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TMI Blog1988 (1) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... of the return of wealth, the case of the assessee was not represented by Shri Indrajit Jain, Advocate. (d) That there was no mala fide or deliberate intention to make any default or non-compliance. 3. In any case and without prejudice to the above grounds the quantum of penalty sustained by the learned AAC is much too high and excessive. 4. The order of the AAC is against facts, law and principles of natural justice. 2. The authorised representative for the assessee contended before us that he purchased Himalaya Hotel in 1957 for a sum of Rs. 40,000 and after renovation the value was estimated at Rs. 86,120 and he was under a bona fide belief that the property income of the assessee was below taxable limit and he was not required under law to file the return. Proceeding further, it was contended that the assessee got the property valued by two different valuers, one of them is Shri M. S. Bapat and the other is Shri Murtaza Hussain. They have valued this property for the assessment year 1969-70 at Rs. 2,03,300 and Rs. 1,12,472 respectively. He challenged the action of the Valuation Officer in not passing the order under section 16A(4) on the basis of the notice issue by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 613 relevant at page 616. 3. On the other hand, the Senior Departmental Representative contended before us that the order of the AAC is perfectly in order and no interference in the matter is required. He has further relied upon the following decisions - CIT v. Sheo Kumari Debi [1986] 157 ITR 13 (Pat.) (FB), Smt. Kamla Vati v. CIT [1978] 111 ITR 248 (Punj. Har.), CIT v. Patram Dass Raja Ram Beri [1981] 132 ITR 671 (Punj. Har.) (FB), CIT v. Gujarat Travancore Agency [1976] 103 ITR 149 (Ker.) (FB) and Nemichand Ganeshmal v. CIT [1980] 124 ITR 438 (MP). The departmental representative further contended before us that the legal advice was available to the assessee and on receipt of second valuation report, he should have filed the return as per legal advice available to him. It was next contended that the exemption limit of Rs. 1,00,000 was not available to the assessee because he was running a hotel and the exemption was only available in regard to the residential building. The Senior Departmental Representative further contended before us that the facts of the Supreme Court's decision in the case of M. Chandra Sekhar are distinguishable because in that case the WTO has not ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time up to that date is the time allowed for furnishing the return" appearing at page 440 in M. Chandra Sekhar's case have to be read in the context of the issue involved in that case. If the entire paragraph appearing at page 440 is read as a whole then it is clear that the Hon'ble Court was referring to the condonation of only "additional period" allowed for filing the return. The court was not called upon to consider the condonation of any period concerned under section 14(1) of the Act in the course of proceeding under section 17(1) of the Act which is the case before us. The case of Hon'ble Supreme Court is thus, distinguishable on facts. Reliance is also placed on Laxmi Co. v. CIT [1981] 128 ITR 259 (All.) and Kashiram Tea Industries Ltd. v. ITO [1981] 132 ITR 783 (Cal.). We therefore, do not agree with the submission of the authorised representative for the assessee in this regard. It is also a fact that the assessee was running a hotel and legal advice of Senior Advocate, Shri Indrajeet Singh was available to him. In this way, it cannot be said that the assessee was under a bona fide belief that his net wealth was below taxable limit. Therefore, the return should have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he issued notice under section 17. On receipt of the notice under section 17, the assessee approached the WTO with a request of extension of time for filing the return as he had to collect details and he had also to get the report of his valuer to whom the matter was referred. The WTO being convinced of the request made by the assessee, granted time for filing the return and eventually the assessee filed the return within the time so allowed by the WTO. There is no dispute on these facts. Thus, the assessee did not commit any delay in the filing of the return in response to notice under section 17. The only alleged default on the part of the assessee is that no return was filed voluntarily by the assessee. The assessee's explanation has been consistently that he had only one immovable property and he was under a bona fide impression that his net taxable wealth would be below the taxable limit after taking into account the exemption in respect of property, which was available to any person owning an immovable property. This explanation of the assessee was not accepted by the WTO and the AAC on the ground that the assessee was represented by Shri Indrajeet Jain, Advocate and thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Shri Jain argued that the assessee did not have any motive for not filing the return voluntarily, as the tax burden involved was nominal. The wealth-tax on the net wealth finally assessed is less than Rs. 1,000. It would not sound to reason that anybody would not file a return only for evading wealth-tax of Rs. 765, when he would expose himself to a heavy penalty of Rs. 32,895. No person would take this chance by which he would render himself liable to pay heavy penalty of this amount only to save payment of wealth-tax of a few hundred rupees. The assessee bonafidely was under an impression that his wealth would not exceed taxable limit. Even as it is, the net wealth finally assessed has exceeded the taxable limit only marginally and even here the exemption meant for one property could not be available to the assessee due to the condition which was there during this year under appeal (this limitation has been abolished with effect from 1-4-1972) that the property should have been exclusively used for purpose of residence before this exemption should be allowed. The assessee being a layman was unaware of these limitations and the technical provisions. Further the repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which prevented the assessee for filing the return voluntarily. The assessee bonafidely felt that his income was below taxable limit. He was all the time under the impression that the exemption meant for property would be available to him as well. He did not have the technical or professional advice of Shri I. J. Jain. Advocate, before he filed the return in response to the notice under section 17. At least, there is no evidence to hold that the services of Shri Jain were available to him even before he received the notice under section 17. In the absence of any evidence it cannot in my opinion, be held that Shri Jain was engaged by the assessee even before the received the notice under section 17. I, therefore, am of the opinion that the services of Shri Jain were not available to the assessee and the assessee had not engaged Shri Jain before the receipt of notice under section 17. Being a laymen, he was under a bona fide impression that his net wealth would be below the taxable limit and he was not expected to file the return voluntarily. Even otherwise, had he known that his net wealth would exceed taxable limit he could not have taken the risk of being subjected to such a hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. M. Chandra Sekhar [1985] 151 ITR 433 and the decisions of the Allahabad High Court in Laxmi Co. v. CIT [1981] 128 ITR 259 and the Calcutta High Court in the case of Kashiram Tea Industries Ltd. v. ITO [1981] 132 ITR 783 ? AND (iii) Whether, in the facts and circumstances of the case, the penalty under section 181(1) (a) of the Wealth-tax Act has been correctly sustained by the Appellate Assistant Commissioner ? 2. We refer the above matter to the President of the Tribunal so that the same may be decided by referring to one or more of the other Members of the Tribunal. THIRD MEMBER ORDER Per Shri T. Venkatappa, Vice President - This matter has come up before me by way of a Third Member Case to express my opinion on the following points of difference of opinion that arose between the learned Members of Allahabad Bench-A, who heard this appeal : "(i) Whether there was reasonable case on the part of the assessee for the delay in submission of the return before the issuance of notice under section 17(1) of the Wealth-tax Act, 1957 ? (ii) Whether such delay could be treated as condoned in the light of the Supreme Court decision in the case of CIT v. M. Chandra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst report of the approved valuer who valued the property at Rs. 1,12,000. Thus, there was a reasonable cause for the delay in filing the return. Further, the very fact that the Wealth-tax Officer has extended the time by two months for filing the return would show that the earlier delay has been condoned and as such no penalty is leviable. He further urged that the assessee is not guilty of conduct contumacious or dishonest and no penalty is leviable. The probabilities of the case have to be taken into consideration in the penalty proceedings. He relied on the decisions in M. Chandra Sekhar's and Gagnaram Chapolia's case, Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC). He further urged that the ground floor two shops are let out and the other portion is run as a restaurant and the rest of the building is used as hotel. Even though it is used as a hotel, any commercial building also could come within the description of 'house'. 5. The learned Departmental Representative justified the levy of penalty. He urged that the very fact that the assessee has obtained the Approved Valuer's report, would show that his belief that his wealth was below the taxable limit, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 lakh could be a valid one. Thus, there was reasonable cause for thirdly in filing the return. Hence, no penalty is leviable under section 18(1)(a). In the view I have taken it is not necessary to consider question No. 2 referred to me for my opinion. Even if it is considered, I hold that the decision of the Supreme Court in the case of M. Chandra Sekhar, the decision of the Allahabad High Court in Laxmi Co.'s case and the decision of the Calcutta High Court in the case of Kashiram Tea Industries Ltd. have no application to the present case. The decision in the M. Chandra Sekhar's case does not relate to reassessment proceedings. Thus, I hold that penalty levied under section 18(1) (a) of the Wealth-tax Act, 1957 is not justified and it should be cancelled. 7. The matter will now go back before the regular Bench for the decision according to the majority opinion. Per Shri Ram Swarup, Judicial Member - This appeal by the assessee is directed against the order of the Appellate Assistant Commissioner dated 20-9-1976 relating to the assessment year 1969-70. 2. Briefly stated the facts of the case are that the due date for filing the return was 30-6-1969. But it was not file ..... X X X X Extracts X X X X X X X X Extracts X X X X
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