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TMI Blog1985 (3) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... was a delay of seven months in filing the return. For this delay he started penalty proceedings under section 18(1)(a) of the Act. After considering the contentions of the assessee, the Wealth-tax Officer passed an order on October 28, 1970, imposing a penalty of Rs. 15,395. A copy of the order of the Wealthtax Officer has been annexed and marked as annexure 'A' forming part of the statement of the case. On appeal before the Appellate Assistant Commissioner it was urged that the assessee had a share in a firm and his interest in the firm was his main wealth and that the firm's accounting year ended on March 31, 1969. The firm took some time in finalising its accounts and under the Income-tax Act the firm did not Me its return before September 30, 1969. The return of the firm, in fact, was filed in January 1970, and it was only then that the assessee was able to find out the value of his interest in the partnership firm. On these facts, the Appellate Assistant Commissioner held that the assessee had a reasonable cause for not filing the return within the specified time. He, therefore, cancelled the order of the Wealth-tax Officer. A copy of the order of the Appellate Assistant Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal held that there was no reasonable cause for delay. The Tribunal, in view of the proviso to section 14 of the Act held that the assessee could file his wealth-tax return by September 30, 1969, and so the Tribunal calculated penalty for four months from September 30, 1969 to February 23, 1970. Thus, in this case, we have only to consider whether the proviso to section 14(1) of the Act will be applicable. Section 14 of the Act lays down that every person, if his net wealth or the net wealth of any other person in respect of which he is assessable under this Act on the valuation date was of such an amount as to render him liable to wealth-tax under this Act, shall, before the 30th day of June of the corresponding assessment year, furnish to the Wealthtax Officer a return in the prescribed form and verified in the prescribed manner setting forth the net wealth as on that valuation date. The proviso to section 14(1) of the Act lays down in the case of a person whose net wealth or the net wealth of any other person in respect of which he is assessable under this Act includes the value of any assets held in a business or profession and the time (whether fixed originally or on extensi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the law applicable in this case will be the law as on June 30, 1969, and the proviso to section 14(1) of the Act will not be applicable in this case. In order to appreciate the contentions of both the parties it is necessary to refer to the Finance Act, 1970. The present proviso to section 14(1) of the Act was introduced by section 26(d) of the Finance Act, 1970. This Finance Act in sub-section (2) of section 1 lays down that sections 2 to 27 (both inclusive) shall be deemed to have come into force on the 1st day of April, 1970. This Finance Act is to be found at pages 121 to 158 in [1970] 76 ITR (Statutes). Thus it cannot be doubted that the proviso to section 14 ( 1) of the Act has come into force from the 1st day of April, 1970. We have to bear in mind that the wealth-tax return was due on June 30, 1969, and it was filed on February 23, 1970, long before the proviso to section 14(1) of the Act was inserted from April 1, 1970. Now the question is whether in such a case the proviso to section 14(1) will be applicable. It has been held in the case of Hajee K Assainar v. CIT [1971] 81 ITR 423 (Ker) that if the amendment of a statute deals merely with matters of procedure a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1952. It appears that section 22(4) before amendment empowered the Income-tax Officer only to require the production of accounts and documents. That section was amended by the Amending Act of 1953 with retrospective effect from April 1, 1952, and the amendment gave power to the Income-tax Officer to require the assessee to furnish particulars and information in addition to producing accounts and documents and in those circumstances this observation was made. Their Lordships of the Bombay High Court at page 660 have pointed out that the liability to pay the tax is founded on sections 3 and 4 of the Income-tax Act, which are the charging sections and section 22, etc., are the machinery sections to determine the amount of tax. It has also been held in this decision that the provision of section 22(4) of the 1922 Act by itself is purely procedural and simply because there has been a change in this procedural provision, which perhaps is a little more inconvenient to the assessee, that would not make the usual rule inapplicable to this provision, viz., that a procedural provision will have application to all pending proceedings subsequent to its introduction. Their Lordships have also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he intention of the legislature. A reference was made to the observations of Lord Hatherley L.C. in Pardo v. Bingham [1869] 4 Ch. Appl. 735, 740 where on the question as to whether a statute operated retrospectively it was stated that we must look to the general scope and purview of the statute, and at the remedy sought to be applied, and consider what was the former state of law, and what it was that the legislature contemplated and hence the observations were made. However, as regards the question of limitation, there are various decisions. As Mr. Pawan Kumar has argued that the proviso lays down only a rule of limitation, let us see how the proviso will be applicable in the present case. He has drawn his analogy from the provisions of section 275 of the Income-tax Act. Section 275 of the Income-tax Act, 1961 (hereinafter to be called as the 1961 Act), originally stood as follows : "275. Bar of limitation for imposing penalty.-No order imposing a penalty under this Chapter shall be passed after the expiration of two years from the date of the completion of the proceedings in the course of which the proceedings for the imposition of penalty have been commenced." This portion w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n had not expired and at that time the period of limitation was extended by the amending Act, then the amending Act extending the limitation will apply. The Orissa High Court again held the same view in the case of CIT v. Soubhagya Manjari Devi [1976] 105 ITR 82 where again it was repeated that when the amending Act came into force, i.e., from April 1, 1971, the two-year period provided under section 275 of the unamended Act had not expired and at that stage the new provision with effect from 1st April, 1971, introduced new scheme of limitation and that no right had accrued to the assessee when the law was changed and, therefore, the law as in force on the date when the order was made must be applicable. It has been held in the case of Addl. CIT v. Watan Mechanical and Turning Works [1977] 107 ITR 743, by a Full Bench of the Andhra Pradesh High Court that no one has a vested and substantive right in the procedure and limitation has to be considered as a part of the procedural law as distinct from substantive law. It has also been held that the liability for tax or penalty would always remain on the assessee; but if the time prescribed under the Act expires, the liability cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as extended the period of limitation which had not yet expired. The Kerala High Court followed its earlier decision in the case of Saraf Trading Corporation v. CIT [1980] 123 ITR 159. The principle laid down in Kerala Oil Mills v. CIT [1980] 121 ITR 254 (Ker) was also followed in the case of CIT v. Sadhu Ram [1981] 127 ITR 517 by the Punjab and Haryana High Court. From the various decisions cited above, it is evident that the law of limitation being a procedural law has always retrospective effect unless the amending statute provides otherwise. The decisions also lay down that if the period of limitation had already expired, then any amendment relating to limitation will not be applicable in such cases and that if by amendment the limitation period is extended when it has not expired, then such an Amending Act will have retrospective operation of being procedural law. Bearing the aforesaid decisions in mind, it has to be considered as to what will be the position in the present case. I have already pointed out above that the due date for filing the wealth-tax return was June 30, 1969, and the return was filed on February 23, 1970. The proviso to section 14(1) of the Act cam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act and that once the law was applicable, it shall apply to the entire period. It has been held in the case of Suresh Seth v. CWT [1977] 108 ITR 86 by the Punjab and Haryana High Court that a fiscal statute cannot be construed retrospectively unless there are clear words to that effect in the statute itself and that section 18(1)(a) of the Act, as amended by the Finance Act, 1969, is not retrospective in its operation and that under section 18 of the Act, the wrongful Act on the part of an assessee becomes complete as soon as he does not Me the return of his wealth on the stipulated date and that his omission to do so does not make the wrongful act a continuing one merely because penalty on him may either continue or get enhanced and that penalty can be imposed on an assessee for failure to file a return on the due date only on the basis of the law which was prevalent on that date. It has been held in the case of CWT v. R. D. Chand [1977] 108 ITR 787 by the Andhra Pradesh High Court that the default under section 18(1)(a) of the Act must be deemed to have been committed by the assessee on the due date on which he was required to Me return for the relevant assessment year and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led as prescribed by law and the offence is committed when the return is not filed on the due date and the penalty has to be computed in accordance with the provisions of the law as it prevailed at the time of the commission of the offence. All the above decisions have been upheld by their Lordships of the Supreme Court in the case of CWT v. Suresh Seth [1981] 129 ITR 328 where their Lordships were considering section 18(1)(a) of the Act. It has been held in this decision that where the default complained of is one falling under section 18(1)(a) of the Act (e.g., failure to Me the return of wealth before the due date without reasonable cause), the penalty has to be computed in accordance with the law in force on the last day on which the return in question had to be filed and that neither the amendment made in 1964 nor the one made in 1969 to clause (i) of section 18(1) of the Act has retrospective effect. From my discussions above, it is evident that the offence was complete on June 30, 1969, when the return was due under section 14(1) of the Act. On June 30, 1969, the present proviso was not in existence. The assessee in this case filed return on February 23, 1970, when the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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