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TMI Blog1995 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the Appellate Assistant Commissioner when the Income-tax Officer had reduced the penalty to 50 per cent. of the Minimum in view of the order of the Commissioner of Wealth-tax made on the application of the assessee under section 181(2A) of the Act ? 3. Whether, on the facts and in the circumstances of the case, the appeal against the order of the Wealth-tax Officer imposing penalty of Rs. 14,520 being 50 per cent. of the minimum penalty imposed on account of the order of the Commissioner of Wealth-tax made under section 18(2A) of the Act was competent in view of the provisions contained in section 18(2B) of the Act ? 4. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has been right in law in confirming the order of the Appellte Assistant Commissioner in cancelling the penalty of Rs. 14,520 imposed by the Wealth-tax Officer for late filing of the return under section 18(1)(a) of the Act ? " The questions relate to levy of penalty under section 18(1)(a) of the Wealth-tax Act for late filing of return for the assessment year 1969-70. The facts necessary for the present purposes are that the assessee filed a return of his net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. The contention in support of the above submission was that the Appellate Assistant Commissioner erred in overlooking the provisions of section 18(2B) according to which the order under section 18(2A) would be final and could not be called in question before any court of law or any other authority. The Tribunal rejected the contention and on the merits upheld the order of the Appellate Assistant Commissioner. It appears that no contentions were raised before the Tribunal on the merits of the case. Coming to the contention of delay in filing the appeal before the Appellate Assistant Commissioner, we notice from the order that initially the assessee had filed a petition before the High Court under article 226 keeping in view the provisions of section 18(2B). However, as a result of discussion between the assessee's counsel and counsel for the Revenue in which it was suggested to counsel for the assessee that in view of the order under section 18(1)(a) being appealable in spite of the petition for waiver before the Commissioner of Income-tax, the petition was withdrawn to prefer appeal before the a propriate authority. From a perusal of the relevant provision as it existed dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the scheme of the provisions it is apparent that the scope and jurisdiction of the two provisions, namely, 18(1)(a) and 18(2A), are entirely different and operate in different fields. Penalty becomes imposable under section 18(1)(a) on account of default on the part of the assessee in failing without reasonable cause to file return in time. If absence of reasonable cause is not established or the assessee is able to prove the existence of reasonable cause for not filing the return, no penalty becomes imposable under section 18(1)(a). On the other hand, the exercise of discretion by the Commissioner under sub-section (2A) assumes the existence of all necessary facts which makes penalty imposable and the discretion of the Commissioner to reduce or waive the penalty which is imposable under section 18(1)(a) rests on considering the factors which have been provided under sub-section (2A) itself, namely, whether the assessee has voluntarily disclosed the particulars of net wealth prior to issuance of notice for furnishing return ; whether the assessee has disclosed the particulars of his net wealth truly and whether the assessee co-operated fully in the enquiry necessary for comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcise his discretion to waive or reduce penalty were entirely different proceedings, the pre-requisites of the orders contemplated by the two provisions were also different, and the Wealth-tax Officer and the Commissioner had to act on different criteria ; (ii) that under section 18(2A), the discretion to waive or reduce penalty had to be exercised by the Commissioner judicially and if the conditions laid down in the section were fulfilled the Commissioner was bound to waive or reduce penalty ; (iii) that the mere failure to file returns within the time allowed did not make the assessee liable to penalty : there had to be contumacious or deliberate default ; and the onus was on the Department to establish that the assessee had no reasonable cause for not filing it within time." In the case of CWT v. B. Kempanna [1980] 126 ITR 825, the Karnataka High Court held : " It is seen that the power conferred on the Commissioner was only to reduce or waive the amount of minimum penalty imposable on a person under clause (i) or (iii) of sub-section (1). Clause (i) of sub-section (1) was in relation to penalty imposable for failure, without reasonable cause, to furnish the return of ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer depides against the assessee, his finding can be challenged in appeal before the Appellate Assistant Commissioner. In our opinion, the right of going up in appeal for challenging an order imposing penalty passed by the Wealth-tax Officer remains effective and is not waived simply because the assessee approaches the Commissioner for waiver of penalty and he refuses to waive penalty under section 18(2A). The view was followed by the same High Court in the case of CWT v. Kekatpure Ginning and Pressing Factory [1984] 145 ITR 813. Regarding the difference in the scope of the two provisions under the Income-tax Act, the Gujarat High Court in the case of Smt. Kherunissa Allibhai v. CIT [1978] 113 ITR 443, has noticed the distinction in the following terms : " When the assessee approaches the Commissioner under section 273A, he does not dispute his liability to pay the penalty. All that he says is that he should be given the relief of reduction or waiver by the fact that the conditions specified in section 273A are satisfied. However, when an assessee files an appeal against the order of penalty, he is challenging the very imposition of penalty and his effort in the appeal is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid conclusion by the decisions of the Delhi, Karnataka and the Madhya Pradesh High Courts. In all the above cases, the facts were similar to the case at hand. The Karnataka High Court in the case of CIT v. B. Kempanna [1980] 126 ITR 825 held : " Under section 18(2B), what is made final is the order made under section 18(2A), i.e., in regard to the quantum of minimum penalty that is directed to be waived or reduced and nothing more. There is no provision that once the assessee filed an application under section 18(2A), before the Commissioner, he waives his other rights. " In Jagdish Agarwal case [1983] 143 ITR 941, the Madhya Pradesh High Court said : The two jurisdictions are entirely different and distinct. Therefore, if the Commissioner refuses to waive the penalty, it cannot be said that there was no reasonable cause for late filing of the return. That question, which is the subject-matter of enquiry before the Wealth-tax Officer, still remains open and if the Wealth-tax Officer decides against the assessee, his finding can be challenged in appeal before the Appellate Assistant Commissioner. In our opinion, the right of going up in appeal for challenging an order imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th-tax Act, as the case may be. Argument was raised before us on the basis of observations made in Kherunnissa's Allibhai case [1978] 113 ITR 443 (Guj) that the concept of section 273A is that the assessee concerned admits his liability to penalty but relies upon certain mitigating circumstances specified in the section. On the basis of this observation, it is contended that once the liability is admitted the right to appeal must be deemed to have been waived. We are unable to read anything of the like in the said observation. In the context in which these observations find place in the order, it is clear that the court was considering the nature and scope of jurisdiction to be exercised under section 273A which proceeded on the assumption of existence of liability to penalty under the relevant provisions ; and the exercise of jurisdiction under section 273A is not de hors the non-existence of liability, that is to say, logically it does not fall for consideration of the Commissioner to hold that there was reasonable cause for the assessee for not filing the return within time, a fact which, would make penalty unimposable and will result in not attracting the provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order itself invalid, as the same would amount to making of order by the Wealth-tax Officer, the authority entrusted with duty to decide on imposition of penalty, without application of mind by abdicating his authority to the Commissioner of Wealth-tax, who had no jurisdiction to decide upon whether penalty was at all imposable. However, we may notice here that in the assessee's case, the Wealth-tax Officer has not merely proceeded to give effect to the order of the Commissioner of Wealth-tax but has in his own right laid the foundation for levying the penalty by rejecting the assessee's explanation for not filing the return in time and having laid found ation for imposing the penalty and calculated the minimum penalty imposable under the relevant provision, then gave effect to the order of the Commissioner of Wealth-tax for raising a demand by reducing the minimum imposable penalty by 50 per cent, Therefore, the order of the Wealth-tax Officer in the present case does not lose its independent character of levying penalty under section 18(1)(a) and is not an order merely of executive nature in giving effect to the order passed by the Commissioner of Wealth-tax. In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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