COMMISSIONER OF WEALTH TAX VS SMT. BRIJ RANT, 1993 PTD-ALLAHABAD-HIGH-COURT-INDIA 1536 (1992)

(a) Wealth tax---

----Penalty---Delay in furnishing return---Provisions of S.18(1)(a) analogous to S.271(1)(a) of the Income-tax Act---Non-filing of return is a continuing offence---Indian Wealth Tax Act, 1957, S 18(1)(a)---Indian Income Tax Act, 1961, S. 271(1)(a).

(b) Wealth tax---

----Penalty---Delay in furnishing, return---Law applicable to assessment-- Quantum of penalty---Effect of amendment with effect from 1-4-1969-- Returns for assessment years 1967-68 and 1968-69 filed in June. 1972---Penalty imposable under unamended law up to 1-4-1969 and under law as amended after 1-4-1969---Indian Wealth Tax Act, 1957: S. 18.

(c) Precedent---

----Supreme Court decision in Maya Rani Punj' s case (1986) 157 ITR 330 under the Income-tax Act applicable to Wealth Tax cases.

The provisions of section 271(1)(a)(i) of the Income Tax Act, 1961, are analogous to the provisions of section 18(1)(a)(i) of the Wealth Tax Aft, 1957. In enacting the provisions of section 18(1)(a)(i) the Legislature intended to deem the non-filing of the return to be a continuing default and penalty was imposable not only for the first default but with reference to the continued default which commences from the date when the return was due to be filed and continues month after month until the compliance is made and default comes to an end. The rule of de die in diem is applicable not on daily but on monthly basis.

Maya Rani Punj v. CIT (1986) 157 ITR 330 (SC) applied.

CWT v. Ram Narain Agrawal (1977) 106 ITR 965 (All.) held no longer good law.

The wealth tax returns for the assessment years 1967-68 and 1968-69 were filed on June 12, 1972. Penalty was levied in terms of the amended provisions of section 18 of the Wealth Tax Act at the rate of half a per cent. of the net wealth for each month of default:

Held, that the amount of penalty had to be quantified up to March 31, 1969, on the basis of the earlier provisions of the Wealth Tax Act before it was amended by the Finance Act, 1969 relating to penalty and after that date on the basis of the amended provisions.

CWT v. P.N. Banerjee (1991) 192 ITR 399 (SC) fol.

CWT v. Amatul Kareem (1987) 167 ITR 703 (AP); CWT v. Amolak Singh Jain (1987163 ITR 825 (Delhi); CWT v. Dalip Kumar Worah (1987) 167 ITR 811 (Pat.); CWT v. Tarawia (S. N.) (1988) 170 ITR 569 (Bom.) and State of Bihar v. Deokaran Nenshi AIR 1973 SC 908 ref.

State of Bihar v. Deokaran Nenshi AIR 1973 SC 908 ref.

JUDGMENT

R.K. GUIATI, J: --This is a reference under section 27(1) of the Wealth Tax Act, 1957, at the instance of the Commissioner of Wealth Tax, Lucknow. The reference arises out of the proceedings relating to levy of penalty under section 18(1)(a) of the Wealth Tax Act (for short "the Act") in respect of the assessment years 1967-68 and 1968-69. The following common question of law has been referred by the Income Tax Appellate Tribunal, Delhi Bench, Delhi, for the opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in directing the Wealth Tax Officer to recompute the penalty as per the law that prevailed when the returns were due?"

We may at once notice that the measure of penalty imposable under section 18(1)(a) of the Act for non-submission or delayed submission of returns without reasonable cause between April 1, 1965, and March 31, 1969, was equivalent to two per cent. of the tax for every month during which the default continued but not exceeding in the aggregate 50 per cent. of the tax. Thereafter, with effect from April 1, 1969, an amendment was effected by section 24(c) of the Finance Act, 1969, in the scale of penalty imposable inasmuch as the rate of penalty provided was a sum for every month equivalent to half a per cent. of net wealth calculated in accordance with the amended provisions of section 18 of the Act. The scale of penalty provided therein is more drastic than that prevailing earlier.

We may set out the background of the facts giving rise to the question of law set out earlier. In each of the two assessment years, the assessee's wealth was assessable to wealth tax. The returns for the assessment years 1967-68 and 1968-69 under the Act were due by June 30, 1967, and August 31, 1968, respectively. However, the return for both the years were filed on June 12, 1972. The return for the assessment year 1967-68 was late by more than fifty nine months and that for the assessment year 1968-69 by more than fifty-five months. Because of the inordinate delay in the submission of the returns, the Wealth Tax Officer commenced penalty proceedings under section 18(1)(a) of the Act. Show-cause notices were issued to the assessee to explain why penalty for the delay in furnishing the returns for the years in question be not levied.

The assessee did not reply in spite of several reminders. The Wealth Tax Officer, therefore, assumed that the assessee had nothing to explain and subjected the. assessee to a penalty for each of the two years calculating the same in terms of the amended provision of section 18 of the Act, at the rate of half per cent. of the net wealth, for each month of default during which the default continued.

On appeal, the Appellate Assistant commissioner of income-tax held that penalty for both the years was leviable but he opined that the penalties should have been calculated on the basis of the law as it stood on the relevant date on which the returns for the -years in question were to be filed. The Appellate Assistant Commissioner disapproved of the action of the Wealth Tax Officer in levying penalties on new rates based on net wealth which was introduced with effect from April 1, 1969, by the Finance Act, 1969. Accordingly, he directed the Wealth Tax Officer to recompute the penalties in accordance with the law that was in vogue immediately before March 31, 1969. On further appeal, at the instance of the Revenue, the Income-tax Appellate Tribunal upheld the appellate order following a decision of this Court in CWT v. Ram Narain Agrawal (1977)106 ITR 965 (All.), where the view taken was that non-filing or filing a belated jet urn was not a continuing wrong and if the assessee fails to file the return on the due date, the default is complete and there is no fresh default committed every month until the return is filed, nor did the fact that the penalty is fixed on the basis of month alter the position. On this reasoning the view taken was that the penalty was to be levied on the prescribed scale as prevailing on the date on which the return was due under the Act.

The question for consideration is whether the omission to file the return or submitting a belated return is a continuing offence commencing with the date of default and continuing month after month until the compliance is made and the default comes to an end. Another related question would be on what scale the quantum of penalty is to be ascertained if the answer to the other question is in the affirmative.

At the outset we may observe that the entire controversy before us now stands concluded on all fours, so far as this Court is concerned, by the authoritative pronouncement of the Supreme Court and the position is no more in doubt.

We have heard learned counsel for the Commissioner of Wealth Tax. No one appeared before us for the assessee. We were invited to a decision of the Supreme Court in Maya Rani Punj v. CIT (1986) 157 ITR 330). Placing reliance on this decision, learned counsel contended that the view expressed by this Court in Ram Narain Agrawal' s case (1977) 106 ITR 965 is no longer good law and the default stipulated under clause (a) of subsection (1) of section 18 of the Act is a continuing offence and not one fixed in point of time. Another contention of learned counsel was that the quantification of the penalties by the Wealth Tax Officer with reference to the amended provisions of, section 18(1)(a) with effect from April 1, 1969, was legal and the interference the Income-tax Appellate Tribunal directing recomputation of the penalties on the basis of the law prevailing on the date when the returns were due, cannot be sustained. In support of his contention, learned counsel placed reliance on a Full Bench decision of the Patna High Court in CWT v. Dalip Kumar Worah (1987) 167 ITR 811) and on two other decisions, one of the Andhra Pradesh High Court in CWT v. Amatul Kareem (1987) 167 ITR 703) and the other of the Delhi High Court in CWT v. Amolak Singh Jain (1987) 163 ITR 825).

In the case of Maya Rani Punj (1986) 157 ITR 330 (SC) what had happened was that the income-tax return of the assessee in that case for the assessment year 1961-62 had to be filed by September 28, 1961, which was admittedly filed after a delay of seven months on May 3, 1962, i.e., after the Income Tax Act, 1961 had come into force. The Income-tax Officer initiated penalty proceedings under section 271(1)(a) of the Act for late submission of the return and in due course subjected the assessee to a penalty of Rs.4,060. On appeal the Income-tax Appellate Tribunal held that the penalty was leviable under section 271(1)(a) of the 1961 Act, but the amount of penalty had to be quantified according to section 28 of the Indian Income-tax Act, 1922, and, therefore, the Tribunal reduced the penalty to Rs. 400. On a reference, the High Court held that the Tribunal was not competent to scale down the penalty under section 271(1)(a) of, the 1961 Act, to a figure lower than the sum equal to two per cent. of the tax every month during which the default continued but not exceeding in the aggregate fifty per cent. of the tax. On appeal, the Supreme Court affirmed the decision of the High Court. It ruled that in the matter of penalty the law to be applied will be the law which existed on the day the satisfaction of the taxing authority was arrived at for imposing the penalty. The date for filing the return for the assessment year was of no importance, but what was relevant was the satisfaction of the income-tax authorities that a default had been committed by the assessee which attracted the provisions relating to penalty. Further, whatsoever be the stage at which the satisfaction was reached, the scheme of sections 274(1) and 275 of the Act of 1961 was that the order imposing penalty must be made after the completion of the assessment. The crucial date for the purposes of penalty is the date of such completion and the satisfaction of the authority that proceedings for levy of penalty be initiated.

The question whether the failure to submit the return on or before the due date is a continuing wrong or nor, has significance for the determination of the quantum of penalty. This question directly and pointedly came up for consideration before the Supreme Court in Maya Rani Punj s case (1986) 157 ITR 330 in connection with the penalty proceedings arising under section 271(1)(a) of the Income Tax Act, 1961. The Supreme Court, while adverting to the scope of the expression "continuing wrong", reviewed several decisions, English and Indian cited at the Bar. Interpreting that expression, as well as section 271(1)(a) of the Act of 1961, and the scheme underlying them the Court held that imposition of penalty under the said section was not confined to the first default but with reference to the continued default on the footing that non-compliance with the obligation of making a return was an infraction as long as the default continued. It was observed (headnote):

"That in view of the languages used in section 271(1)(a) of the 1961 Act, the position was beyond dispute that the Legislature intended to deem the non-filing of the return to be a continuing default the wrong for which penalty was to be visited, commenced from the date of default and continued month after month until compliance was made and the default came to an end. The rule of de die in diem was applicable not on daily but on monthly basis. The imposition of penalty was not confined to the first default but with reference to the continued default was obviously on the footing that non-compliance with the obligation of making a return was an infraction as long as the default continued.

If a duty continued from day to day, the non-performance of that duty from day to day is a continuing wrong. The legislative scheme under section 271 (1)(a) of the 1961 Act, in making provision for a penalty co-terminus with the default, provided for a situation of continuing wrong."

The expression "continuing offence" indicates that as long as the default continues, the offence is deemed to be repeated and, therefore, it is taken as a "continuing offence". It gives rise to a fresh cause of action de die in diem as long as the wrongful state of affairs subsists and the omission which has been made penal by the statute is not satisfied. The concept "continuing offence" has come to acquire a well-recognised meaning in legal parlance as an offence which is susceptible of continuance and arises out of failure to obey or comply with a rule or its requirement and which continues until the rule or its requirement is obeyed. On every occasion that such disobedience or non-compliance occurs and reoccurs, the offence is committed. (See State of Bihar v. Deokaran Nenshi AIR 1973 SC 908).

Now the question is whether the default spoken of in section 18(1)(a)(i) of the Act, i.e., non-furnishing or not furnishing the return of net wealth by the due date continues de die in diem or whether it is complete by the date on which the failure or omission occurred. The principle governing the issue has already been stated above and requires no reiteration. Under the Act, the assessee is enjoined with a duty and is obliged to furnish the return of net wealth by the due date. On his failure to do so, he commits a "default" within the meaning of section 18(1)(a)(i) of the Act which continues de die in diem until the return is filed or the assessment is made. The provision contained in section 18(1)(a)(i) of the Act for computation of penalty with reference to each succeeding month during which the default continues is not without significance and is indicative of the legislative intent that the default contemplated therein is a continuing one. It requires no mention that the Provisions of section 271(1)(a)(i) of the Income-tax Act, 1961, which were the subject-matter of scrutiny before the Supreme Court in Maya Rani Punj' s case (1986) 157 ITR 330) are analogous to section 18(1)(a)(i) of the Act. The close similarity and virtual identity of the aforesaid provisions are somewhat too patent to call for further elaboration. The ratio decidendi of the case of Maya Rani Punj (1986) 157 ITR 330 (SC) squarely applies to the interpretation of section 18(1)(a)(i) of the Act. Without sanction of law, no penalty is imposable with reference to defaulting conduct. The accrual of penalty depends upon the terms of the statute imposing it. On the analogy of the ratio accepted by their Lordships of the Supreme Court, it must be held that in enacting the provisions of section 18(1) (a)(i) of the Wealth Tax Act, the Legislature intended to deem the non-filing of the returns to be a continuing default and penalty was imposable not only for the first default but with reference to the continued default which commences from the date when the return was due to be filed and continues month after month until the compliance is made and default comes to an end. The rule of de die in diem is applicable not on daily but on monthly basis. The view to the contrary expressed by this Court in Ram Narain Agrawal' s case (1977) 106 ITR 965 (All.) stands overruled.

This brings us to the second contention put forward on behalf of the Revenue which we have noticed earlier. It is pertinent to mention that the period of default in both the years in dispute could be bifurcated in two parts - one from the date the respective returns for the two years in question fell due and up to March 31,1969, and the other, from April 1,1969, when the law was amended and up to the date the returns were filed. The question at issue is, what should be the base for calculating the quantum of penalty. Whether the amount of penalty is to be determined with reference to the law obtaining after the amendment of section 18 of the Act by the Finance Act, 1969, or on different rates applicable during the period of each month, in accordance with the rates existing during the said period.

In CWT v. Dalip Kumar Worah (1987) 167 ITR 811, a Full Bench of the Patna High Court has held that in view of the decision of the Supreme Court in the case of Maya Rani Punj (1986) 157 ITR 330), the date of the decision of the authority to initiate proceedings for levying penalty would govern the relevant law applicable for the quantifications of the amount of such penalty under section 18 of the Wealth Tax Act. A similar view has also been expressed by a Division Bench of the Andhra Pradesh High Court in Amatul Kareem (1987) 167 ITR 703). The Delhi High Court in Amolak Singh Jain's case (1987) 163 ITR 825) has taken the view that the law prevailing on the date of which the relevant return was furnished, will govern the situation for ascertaining the amount of penalty. Yet a different view has been expressed by the Bombay High Court in CWT v. S.N. Tarawia (1988) 170 ITR 569). It has held that the quantum of penalty under section 18(1)(a) is to be determined as per the unamended law for the period of delay prior to the date of amendment and as per the amended law for the delay subsequent thereto. Fortunately, we are relieved of going through this exercise in view of the decision of the Supreme Court in CWT v. P.N. Banerjee (1991) 192 ITR 399), by which the controversy with which we are concerned has been set at rest. The Supreme Court has taken the same view that is expressed by the Bombay High Court. It has held that the amount of penalty has to be quantified up to March 31, 1969, on the basis of the earlier provisions of the Wealth Tax Act, relating to penalty and, after that date, on the basis of the amended provisions. In this view of the matter, we regret our inability to concur with the contrary view expressed by some of the High Courts referred to earlier.

In view of the above discussion, we answer the question referred to us by saying that the penalties under section 18 (1)(a)(i) of the Wealth Tax Act for delay in filing the returns for the assessment years in question are to be levied for the period of delay prior to April 1, 1969, in terms of the prescribed rates with reference to the unamended section 18 of the Act as it stood prior to its amendment by the Finance Act, 1969, and for the period of delay subsequent to April 1, 1969, at the prescribed rates in terms of law under the amended section 18(1)(a)(i) as it stood after its amendment effected thereto by the Finance Act, 1969.

M.BA./2442/T Reference answered.