PRANAKRUSHNA SWAIN VS COMMISSIONER OF WEALTH TAX, 1992 PTD-ORISSA-HIGH-COURT-INDIA 887 (1990)

(a) Wealth tax---

----Penalty---Appeal to AAC---Failure to furnish returns in time-- Enhancement of penalty by AAC---Notice must be given to assessee.

A perusal of section 23(5) of the Indian Wealth Tax Act, 1957. makes it clear that no order can be passed by the Appellate Assistant Commissioner which has the effect of enhancement of penalty without giving notice to the assessee to show cause.

(b) Wealth tax---

---- Appeal to Appellate Tribunal---Powers of remand---Enhancement of penalty by AAC without giving notice to assessee---Tribunal justified in remanding case.

Non-issue of the notice to show cause by the Appellate Assistant Commissioner does not take away the power of the Tribunal to set aside the order and send it back to the Appellate Assistant Commissioner to exercise his power of enhancement after giving notice to show cause.

C.W.T. v. Suresh Seth (1981) 129 ITR 328 (SC) ref.

N. Paikray, R.P. Kar, AX Ray, M.K. Bodu and G. Naik for the Assessee.

S.C. Ray, Advocate-General for the Commissioner.

JUDGMENT

S.C. MOHAPATRA, J: --These references are at the instance of the assessee under section 27(1) of the Wealth Tax Act, 1957 (hereinafter referred to as "the Act"). A common statement of the case has beds made on the following question of law:

"Whether, on the facts and the circumstances of the case, the non -issue of the show-cause notice by the Appellate Assistant Commissioner before directing enhancement was a procedural irregularity which was a curable defect or it was a legal infirmity making her order a nullity?"

Against orders under section 18(1)(a) of the Act the assessee preferred appeals. In those appeals, the Appellate Assistant Commissioner enhanced the penalty. For the purpose, no notice was given to the assessee. Against the appellate orders, the assessee preferred appeals before the Income-tax Appellate Tribunal where he submitted that the entire proceeding for enhancement in appeal is vitiated since no power of enhancement could have been exercised since there was no notice as required under the Act.

The assessee is a Hindu undivided family. Its wealth consists of immovable property and some movable assets. For the years 1969-70 to 1975-76, returns were filed on January 25, 1977, together. Delay could not be explained by the assessee and the Wealth Tax Officer imposed penalties for late filing of the returns. In appeal, the Appellate Assistant Commissioner, while confirming the finding of absence of justification for late filing of the return, directed re-computation of penalty on the basis of the decision of the Supreme Court in CWT v. Suresh Seth (1981) 129 ITR 328, which had the effect of enhancement of penalty. The assessee preferred appeals before the Tribunal. Appeals were allowed and the Appellate Assistant Commissioner was directed to give notice to show cause as required under section 23(5), proviso, of the Act and to pass orders. The grievance of the assessee is that the appellate order ought to have been reversed. On the grievance made by the assessee, the question of law as extracted earlier arises for our decision.

Section 23 of the Act deals with appeals. Subsection (5) which is material reads as follows:

"23. Anneal to the Appellate Assistant Commissioner from orders of Wealth Tax Officers.---...

(5) In disposing of an appeal, the Appellate Assistant Commissioner or, as the case may be, the Commissioner (Appeals) may pass such order as he thinks fit which may include an order enhancing the assessment or penalty:

Provided that no order enhancing the assessment or penalty shall be made unless the person affected thereby has been given a reasonable opportunity of showing cause against such enhancement."...

A perusal of the aforesaid provision makes it clear that no order can be passed by the Appellate Assistant Commissioner which has the effect of enhancement of penalty without giving notice to the assessee to show cause.

Admittedly, notice has not been given. The question is whether the Tribunal ought to have confirmed the order of the Wealth Tax Officer since no notice has been given. Any order passed without notice is a nullity having violated the principles of natural justice which is embodied in the proviso itself. The appellate authority decided to consider the question of enhancement. In that view, the appeal does not come to an end. It is to go back to the stage where there is defect. Hence, the Tribunal is correct in setting aside the appellate order and remitting back the appeals for fresh disposal after giving notice to show cause. Our answer to the question, on the facts and in the circumstances of the case, is that non-issue of the notice to show cause by the Appellate Assistant Commissioner does not take away the power of the Tribunal to set aside the order and send it back to exercise the power of enhancement after giving notice to show cause. The answer is given against the assessee. There shall be no order as to costs.

J.M. Mahapatra, J.--I agree.

M.B.A./1542/TReference answered.