1997 (1) TMI 4 - SC - Wealth-tax

Penalty under section 18 of the Wealth-tax Act, 1957 (for short the Act ), for failure to file the returns - commissioner gave a partial waiver of penalty - Commissioner had indicated his reasons for reducing penalty instead of granting full waiver - commissioner was justified in granting partial waiver

Summary

Issues:
- Applicability of penalty under section 18 of the Wealth-tax Act for failure to file returns
- Interpretation of section 18B and the power conferred on the Commissioner to reduce or waive penalties
- Discretion of the Commissioner in exercising the power to waive penalties
- Comparison of section 18B with section 273A of the Income-tax Act
- Judicial precedents regarding the Commissioner's discretion in granting penalty waivers

Analysis:
The Supreme Court addressed the issue of penalty under section 18 of the Wealth-tax Act for the appellants' failure to file returns for several assessment years. The Court highlighted that the Commissioner has the authority to impose penalties if a person fails to comply with the Act's requirements, such as furnishing accurate information or disclosing assets. However, the introduction of section 18B allowed the Commissioner to reduce or waive penalties under specific conditions, including full and true disclosure of net wealth and cooperation in assessment inquiries.

The Court emphasized that the discretion granted to the Commissioner under section 18B must be exercised fairly and justly. The use of the terms "may" and "in his discretion" indicated that the Commissioner had the power to choose between reducing or waiving penalties based on the circumstances of each case. The Court clarified that the Commissioner's decision to reduce penalties instead of granting full waivers must be supported by reasons to demonstrate a thoughtful consideration of the case.

Moreover, the Court compared section 18B with section 273A of the Income-tax Act, noting a similar discretionary power conferred on the Commissioner of Income-tax for penalty waivers. The Court referred to a Bombay High Court decision to emphasize the importance of providing reasons for declining to waive penalties. In the present case, the Commissioner had provided valid reasons for opting to reduce penalties rather than granting full waivers, leading the Court to uphold the Commissioner's decision and dismiss the appeals.

Additionally, the Court discussed various judicial precedents from different High Courts, highlighting that while the Commissioner must exercise discretion when granting penalty waivers, there is no strict requirement to always waive penalties in entirety when conditions are met. The Court underscored the importance of the Commissioner's reasoned decision-making process in determining penalty reductions or waivers, ensuring fairness and compliance with the law.

In conclusion, the Supreme Court upheld the Commissioner's decision to reduce penalties instead of granting full waivers for the appellants, emphasizing the need for a fair and reasoned exercise of discretion in penalty imposition and waiver under the Wealth-tax Act.