2021 (2) TMI 2 - AT - Wealth-tax

Concealment of wealth - assessee has not filed wealth tax return u/s.14 - penalty proceedings u/s.18(1)(c) of the Act was initiated - when notice was issued u/s.17(1) of the Act, return of wealth declaring taxable wealth has been filed along with payment of consequent taxes - HELD THAT - Presumption of automatic levy of penalty is completely unsustainable in law, while such presumption of the department negated the discretion vested with the original authority for levying or not levying of such penalty depending upon the facts and circumstances of the case. Further, the deemed concealment of wealth or furnishing of inaccurate particulars of wealth as per Explanation 3 should be subject to the discretion vested with the authority in the matter of levying or not levying of penalty. Levy of penalty u/s.18(1)(c) of the Act, after completion of reassessment in accepting return of wealth would deserves exercise of discretion vested with the authority for not levying penalty - levy of penalty u/s.18(1)(c) of the Act without exercising discretion is not sustainable in law, more particularly, when the assessee has explained the reasons for not filling return of wealth for the concerned assessment year within the time limit as per section 14 of the Act and such reasons are bonafide. In this case, although the assessee has not filed return of wealth under the provisions of section 14 of the Act, but subsequently on issue of notice u/s.17 for reopening of assessment, return of wealth disclosing correct taxable wealth has been filed along with payment of taxes. AO has accepted the return of wealth filed by the assessee without any modification. Even though the deeming provision of Explanation 3 to section 18(1)(c) would come into operation in the event the assessee has not complied with the provisions of section 14 or section 17(1) of the Act, but because the assessee has disclosed taxable net wealth in the return filed in response to notice u/s.17(1) of the Act and paid taxes thereon, the authority would have accepted the explanation furnished by the assessee that he has not filed return of wealth for concerned assessment year within the time limit specified u/s.14 of the Act, on the bonafide presumption that there is no taxable wealth for the relevant assessment years on the disputed land, jewellery and cash on hand. We, further, are of the opinion that Assessing Officer would also have considered the fact that surrender of taxable wealth in the reassessment proceedings would not automatically lead to levy of penalty under consideration and the bonafide understanding of the assessee on the non-taxability cannot be ruled out or negated mechanically by imposing penalty in relation thereto. The component of wealth based on the admission of return of wealth after the issuance of notice for reopening could not fall within mischief of explanation 3 of section 18(1)(c) of the Act. We are therefore of the considered opinion that the Assessing Officer and CWT (A) were erred in levying penalty u/s.18(1)(c) - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty under section 18(1)(c) of the Wealth Tax Act for assessment years 2010-11, 2011-12, and 2012-13.

Analysis:

Issue 1: Penalty under section 18(1)(c) of the Wealth Tax Act
The case involved multiple appeals against penalties imposed under section 18(1)(c) of the Wealth Tax Act for assessment years 2010-11, 2011-12, and 2012-13. The appeals were consolidated due to identical facts and common issues. The Assessing Officer initiated penalty proceedings after the completion of reassessment and accepting the returned wealth. The penalty was levied under Explanation 3 to section 18(1)(c) for alleged concealment of particulars of assets.

Issue 2: Arguments of the Assessee
The assessee contended that there was no deliberate concealment of wealth as the return of wealth was filed upon receiving notice under section 17 of the Act, disclosing taxable wealth and paying taxes. The assessee argued that the discretion to levy or not levy a penalty should have been exercised by the authority, especially considering the bonafide reasons for not filing the wealth tax return within the prescribed time limit.

Issue 3: Arguments of the Department
The Department argued that the search action revealed assets that would not have come to light otherwise, indicating concealment of wealth. They maintained that the assessee's explanation of a bonafide belief in not filing the wealth tax return was not valid. The Department supported the penalty imposed by the Assessing Officer.

Issue 4: Tribunal's Decision
The Tribunal analyzed the provisions of section 18(1)(c) and Explanation 3, emphasizing the discretionary power of the authority to levy penalties. The Tribunal noted that the deeming fiction of concealment of wealth should not automatically lead to the imposition of a penalty, especially when the assessee disclosed taxable wealth upon notice and paid taxes. Citing the decision of the Supreme Court in Hindustan Steel Ltd vs. State Of Orissa, the Tribunal held that the penalty for failure to fulfill a statutory obligation is a matter of discretion and should be imposed judiciously.

Issue 5: Tribunal's Ruling
The Tribunal allowed the appeals, directing the Assessing Officer to delete the penalties imposed under section 18(1)(c) for all the assessment years. The Tribunal applied its reasoning from one appeal to others with identical facts and issues, emphasizing the need for the authority to exercise discretion in penalty imposition based on the circumstances of each case.

In conclusion, the Tribunal's decision highlighted the importance of discretion in levying penalties under the Wealth Tax Act, emphasizing that the deeming fiction of concealment should not override bonafide explanations and compliance with tax obligations upon notice.