Levying and penalty u/s 18(1)(a) of the W.T. Act, 1957. - Income Tax - 447/CBDT

INSTRUCTION NO. 447/CBDT Dated: August 19, 1972 Section(s) Referred: 18(1)(a) Statute: Wealth Tax Act, 1957 Attention is invited to the provisions of Section 18(1)(a) of the W.T. Act, 1957 which provide for the levy of penalty for non filing belated filing of return of net wealth. Prior to 1-4-1965, the penalty leviable for failure to furnish the return of net wealth within the time allowed and in the manner required was, in addition to the amount of wealth-tax payable "a sum not exceeding one and a half times the amount of such tax". Henceforth, by the W.T. (Amendment) Act, 1964, this provision was altered with effect from 1-4-1965 and it was provided that the amount of penalty would be "a sum equal to 2 per cent of the tax for every month during which the default continued, but not exceeding in the aggregate 50 per cent of the tax". Thereafter, through the amendment effected by the Finance Act, 1969, with effect from 1-4-1969, it has been provided that the penalty for such defaults shall be a sum (for every month during which the default continued) equal to one half per cent of the net wealth assessed as reduced by the amount of net wealth on which the wealth-tax chargeable was nil. 2. The question of levy of penalty as well as the law which should govern the imposition of penalty for non belated filing of return under the W.T. Act has been considered particularly from the point of view of clarifying the issue to ensure uniformity of approach as the penalty which may be imposed has changed from time to time. The Board are advised that although the default occurs after the expiry of the prescribed period for the filing of the return, the offence is not one which can be said to have been completed on that date, once and for all. The default is a continuing one since the obligation to file the return continues day after day, even after the expiry of the prescribed period. The provisions of the W.T. Act make it clear that the penalty is to be reckoned for every month during which the default continues and, therefore, the offence itself is a continuing one. It may be that after a period of time the penalty has increased. But, the increased penalty would relate only to the period when the default continues after the amendment, and not to earlier period. The law applicable to levy of penalties is the law as it stands at the time when the default is committed, and not as it stands in the financial year for which the assessment is made (as per the ratio of judgment in the case of C.I.T. Vs. Vedlapatla Veera Venkataramaiah 11 I.T.R.P. 308. Thus, the new penalty provisions would be operative only for that part of the default which occurs or continues after the amendment. 3. These instructions may kindly be brought to the notice of all the officers working in the charge and it should be ensured that this clarification is strictly adhered to while levying and penalty u/s 18(1)(a) of the W.T. Act, 1957.