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TMI Blog1977 (8) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Commissioner of Wealth-tax under s. 18(2-A) of the Act on 6th Jan., 1972 intimating that on account of bonafide mistake and omission the value of the assets in question could not be disclosed in the original returns. It was also prayed that the penalty either may be waived or reduced. The learned Commissioner in the case of Shivduttarai Lila, Kashiram Lal, Gorja Devi Lila and Murlidhar Lila reduced the penalties to Rs. 12,000, Rs. 7,500, Rs. 5,000 and Rs. 10,000 respectively. 4. The WTO passed the penalty order in the case of Shri Shivduttrai Lila under:- " During the course of assessment it was observed that the assessee concealed the particulars of her/his wealth. Notice under s. 18(2) of the Wealth-tax Act, was issued and served on the assessee. No reply was received to this notice. However, the assessee moved the Commissioner of Income-tax to reduce the penalty under s. 18(2-A). The above facts establish beyond doubt that the assessee has deliberately concealed the particulars of her/his income, therefore, she/he is liable for penalty. The penalty imposable in the case was Rs. 28,710. However the learned CIT vide his letter No. SIB/VD/WT/22/71/72 dated 3rd Oct., 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the completion of re-assessment proceedings, initiated penalty proceedings under s. 18(1) (c) of the Act. The assessee were served with show cause notices. The learned WTO himself held in the orders that the assessees have concealed the particulars of assets or furnished inaccurate particulars of any assets. According to the learned WTO, the provisions of s. 18(1) (c) were clearly attracted. He also held that penalty imposable in the case of Shivduttrai Kashiram, Gorja Bai and Murlidhar was at Rs. 20,000, Rs. 15,000, Rs. 10,000, and Rs. 22,000 respectively. After giving this finding the learned WTO held that in view of the letter of the Commissioner dated 3rd Oct., 1973, the penalty of Rs. 12,000, Rs. 7,500, Rs. 5,000 and Rs., 10,000 is being imposed against the above mentioned persons respectively. Thus, according to the learned counsel the orders passed by the WTO were really orders passed under s. 18(1) (c) of the Act. Thus it was contended that proceedings under s. 18(1) (c) and 18(2A) are quite separate and independent. In support of this contention, the learned counsel for the assessee relied on the decision of the Tribunal, Jaipur Bench in the case of Premji Raoji, Udaipu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd as such the WTO was wrong in imposing the penalty. The learned AAC inter alia observed as under: " Now once it is established that concealment was done, and it is admitted indirectly by filing the mercy petition under s. 18(2A), the WTO was justified to levy the penalties. In order to close the proceedings under s. 18(1) (c) started against these assessees he had to issue the demand notice of the penalty reduced by the Commissioner and could have ended the matter. But owing to the ignorance in procedure, the WTO drafted an order under s. 18(1) (c) and levied the penalty as reduced by the Commissioner under s. 18(2A). In fact this was not necessary. The CIT has already taken decision on the petition of the appellants under s. 18(2A) and his order....." Consequently, the learned AAC held that there was no substance of appeal. Even the learned AAC was of the view that the WTO imposed penalty under s. 18(1) (c) of the Act. We have discussed the order of the WTO passed under s. 18(1) (c) in detail.. From the wordings of the ITO s orders it is clear that the orders passed by the WTO were really orders under s. 18(1) (c) of the Act. We do not agree with the contention of the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also contended that by mistake the particulars of the assets in question could not be disclosed in the original returns. From these facts it is clear that there was no concealment of particulars of assets in question. As a matter of fact, there was only bona fide omission in not disclosing the particulars of the assets. In any view of he matter on behalf of the Department nothing was brought on record to establish that the conduct of the assessees has been contumacious or dishonest. There is also nothing to establish that there was mens rea on the part of the assessee in not disclosing of the assets at the original stage. Looking to the aforesaid facts and the circumstances of the case, we are of the opinion that no penalty is leviable unders.18(1) (c) of the Wealth-tax Act, 1957. Thus in our opinion the finding of the learned AAC is incorrect. 15. In the result, all the appeals are allowed. The impugned orders of penalty are cancelled. PER ANAND PRAKASH, A.M. These appeals raise a very interesting, though difficult question, bearing on the inter-relation of sub-Ss. (1), 2(A) and (2B) of S. 18 of the Wealth-tax Act, 1957. 2. Before we proceed to examine the various con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iculars of assets or of the inaccuracy of particulars furnished in respect of the assets or debts in respect of which the penalty is imposable, voluntarily and in good faith, made full true disclosure of such particulars ; (b) has co-operated in any enquiry relating to the assessment of the wealth represented by such assets ; and (c) has either paid or made satisfactory arrangements for payment of any tax or interest payable in consequence of any order passed under this Act in respect of the relevant assessment year." Sec. 18 (2B): "An order under sub-s. 2(A) ; shall be final and shall not be called in question before any court of law or any other authority." 3. It will be seen from the plain reading of the various sub-sections, extracted above, that the penalty proceedings for concealment can be initiated in terms of s. 18(1) of the Wealth-tax Act, 1957 only. Sub-s. (2-A) would come into play only if there subsists a penalty proceeding in terms of s. 18(1). s. 18(2-A) does not initiate the penalty proceedings, it aims at reducing or waiving it. The initiation is done under s. 18(1) alone. One may, of course, approach the commissioner of Wealth-tax under s. 18(2A) either be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial section. It is aimed at reducing the rigour of the s. 18(1). It, therefore, comes into play only if penalty in terms of s. 18(1) is imposable. If the pre-requisites for the imposition of penalty under s. 18(1) are absent, there is no occasion to sub-s. (2A) of S. 18 at all. Before exercising his jurisdiction under s. 18(2A), therefore, the commissioner has to satisfy himself that in the case of default mentioned in Clause (a) of sub-s. (1), (i) there has been a failure to file the return of net wealth without reasonable cause", and (ii) that the return of net wealth has been filed by him voluntarily prior to the issue of notice to him under sub-s. (2) of s. 14 and (iii) that in the said return, he has, in good faith, made full disclosure of his net wealth. In the cases covered by clauses (c) of s. 18(1), the Commissioner has to satisfy himself (i) that, to begin with, there has been a concealment of particulars of assets or furnishing of inaccurate particulars of the assets or debts, (ii) that in respect of such concealment or furnishing of inaccurate particulars of the assets or debts, penalty is imposable, (iii) that the assessee has made full and true disclosure of such pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the wealth represented by such asset; and has either paid or made satisfactory arrangements for payment of any tax of interest payable in consequence of an order passed under this Act in respect of the relevant assessment year." Elaborating the above position, further their Lordship, at page 306, observed as follows: "The satisfaction that is required under sub-clause (i) of s. 18(2A) is whether there was reasonable cause for failure to furnish the returns. Under sub-clause (ii) of s. 18(2A) satisfaction required is that the returns have been filed voluntarily and prior to issue of notice. Under s. 14(2), and the same have been filed in good faith making full disclosure prior to any detection of concealment by the Wealth-tax-Officer. The further satisfaction required under the sub-clause is whether the assessee has co-operated in the enquiry and has either paid or made necessary arrangements for payment of the tax assessed. If these conditions are fulfilled then, in my view, the Commissioner is bound to waive or reduce penalty." After noting thus the scope of sub-s. (1) of s. 18 and sub-s. (2A) of s. 18, their Lordships observed: "The proceedings under Ss. 18(1) and 18(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime or not." 10. To sum-up the above discussion, it may be pointed out that the field of operation of s. 18(2A) is certainly different from the field of operation of s. 18(1), but nevertheless it has to be remembered that s. 18(2A) has its roots in s. 18(1) and would come into play only after the Commissioner has satisfied himself that the provisions of s. 18(1) are attracted to a particular cases. In a case where an order under s. 18(1)(a) or 18(1)(c) has already been passed, imposing the penalty, the finding of the Wealth-tax Officer or of any other authority mentioned in s. 18(1) would be there to the effect that the provisions of s. 18(1) are attached to the said case. In such case, of course, it would not be necessary for the Commissioner, particularly, when the orders passed are by the Appellate Assistant Commissioner or by the Appellate Tribunal, to go once again into the question as to whether the case in question is hit by the provisions of s. 18(1). He will have to take in such cases the finding that the Appellate Assistant Commissioner and the Tribunal have already given and then proceed on that basis, to determine whether the other factors mentioned in s. 18(2A) are p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he normal legal consequences, including the appealability of penalty order under s. 23 and 24 of the Wealth-tax Act, 1957 would follow. This position was made clear by their Lordships of Mysore High Court in the case of Indian Telephone Industries,(6) wherein after confirming the order of the Commissioner refusing to exercise his discretion under s. 271(4A), their Lordships observed: "The petitioner can show cause as to why penalty should not be levied in the proceedings for levy of penalty before the first respondent i.e. the Wealth-tax Officer, and against the orders of the first respondent there is the right of appeal provided under the Act." 13. As noted above, there would be cases where the Commissioner would pass orders under s. 18(2-A) reducing or waiving the penalty. The said section, however, does not lay down any particular form in which the Commissioner has to pass his order. The order may, therefore, be passed in any manner which would indicate that the powers so vested in the Commissioner has been exercised. In the case of Fair Deal Motors vs. CIT(7), the order of the Commissioner was contained in one of the letters which were exchanged between him and the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid direction of the Commissioner, they observed: "Looking at the penalty orders it is obvious that the same has been passed as per the directive of the Commissioner. These penalty orders were not passed by the Wealth-tax Officer by application of his own mind and on the ground that the conditions mentioned in s. 18(1)(a) were not fulfilled..." It would be clear from the aforesaid observations of their Lordships of the Delhi High Court that an order under s. 18(2-A) has to be not in the nature of a directive to the Wealth-tax Officer to pass an order under s. 18(1)(a) in a specific manner but the order itself has to either reduce or waive the penalty. If an order is passed in this manner, it would be valid and it would be open to the Wealth-tax Officer to give effect to it in the manner prescribed by the law. 16. An order passed thus by the Commissioner under s. 18(2-A) would be final and it would not be open to challenge before any Court in terms of s. 18(2-A) of the Wealth-tax Act, 1957. The finality of such an order was also emphasised by their Lordships of the Jammu Kashmir High Court in the case of Fair deal Motors vs. CIT(7) when they observed "I might further me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order by which a demand is created, it is the duty of the Wealth-tax Officer to serve upon the assessee a notice of demand in the prescribed form specifying the sum payable by the said order. It is also worth noting that the above section refers to the demand "payable in consequence of any order passed under this Act.". Apparently, the above wordings would include an order passed by the Commissioner under s. 18(2A) reducing the minimum penalty otherwise imposable u/s. 18(1). If as a result of order any tax or penalty becomes payable, it is the duty of the Wealth-tax Officer to serve upon the assessee a notice of demand specifying the amount of penalty so payable. It thus follows that the proper procedure to be followed in a case where the Commissioner of Wealth-tax passes an order under s. 18(2A) is to send a copy of it to the Wealth Tax Officer who thereupon would issue to the assessee a demand notice in terms of s. 30 of the Wealth-tax Act, 1957 specifying the amount of penalty payable in terms of the order of the Commissioner u/s. 18(2A). It would also be permissible for the Wealth-tax Officer to send along with the said demand notice a forwarding letter explaining the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding anything contained in s. 18(1)(i), 18(i)(iii), the order of the Commissioner will have an overriding effect even over the order of the Tribunal on account of which the quantum of penalty as reduced by the Commissioner of Wealth-tax alone would hold the field. 20. Where, however, the Commissioner of Wealth-tax passes an order under s. 18(2A) before an order under s. 18(1) is passed, the penalty proceedings initiated under s. 18(1) gets culminated by this order and it appears to me that the Wealth-tax Officer is precluded thereafter to pass a fresh order under s. 18(1) for, as noted earlier, the Commissioner of Wealth-tax himself is required to go into the pre-requisition of s. 18(1), before he chooses to step in terms of s. 18(2A). Therefore, whether or not there is concealment of certain assets or furnishing of inaccurate particulars of certain assets or debts has to be first determined by the Commissioner on account of which penalty under s. 18(1)(c) is in the normal course imposed. He enters into the jurisdiction of s. 18(2A) only after he has made up his mind about this aspect. If there is no concealment, the Commissioner cannot proceed with the exercise of the powers und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the cases are similar, it would in my opinion be in order if reference is made to the facts of the cases of Shivduttrai Lila. I will point out the difference in facts, in other cases later. The valuation date adopted by Shri Shivduttrai Lila in respect of assessment year 1970-71 is 1st March, 1970. His assessment for the aforesaid year was originally completed at a net wealth of Rs. 1,00,808. On 6th Jan., 1972 he moved an application under s. 18(2A) of the Wealth-tax Act, 1957 to the Commissioner of Wealth-tax pointing out therein that he could not include the value of the following assets in the original net wealth returned by it in respect of assessment year 1970-71. 1. Value of 15 ordinary shares of Lila Sons Breweries(P) Ltd. Rs. 15,000 2. Investment in dissolved firm i.e. M/s Faquirchand Ramlal, Sri Ganganagar Rs. 13,710 . Rs. 28,710 He further pointed out that "this omission has not been detected by the Income-tax Department and your petitioner is now filing the suo motu revised wealth-tax return of above year for re-assessment. Now prayer is made that under the provisions of s. 18(2A) of the Wealth-tax Act, no penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000. Therefore, a penalty of Rs. 12,000 is imposed." 23. In the cases of other assessees, the minimum imposable penalty and the penalty as reduced by the Commissioner of Wealth-tax is as follows: Name Penalty imposable Penalty imposed by C.W.T 1. Shivduttrai Lila Rs. 28,710 Rs. 12,000 2. Smt. Gorjadevi Lila Rs. 10,000 Rs. 5,000 3. Shri Kashiram Lila Rs. 15,000 Rs. 7,000 4. Shri Murlidhar Lila Rs. 22,000 Rs. 10,000 24. The aforesaid orders of the Wealth-tax Officer were appealed against by the assessee to the Appellate Assistant Commissioner who rejected the assessee s claim and pointed out inter alia as follows: "In order to close the proceedings, under s. 18(1)(c), started against the assessees, he (i.e. the Wealth-tax Officer) had to issue the demand notice of the penalty reduced by the Commissioner..." But owing to the ignorance in procedure, the Wealth-tax Officer drafted an order under s. 18(1)(c) and levied the penalty as directed by the Commissioner of Wealth-tax under s. 18(2A). In fact, this was not necessary. The Commissioner of Wealth-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sequence of events in these cases, it is not possible to come to a conclusion that the Wealth-tax Officer was passing an independent order under s. 18(1)(c) after the orders of the Commissioner under s. 18(2A) had already been communicated to him he was only trying to give effect to the said orders as that the penalty proceedings were initiated under s. 18(1)(c) and that a show cause notice was issued under s. 18(2) would not go to show that an order independent under s. 18(1)(c) was a legal necessity. We have already seen above that to give jurisdiction to the Commissioner of Wealth-tax under s. 18(2A), the existence of penalty proceedings under s. 18(1) is a must, for if there are no penalty proceedings, apparently, the question of imposing the penalty on the assessee for concealment would never arise and in the circumstances the discretion to waive or reduce the penalty would also not arise. The Commissioner could start considering the assessee s application under s. 18(2A) only if it was found that penalty proceedings under s. 18(1) were pending against the assessee and that (ii) in terms of the said section, minimum penalty as prescribed would be imposable on the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealth-tax Officer, as rightly pointed out by the Appellate Assistant Commissioner fumbled at the procedure to be adopted by him to give effect to the aforesaid order. This happened because the Act as such does not lay down any clear-cut procedure to give effect to the order of the Commissioner. We have already noted that s. 18(2A) merely lays down the power of the Commissioner; but it does not lay down the procedure. Will in the circumstances it be correct to invalidate a valid order passed only because the procedure of giving effect to it followed by the Wealth-tax Officer was not correct? In my opinion the Courts should remain from invalidating, otherwise a valid order, on account of a bonafide procedural mistake. In fact, there is the authority of the Hon ble Supreme Court in 41 ITR 12 to the effect that if an action of an authority can be correlated with a jurisdiction which is valid in preference to a jurisdiction which is invalid, such power should be correlated to the valid jurisdiction. In view of this, I am of the opinion that, by passing the impugned orders, the Wealth-tax Officer was doing nothing but taking "necessary action" to give effect to the order of the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d would get time-barred on 31st March, 1974. There was, therefore, absolutely nothing to compel him to rush through the matter except the impression that nothing further remained to be done after the passing of the orders of the Commissioner under s. 18(2-A), but to carry them out, I am, therefore, convinced on the facts of these cases that the Wealth-tax Officer was merely giving effect to the Commissioner s orders when he passed the impugned orders. They are in law not orders under s. 18(1)(c), his description of them as such notwithstanding, but mere communications of the amount of the penalties, sent along with demand notices which he has obliged to issue under s. 30 of the Wealth-tax Act. 30. In the present case as a fact also, he has not taken an independent stand. I would, therefore, reject the assessee s appeals on the preliminary ground that the orders of the Commissioner of Wealth-tax, passed under s. 18(2-A) to which the Wealth-tax Officer was given effect by passing the impugned orders cannot be questioned before us. In view of this, I do not express any opinion on the merits of the appeals. 31. In the result I reject the assessee s appeals. PER V.P. TEWARI, VICE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir revised returns. The Wealth-tax Officer started proceedings for re-assessment in order to bring to tax the escaped income and in reply to the said notice issued by the Wealth-tax Officer it was submitted by the assessee that the return filed on 31st Jan., 1972 including the value of the two items mentioned above be treated to have been filed in compliance of notice under s. 17. The Wealth-tax Officer accordingly included in the wealth as originally assessed, the value of the other items as declared by the assessees in the revised returns filed voluntarily. He, therefore, initiated penalty proceedings under s. 18(1)(c) of the Act. When the matter was pending before the Wealth-tax officer in penalty proceeding the assessees moved the Commissioner of Wealth-tax, Rajasthan, by filing petition under s. 18(2A) of the Wealth-tax Act, 1957, mentioning, inter alia, in the said petition the circumstances in which the shares in M/s. Lila Sons Breweries (P) Ltd., Bhopal and the wealth from the other sources could not be declared through it inadvertance and the matter was brought to the notice of the Wealth-tax Officer voluntarily by filing revised returns and made a prayer that in these ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voided, it could not be said that the assessees have got a right to file an appeal against the order made under s. 18(1)(c). In fact, the order of the Commissioner of Wealth-tax is not questionable as per s. 18(2B) of the Act. In he result, he dismissed all the appeals. 4. The assessees came up in appeal to the Tribunal against the said orders. It was submitted that the orders of the Appellate Assistant Commissioner dismissing the appeals were not correct. The learned Judicial Member was of the opinion that there was force in the assessees contention and then the orders of the Appellate Assistant Commissioner were not correct. After discussing the legal aspect of the matter, the Judicial Member proceeded to consider the cases on merits and held that on the facts and in the circumstances of the cases it was clear that there is no concealment of particulars of assets in question. As a matter of fact, there was only bonafide omission in not disclosing the same. In short, on merits, he held that no penalties were imposable. He was of the opinion that the impugned orders of penalty should be cancelled. The learned Accountant Member was however, of the opinion that once the assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om.)/75-76 in respect of assessment years 1962-63 to 1969-70, The 12th Wealth Tax Officer, C-IV, Ward, Bombay vs. L/H of Late Shri Tulsidas Jetha Lal, Bombay(8) the relevant abstracts of which were also filed before me. 6. The Departmental Representative, on the other hand, has placed reliance on the order of the Accountant Member and has submitted on the basis of the same that once the assessees have gone to the Commissioner under s. 18(2A) and the Commissioner has, after considering the facts and circumstances of these cases held that certain amount of penalty is leviable but reduced the quantum of it, and intimated the Wealth-tax Officer to take suitable action accordingly to give effect to his order, it cannot be said that the said order passed by the Wealth-tax Officer in conformity with the order of the Commissioner is again appealable to higher authorities i.e. the Tribunal keeping in view the provisions of s. 18(2B) of the Wealth-tax Act, which specifically mentions that the orders passed by it cannot be questioned any further. 7. In my opinion, the question has to be answered in favour of the assessee by holding that since the Wealth-tax Officer has passed an order und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealth-tax Officer by other means so that his intention could be known in the matter. When he has chosen to pass an order u/s. 18(1)(c) and the said order is admittedly appealable under the Wealth-tax Act, it cannot be said that the same could not be appealed merely because the quantum of penalty has been restricted in terms of order passed by the Commissioner u/s. 18(2A) and the same is final u/s. 18(2B) of the Wealth-tax Act. In this connection the order of the Bombay Bench of the Tribunal referred to by the assessee s representative also supports his contention and I follow the same with respect. 9. The answer to question No. 3 is thus to the effect that the impugned orders of penalty passed by the Wealth-tax Officer were order u/s. 18(1)(c) of the Wealth-tax Act and the same were not only to the effect to the order of the Commissioner of Wealth-tax passed u/s. 18(2A) of the Act. As the Accountant member has mentioned in his note that once it is held that the orders in question are, in fact, order u/s. 18(1)(c), there is no difference of opinion about the appealability of such orders. I do not think that questions No. 1 and 2 as referred could still be said to survive for any a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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