2014 (1) TMI 415 - HC - Wealth-tax

Penalty under section 18(1)(c) - Tribunal Upheld penalty but reduced the amount - Prior approval of the requisite authority - Valuation of immovable property - Held that - Section 7 of the Wealth Tax Act is emphatic which provides that valuation shall be made as provided in Schedule III. Therefore, no other mode of valuation was permissible. The contention that schedule III does not apply to a vacant piece of land is not acceptable. The caption of part B of schedule III is immovable property . It is difficult to proceed on the basis that the expression does not include a vacant piece of land. If that were the intention of the legislature then the vacant piece of land cannot taxed at all. It is no doubt true that the provisions contained chapter B of schedule III refer to a vacant piece of land appurtenant to a building which is not the case before us. Considering that the Act provides for valuation in the manner indicated therein, it is difficult if not impossible to hold that any other mode of valuation is permissible - filing of the valuation report along with the return was not mandatory. Production of the same at the time of hearing was enough. The assessee cannot be denied a right to adduce evidence to substantiate his contention at the hearing. It was the obligation of the Income Tax Officer to indicate in his order that he passed the order after obtaining requisite approval. Since the order passed by the Income Tax Officer does not contain the requisite recital, it has to be held that no such approval was obtained. The order itself is incompetent. An incompetent order is a nullity and the point as regards nullity can be taken at any stage. It can even be taken at the stage of execution. Even if the orders imposing penalty were not set aside by us, which we propose to do, the order could not have been executed - Decided in favour of assessee.

Summary

Issues Involved:
1. Justification of penalty under Explanation 2 to section 18(1)(c) of the Wealth Tax Act, 1957.
2. Validity of the Appellate Tribunal's decision regarding the valuer's report and its relevance.
3. Jurisdiction of the Wealth (Income) Tax Officer under Section 18(1) of the Wealth Tax Act, 1957 without prior approval under section 18(3).
4. Whether the omission to take prior approval is a curable defect under Section 42C of the Wealth Tax Act.

Issue-wise Detailed Analysis:

1. Justification of Penalty under Explanation 2 to Section 18(1)(c) of the Wealth Tax Act, 1957:
The Income Tax Officer imposed a penalty for the assessment years 1989-90 and 1990-91, concluding that the assessee furnished inaccurate particulars in the Wealth Tax Return. The Tribunal upheld this decision. The assessee argued that the valuation disclosed was based on a registered valuer's report, which should not be considered concealment. The court noted that the valuation should have adhered to Section 7 of the Wealth Tax Act, which mandates valuation as per Schedule III. The court concluded that no other mode of valuation was permissible, thus answering the first question in the negative.

2. Validity of the Appellate Tribunal's Decision Regarding the Valuer's Report:
The Tribunal's decision was challenged on the grounds that it ignored the fact that the valuer's report was filed during the assessment proceedings, not with the return. The court agreed that filing the valuation report along with the return was not mandatory, and its production at the hearing was sufficient. The second question was answered in the affirmative, supporting the assessee's right to present evidence during the hearing.

3. Jurisdiction of the Wealth (Income) Tax Officer under Section 18(1) of the Wealth Tax Act, 1957 Without Prior Approval under Section 18(3):
The court found that the Income Tax Officer had no jurisdiction to impose a penalty exceeding Rs.10,000 without the Deputy Commissioner's approval. The absence of such approval rendered the order incompetent and null. The court emphasized that nullity can be contested at any stage, thus answering the third question in the affirmative.

4. Whether the Omission to Take Prior Approval is a Curable Defect under Section 42C of the Wealth Tax Act:
The court held that Section 42C does not apply to the imposition of penalties. The term "other proceeding" should be construed ejusdem generis, meaning it does not include penalty imposition. The court concluded that an order passed without requisite power is a nullity and cannot be salvaged by Section 42C. Hence, the fourth question was answered in the negative.

Conclusion:
The court ruled in favor of the appellant, setting aside the challenged order. The court upheld the importance of adhering to statutory valuation methods, recognized the procedural correctness in filing valuation reports, and emphasized the necessity of obtaining requisite approvals for penalty imposition. This judgment reinforces the procedural safeguards and statutory requirements in the imposition of penalties under the Wealth Tax Act.