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TMI Blog1975 (1) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... not an assessee during the lifetime of her husband. She also claims that she is an uneducated lady and knew nothing about tax laws nor dealt with any financial matters during the lifetime of her husband. Her eldest son had died in 1968 and her youngest son is mentally undeveloped from birth. She has one other son, Moti Lal Mehra, who was also inexperienced and unaware of taxation and financial matters. During the lifetime of her husband there was no tax consultant or lawyer engaged to look after the tax and financial matters of the family. Consequently, no returns were filed after the death of Mohan Lal Mehra till May, 1971. Moti Lal Mehra, son of the petitioner, did attend to the routine assessments after the death of his father and the petitioner was assessed to income-tax for the assessment year 1965-66 for the first time on May 10, 1968. It is contended that in or about April/May, 1971, a well-wisher of the family advised the petitioner to examine the liability to file wealth-tax returns as a consequence of the devolution of the estate of Mohan Lal Mehra on the petitioner and her two sons. It was then discovered by the petitioner that she was liable to wealth-tax for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts to failure to exercise of jurisdiction or amounts to an incorrect exercise of jurisdiction. Regarding the proceedings taken by the Wealth-tax Officer it is submitted that the penalty proceedings are independent of the proceedings under section 18(2A) but the Wealth-tax Officer is considering the levy of penalty as if he had received a directive from the Commissioner. The issue of writ is opposed on the ground that the Commissioner has exercised his discretion under the statute which cannot be interfered with. Penalty has since been imposed and inasmuch as those orders are not challenged, they have become final. It is contended that once the Commissioner has passed orders under section 18(2A) he becomes functus officio. It is further submitted that the Central Board of Direct Taxes could issue no directions to the Commissioner to give a fresh hearing to the petitioner and so the second order passed by the Commissioner as communicated to the petitioner on January 9, 1974, is no order in the eye of law. Adverting to the penalty orders having been passed it is contended that even if the Commissioner's orders are now set aside the writ would be infructuous. Penalty vis-a-v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2A) being fulfilled. Accordingly, a direction was given to the Wealth-tax Officer to levy a penalty of 5 per cent. of the penalty leviable under the provisions of section 18(1)(a) of the Act for each of the six years. The order on the very face of it is contradictory. On the one hand, the Commissioner says that the contentions of the assessee do not carry conviction. On the other hand, he says that the conditions laid down in section 18(2A) are fulfilled and notices that the returns were filed before the department issued any notices under section 14(2) of the Act. Furthermore, the order presumes that the petitioner was aware of her liabilities to pay wealth-tax merely because she was an income-tax assessee. It is also worth noting that instead of reducing or waiving the amount of minimum penalty the order is a directive to the Wealth-tax Officer to levy a penalty of 5 per cent. of the penalty leviable under the provisions of section 18(1)(a) of the Act. This direction may well amount to interfering with the discretion of the Wealth-tax Officer who can levy penalty under section 18(1) of the Act only if he is satisfied as to the existence of the conditions prescribed by clauses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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. The imposition of penalty is in the nature of quasi-criminal proceedings and unless the assessee has acted deliberately in defiance of law or is guilty of contumacious or dishonest conduct or has acted in conscious disregard of his obligation, no penalty can be imposed. The Supreme Court in Hindustan Steel Ltd. v. State of Orissa enunciated the above principles in a case under the Orissa Sales Tax Act. These principles were applied to penalty proceedings under section 271(1)(a) of the Income-tax Act, 1961, by the Kerala High Court in P. V. Devassy v. Commissioner of Income-tax. To quote the Supreme Court in the case of Hindustan Steel Ltd. : "...... the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party oblig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax, relied upon on behalf of the respondent, does not apply to the facts of this case. In the reported decision the return was filed subsequent to notice from the revenue authorities under the Gift-tax Act, 1958. The principles applicable under section 18(2A) would be similar to the principles applicable to petition under section 271(4A) of the Income-tax Act, 1961. As was laid down by the Mysore High Court in S. Sannaiah v. Commissioner of Income-tax, if the conditions laid down in clauses (a), (b) and (c) of section 271(4A) of the Act are satisfied, the Commissioner has no discretion to refuse to reduce or waive the amount of minimum penalty imposable, but he is under a statutory duty to exercise his discretion of either reducing or waiving the penalty. As noticed earlier, the Commissioner has himself stated in the present case that the conditions of section 18(2A) were satisfied. In this view of the matter, he acted wholly illegally and without jurisdiction in issuing a direction to the Wealth-tax Officer to levy penalty at the rate of 5 per cent. of the minimum penalty leviable. Coming to the second order of the Commissioner when he refused to revise his earlier order, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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