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TMI Blog2002 (8) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociation of persons and not liable for payment of wealth-tax. Reliance was placed on the decision of the Income-tax Appellate Tribunal for the earlier assessment years in the assessee's own case, wherein it was held that it was not liable to wealth-tax in view of the language employed in the charging provision, namely, section 3 of the Act. The first appellate authority has allowed the assessee's appeals for the assessment year 1980-81 and in so far as the assessment years 1981-82, 1982-83 and 1983-84 are concerned, keeping in view the provisions of section 21AA of the Act, which has been inserted in the Wealth-tax Act by the Finance Act, 1981, with effect from April 1, 1981, has noticed in his order that: "4. Assessment years 1981-82 to 1983-84 : A new section 21AA was inserted in the Wealth-tax Act by the Finance Act, 1981, with effect from April 1, 1981. Sub-section (1) of section 21AA provides that where assets chargeable to wealth-tax are held by an association of persons (other than a company or co-operative society) and the individual shares of the members of the association in the income or assets or both are indeterminate or unknown the wealth-tax shall be levied and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1979-80 is not applicable for the assessment year 1981-82 onwards in view of the change in law. The Tribunal's decision was rendered on the interpretation of the word 'individual' occurring in section 3. There is therefore no doubt regarding the liability of the appellant for wealth-tax for the assessment years 1981-82 to 1983-84. 7. The appeal for the assessment year 1980-81 is allowed and the appeals for the assessment years 1981-82, 1982-83 and 1983-84 are accordingly dismissed." On further appeals by the assessee-club against the aforesaid order passed by the first appellate authority, the Income-tax Appellate Tribunal has allowed the appeals, on the ground, that the assessee is an entity not susceptible to be assessed for its wealth, relying on the decision of the Karnataka High Court in the case of CWT v. Bowring Institute [1992] 194 ITR 287. The Income-tax Appellate Tribunal, pursuant to the directions issued by this court in C. P. Nos. 406 to 409 of 1993 dated February 14, 1994 has referred the following question of law arising out of the orders passed in W. T. A. Nos. 498 to 500 of 1998 and W. T. A. No. 553 of 1988 dated November 29, 1991, pertaining to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h-tax Act would not apply to a club. The first appellate authority while allowing the appeals filed by the assessee, in its order has observed that the cause shown by the assessee is not only reasonable but also sufficient and therefore, the Wealth-tax Officer was not justified in levying penalty, on the ground that the returns under the Wealth-tax Act were filed belatedly. The findings and the conclusion reached by the first appellate authority are as under: "4. The only question for determination here would be whether the appellant had sufficient or reasonable cause to believe that it was (not?) under any obligation to file the returns of wealth. Prior to April 1, 1981, there were several decisions that clubs, which were A.O.Ps., could not be treated as a taxable unit; the Gujarat High Court in Orient Club v. WTO [1980] 123 ITR 395; the Bombay High Court in Orient Club v. CWT [1982] 136 ITR 697 and Willingdon Sports Club v. C. B. Patil, Third Addl. WTO [1982] 137 ITR 83 (Bom); the Bangalore Bench of the Income-tax Appellate Tribunal had also held similarly in the appellant's own case as well as in the case of other clubs etc. With effect from April 1, 1981, section 21AA was int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the provisions of the Karnataka Societies Registration Act is exigible to tax under the provisions of the Wealth-tax Act, but in our view, for the present, the issue is now settled by the pronouncement of the Supreme Court in the case of the CWT v. Ellis Bridge Gymkhana [1998] 229 ITR 1 wherein it is held that "club is not assessable to wealth-tax in the assessment years 1970-71 to 1977-78 as an association of persons" and while saying so, the court has observed that "the position has been placed beyond doubt by the insertion of section 21AA in the Wealth-tax Act itself". The facts in the aforesaid decision were that, the assessee was a club and the assessment years involved were 1970-71 to 1977-78. Pursuant to a notice issued by the Wealth-tax Officer, the assessee-club had filed its return of wealth-tax for the aforesaid assessment years, but had contended that it was not liable to be assessed under the Wealth-tax Act, 1957. The Wealth-tax Officer had rejected the claim of the assessee. The assessee was successful before all the forums, including before the High Court, where the court has confirmed the orders passed by the Appellate Tribunal in holding that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (1). That means only associations of persons in which individual shares of the members were unknown or indeterminate can be subjected to wealth-tax. Sub-section (3) also deals with associations of persons referred to in sub-section (1). Sub-sections (4) and (5) deal with some consequences which will follow the members of an association of persons spoken of in sub-section (1) in the case of discontinuance or dissolution." In reference proceedings, namely, T. R. C. No. 120 of 1998 (old T. R. C. Nos. 120-123 of 1998), we are primarily concerned with the assessment years, namely, 1981-82, 1982-83 and 1983-84. In fact, for the assessment year 1980-81, the first appellate authority has given relief to the assessee by cancelling the assessment order passed by the Wealth-tax Officer under section 16(3) of the Wealth-tax Act, treating the status of the assessee as an "individual". However, he has confirmed the orders of assessment passed for the assessment years 1981-82 to 1983-84, keeping in view the amendment effected to the Wealth-tax Act by the Finance Act, 1981, by which amendment section 21AA is inserted with effect from April 1, 1981, which is applicable for and from the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt years require to be noticed. Omitting what is not necessary for the purpose of this case, the said provision is extracted and it reads as under: "Section 18 : Penalty for concealment.-(l) If the Wealth-tax Officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act, is satisfied that any person (a) has without reasonable cause failed to furnish the return of his net wealth which he is required to furnish under sub-section (1) or sub-section (2) of section 14 or section 17 or has without reasonable cause failed to furnish within the time allowed and in the manner required or... he or it may, by order in writing, direct that such person shall pay by way of penalty (i) in the cases referred to clause (a), in addition to the amount of wealth-tax payable by him, a sum not exceeding one-and-a-half times the amount of such tax, and... (2) No order shall be made under sub-section (1) unless the person concerned has been given a reasonable opportunity of being heard." The Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, apart from others, made the following amendments with effect from Septembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow cause why penalty should not be levied for filing wealth-tax returns belatedly. In the reply filed to the show-cause notice, the assessee had brought to the notice of the Wealth-tax Officer that it was under a bona fide impression that wealth-tax was not payable by a club, which is a society registered under the Karnataka Societies Registration Act, in view of the law declared by several High Courts and also the orders passed by the Income-tax Appellate Tribunal in the assessee's own case for the earlier assessment years. This explanation is rejected by the Wealth-tax Officer while passing the order levying penalty. However, the assessee has succeeded in persuading both the first appellate authority and the Income-tax Appellate Tribunal to accept its explanation for belated filing of the return under the Act. The question now before us is, whether the Tribunal is justified in setting aside the orders passed by the Wealth-tax Officer in levying penalty under section 18(l)(a) of the Act for belated filing of the wealth-tax returns for the assessment years 1981-82 and 1982-83? The omission to file returns within the time stipulated in the Act would attract penalty, but the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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