-section (1) of section 14, and also specifies in the statement the manner in which such net wealth has been acquired and pays the tax, together with interest, if any, in respect of such net wealth].] 24 [ Explanation 6. Where any adjustment is made in the wealth declared in the return under the proviso to clause (a) of sub-section (1) of section 16 and additional wealth-tax charged under that section, the provisions of this sub-section shall not apply in relation to the adjustments so made.] 25 [ (1A) Where any amount is added or disallowed in computing the net wealth of an assessee in any order of assessment or reassessment and the said order contains a direction for initiation of penalty proceedings under clause (c) of sub-section (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause (c). ] (2) No order shall be made under sub-section (1) unless the person concerned has been given a reasonable opportunity of being heard. (2A) and (2B) 26 [***] 27 [(3) No order imposing a penalty under sub-section (1) shall be made, (i) by the Income-tax Officer, where the penalty exceeds ten thousand rupees ; (ii) by the Assistant Commissioner 28 [or Deputy Commissioner], where the penalty ex ceeds twenty thousand rupees, except with the prior approval of the 29 [Joint] Commissioner.] (3A) 30 [***] (4) A 31 [Deputy Commissioner (Appeals)], 32 [a Commissioner (Ap peals),] a 33 [Chief Commissioner or Commissioner] or the Appellate Tribunal on making an order under this section imposing a penalty, shall forthwith send a copy of the same to the 34 [Assessing Officer.] 35 [(5) No order imposing a penalty under this section shall be passed (i) in a case where the assessment to which the proceedings for imposition of penalty relate is the subject-matter of an appeal to the Deputy Commissioner (Appeals) or the Commissioner (Appeals) under section 23 or an appeal to the Appellate Tribunal under sub-section (2) of section 24, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Deputy Commissioner (Appeals) or the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever is later ; (ii) in a case where the relevant assessment is the subject-matter of revision under sub-section (2) of section 25, after the expiry of six months from the end of the month in which such order of revision is passed ; (iii) in any other case, after the expiry of the finan cial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. Explanation . In computing the period of limitation for the purposes of this section, (i) any period during which the immunity granted under section 22H remained in force ; (ii) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 39 ; and (iii) any period during which a proceeding under this section for the levy of penalty is stayed by an order or injunc tion of any court, shall be excluded. (6) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1989 shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applica ble to the relevant assessment year.] ----------------------- Notes: 1. Substituted by the Wealth-tax (Amendment) Act, 1964, w.e.f. 1-4-1965. Restored to its original provision by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier, it was substituted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date. 2. See also Circular No. 8-WT, dated 15-11-1965. For details see Referencer. 3. Substituted vide the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988, before it was read as:- "Wealth-tax Officer" 4. Substituted vide the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988., before It was read as:-"Appellate Assistant Commissioner" by 5. Inserted by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978. 6. Substituted vide the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988., before it was read as:- "Commissioner" 7. Omitted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Before omission, clause (a), as amended by the Taxation Laws (Amendment Miscellaneous Provisions) Act, 1986, w.e.f. 10-9-1986, stood as under: "(a) has failed to furnish the return which he is required to furnish under sub-section (1) of section 14 or by notice given under sub-section (2) of section 14 or section 17, or has failed to furnish within the time allowed and in the manner required by sub-section (1) of section 14 or by such notice, as the case may be; or" 8. Omitted vide the Taxation Laws (Amendment Miscellaneous Provisions) Act, 1986, w.e.f. 10-9-1986., "without reasonable cause" 9. Omitted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Before omission, clause (i), as amended by the Finance Act, 1969, w.e.f. 1-4-1969, Finance (No. 2) Act, 1971, w.e.f. 1-4-1972 and Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976, stood as under : '(i) in the cases referred to in clause (a), in addition to the amount of wealth-tax, if any, payable by him, a sum equal to two per cent of the assessed tax for every month during which the default continued. Explanation . In this clause, "assessed tax" means the wealth-tax chargeable under the provisions of this Act;' 10. Substituted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Before substitution, clause (ii), as amended by the Finance Act, 1969, w.e.f. 1-4-1969 and Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976, stood as under: "(ii) in the cases referred to in clause (b), in addition to the amount of wealth-tax payable by him, a sum which shall not be less than ten per cent, but which shall not exceed fifty per cent of the amount of the wealth-tax, if any, which would have been avoided if the net wealth returned by such person had been accepted as the correct net wealth ;" 11. Substituted, along with Explanations 1 and 2, by the Finance Act, 1968, w.e.f. 1-4-1968 and later on substituted, along with clauses (i), (ii) and (iii) and Explanations 1 and 2, by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1975. 12. Substituted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Prior to its substitution, proviso, as inserted by the Taxation Laws (Amendment Miscellaneous Provisions) Act, 1986, w.e.f. 10-9-1986, stood as under : " Provided that in the cases referred to in clause (a) or clause (b), no penalty shall be imposable if the person proves that there was reasonable cause for the failure referred to in those clauses." 13. Substituted for "Wealth-tax Officer" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 14. Substituted vide the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988., before it was read as;- "Appellate Assistant Commissioner" 15. Inserted by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978. 16. Inserted by the Finance Act, 2002, w.e.f. 1-6-2002. 17. Inserted vide the Taxation Laws (Amendment Miscellaneous Provisions) Act, 1986, w.e.f. 10-9-1986. 18. Omitted by the Taxation Laws (Amendment Miscellaneous Provisions) Act, 1986, w.e.f. 10-9-1986. Prior to its omission, proviso stood as under: " Provided that nothing contained in this Explanation shall apply to a case referred to in clause ( B ) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his net wealth have been disclosed by him." 19. Substituted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Before substitution, Explanation 3, as amended by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978 and Taxation Laws (Amendment Miscellaneous Provisions) Act, 1986, w.e.f. 10-9-1986, stood as under : " Explanation 3. Where any person who has not previously been assessed under this Act fails to furnish within the period specified in clause (a) or, as the case may be, clause (b) of sub-section (1) of section 17A, a return of his net wealth which he is required to furnish under section 14 in respect of any assessment year and, until the expiry of either of the periods applicable to him, no notice had been issued to him under sub-section (2) of section 14 or sub-section (1) of section 17 and the Assessing Officer or the Deputy Commissioner (Appeals) or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has assessable net wealth, then, such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his assets or furnished inaccurate particulars of any assets or debts in respect of such assessment year, notwithstanding that such person furnishes a return of his net wealth at any time after the expiry of either of the periods aforesaid applicable to him in pursuance of a notice under section 17." 20. Omitted by the Finance Act, 2002, w.e.f. 1-4-2003. Before it was read as:- "who has not previously been assessed under this Act," 21. Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984. 22. Substituted for the following portion by the Taxation Laws (Amendment Miscellaneous Provisions) Act, 1986, w.e.f. 10-9-1986: "unless such assets are recorded, (i) in a case falling under clause (a), before the date of the search ; and (ii) in a case falling under clause (b), on or before such date, in the books of account, if any, maintained by him or such assets are otherwise disclosed to the Commissioner before the said date." 23. Substituted vide the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. Before it was read as:- "Commissioner" 24. Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. 25. Inserted by the Finance Act, 2008, w.r.e.f. 1-4-1989. Earlier sub-section (1A) was inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972 and omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. 26. Omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. Provisions of sub-sections (2A) and (2B) have been incorporated in section 18B. These sub-sections were inserted by the Finance (No. 2) Act, 1965, w.e.f. 11-9-1965. Sub-section (2A) was later on amended by inserting proviso thereto by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971. 27. Substituted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Before substitution, sub-section (3), as amended by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971 and substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976, stood as under: "(3) Notwithstanding anything contained in clause (iii) of sub-section (1), if, in a case falling under clause (c) of that sub-section, the amount (as determined by the Assessing Officer on assessment) in respect of which penalty is imposable under clause (c) aforesaid exceeds a sum of twenty-five thousand rupees, the Assessing Officer shall not issue any direction under sub-section (1) for payment by way of penalty without the previous approval of the Deputy Commissioner." 28. Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998. 29. Substituted vide the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998. Before it was read as:- "Deputy" 30. Omitted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Before omission, sub-section (3A) stood as under: "(3A) Notwithstanding anything contained in this section, the penalty imposed under clause (iii) of sub-section (1) read with Explanation 3 to that sub-section and the penalty imposed under clause (i) of that sub-section shall not exceed, in the aggregate, five times the amount of the tax sought to be evaded." 31. Substituted vide the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. Before it was read as:- "Appellate Assistant Commissioner" 32. Inserted by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978. 33. Substituted vide the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. Before it was read as:- "Commissioner" 34. Substituted vide the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. Before it was read as:- "Wealth-tax Officer" 35. Substituted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Before substitution, sub-section (5), as amended by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971, Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976 and Finance (No. 2) Act, 1977, w.e.f. 10-7-1978, stood as under : "(5) No order imposing a penalty under this section shall be passed (a) in a case where the assessment to which the proceedings for imposition of penalty relate is the subject-matter of an appeal of the Deputy Commissioner (Appeals) or Commissioner (Appeals) under section 23 or an appeal to the Appellate Tribunal under sub-section (2) of section 24, after the expiration of a period of (i) two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or (ii) six months from the end of the month in which the order of the Deputy Commissioner (Appeals) or Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later ; (b) in any other case, after the expiration of two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. Explanation . In computing the period of limitation for the purposes of this section, (i) any period during which the immunity granted under section 22H remained in force ; (ii) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 39 ; and (iii) any period during which a proceeding under this section for the levy of penalty is stayed by an order or injunction of any court, shall be excluded."