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TMI Blog1972 (12) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... , in his proceedings G.I.No. 1941-S/WT 1968-69 dated August 24, 1970, and 1941-S/WT 1969-70 dated August 24, 1970. In respect of the assessment years 1968-69 and 1969-70 the petitioner filed his return of wealth on May 27, 1970, admitting a net wealth of Rs. 1,97,101 and Rs. 2,09,737, respectively The assessment was completed on June 22, 1970, under section 16(3) of the Wealth-tax Act, 1957 (hereinafter called "the Act"), on the total wealth of Rs. 1,97,101 and Rs. 2,09,737. The wealth-tax demanded for 1968-69 and 1969-70 was Rs. 286 and Rs. 328, respectively, For late filing of the returns, a notice under section 18(1)(a) of the Act was issued to the assessee on June 22, 1970. In his reply dated July 7, 1970, the petitioner represented that the firms in which he was a partner took their own time to complete and finalise their accounts and hence he was not able to compute his share of wealth from these firms in time. He also stated that he was under the mistaken impression that wealth-tax is leviable only on assets situated within the taxable territory and the net value of the assets within the taxable territory was below the taxable limit. After hearing the petitioner, the Wealth- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rates of wealth-tax specified in Paragraph A of Part I of the Schedule or Part II of the Schedule, the wealth-tax chargeable is nil, or (B) the net wealth assessed under section 17, where assessment his been made under that section, as reduced by-- (1) the net wealth, if any, assessed previously under section 16 or section 17, or (2) the amount of net wealth on which, in accordance with the rates of wealth-tax specified in paragraph A of Part I of the Schedule or Part II of the Schedule, the wealth-tax changable is nil, whichever is greater, but not exceding in equal to the net wealth assessed under section 16, or, as the case may be, the net wealth assessed under section 17, as reduced in either case in the manner aforesaid ......." It is seen from the a bove provision that the penalty will be calculated on the basis of the assessed wealth as reduced by the amount of initial exemption. The penalty will be one-half per cent. of the aforesaid amount for every month during which there was a failure without reasonable cause to furnish the return subject to a maximum in the aggregate of an amount equal to the assessed net wealth. For the purpose of levy of tax, section 3, read wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by the statute in question. The classification may be founded on different basis, namely, geographical or according to objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration. It is also well established by the decisions of this court that article 14 condemns discrimination not only by a substantive law but also by a law of procedure. In Ramkrishna Dalmia v. justice Tendolkar the Supreme Court, after a review of the previous decisions, classified the statute which may come up for consideration on the question o f its validity under article 14 into five categories, and the first category is given thus : " A statute may itself indicate the persons or things to whom its provisions are intended to apply and the basis of the classification of such persons or things may appear on the face of the statute or may be gathered from the surrounding circumstances known to or brought to the notice of the court. In determining the validity or otherwise of such a statute the court has to examine whether such classification is or can be reasonably regarded as based upon some different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of taxation, which leads to obvious inequality. A taxing statute is not, therefore, exposed to attack on the ground of discrimination merely because different rates of taxation are prescribed for different categories of persons,, transactions, occupations or objects. It is for the legislature to determine the objects on which tax shall be levied, and the rates thereof. The courts will not strike down an Act as denying the equal protection of laws merely because other objects could have been, but are not, taxed by the legislature. . . . . . " Bearing these well-settled principles in mind, let us examine the provisions of the Wealth-tax Act, 1957. Section 18(1)(a), as extracted above, was substituted for the original section 18(1)(a) by Finance Act of 1969 which came into force on April 1, 1969. The Finance Act has increased the scale of penalty imposable on persons who failed without reasonable cause to furnish the return of net wealth within the time allowed and for noncompliance with the notice to produce evidence, etc. It is intended to provide an effective deterrent against faults without reasonable cause in the matter of furnishing the return of wealth or the production of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of taxis, the profit it makes s and the miles per gallon it delivers. An Ambassador taxi and a Fiat taxi give different outturns in terms of money and mileage. Cinemas pay the same should fee. We do not take I, doctrinnarie view of equality The legislature has obviously thought of equalising the ax through method which is inherent in the tax scheme. Nothing been said to ,how that there is inequality much less 'hostile treatment'. All that is said is that the State must demonstrate equality. That is not the approach. At this rate notthing can ever be proved to be equal to another. Ultimately the Supreme Court upheld the validity of the uniform rate of tax. As held in V. Venugopala Ravi Rajah v. (Union, of lndia the laws being the expression of legislative will intended to solve specific problems or to achieve definite objectives by a specific remedy, absolute equality or uniformity of treatment is impossible of achievement. If the classification is rationale the legislature is free to impose different rates in different ways and adopt different modes of assessment. It is also not correct to state that the burden is discriminatively cast by adopting the penalty at one-hal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the object intended to be achieved by the law. Plea of invalidity of section 10 on the ground that it infringes article 14 of the Constitution must, therefore, fail." We are, therefore, unable to accept the contention of the petitioner that section 18(1)(a) infringes article 14 of che Constitution. We are also of the view that there is no substance in the contention of the petitioner that the penalty levied under section 18(1)(a) is confiscatory in nature and, therefore, offends article 19(1)(f) of the Constitution. As we have seen already section 18 is designed, to prevent evasion of tax or concealment of wealth. It is also necessary to state that, under section 14, the return under the Wealth-tax Act shall be furnished before the thirtieth day of June of the corresponding assessment year. But the Wealth-tax Officer, if he is satisfied that it is necessary so to do, can extend the date of submission of the return. Section 18 itself requires that, in order to attract the liability for penalty, the Wealth-tax Officer must be sastified person has failed to furnish the return "without reasonable cause" Thus only fraudulent concealment attracts liability for penalty. In dealing wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain classes of property and suffer no loss when the property was discovered, for the State could then do no more than collect the taxes due...... Statutes usually impose a severe penalty of a criminal nature upon persons wilfully filing a false return, and the constitutionality of such statute is unquestionable ........" It should be borne in mind that any concealment of the wealth and evasion of tax is a loss to the exchequer, and consequently, a loss to the public, that is, the community in general. Any provision intended against such evasion is, therefore, eminently a provision in the interest of the general public. Section 18(1)(a) being a penal provision intended to prevent evasion of tax and concealment of wealth, it is saved under article 19(5) as a reasonable restriction on the fundamental right of the petitioner under article 19(1)(f) of the Constitution, in the interest of the general public. Therefore, the contention of the petitioner that section 18(1)(a) offends article 19 (1)(f) is utenable. Equally untenable is the contention that Parliament lacks legislative competence to enact section 18(1)(a) of the Act. The contention is based on a wrong assumption that a powe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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