Wealth tax---

---- Penalty---Return---Concealment of the wealth---Returned wealth less than 75 per cent of assessed wealth---Amounts brought into account books following tax raid---Failure to file revised return before assessment---Levy of penalty valid---Indian Wealth Tax Act, 1957, Ss. 15 & 18(1)(c).

The Income-tax Department conducted a raid on the business premises of the assessee who was a sole proprietor. In the raid, certain incriminating documents were seized. The assessee filed a settlement-cum -disclosure petition to the Commissioner of Income-tax, dated March 24, 1971. He also requested that he should be allowed the benefit of capitalization in respect of the additions pertaining to the assessment years 1962-63 to 1964-65. The request of the assessee was accepted by the Commissioner of Income-tax and, in pursuance thereof, the assessee introduced .the above amounts in his books of account on April 24, 1971. The assessee also filed two returns under the Act for the assessment years 1968-69 and 1969-70. The returns were filed on April 30, 1969, and September 29, 1969, respectively. The Wealth Tax Officer framed orders of assessment on the basis of the said returns, vide orders of the same date, namely, January 29, 1972. According to the Wealth Tax Officer, the assessee had concealed under section 18(1)(c) of the Wealth Tax Act, 1957, the particulars of the amount, brought in his books of account following the raid, which amount was added by him at the time of framing the assessment. Penalty was imposed and the Tribunal upheld the order. On a reference:

Held, that with the filing of the application for settlement, dated March 24, 1971, it became necessary for the assessee to file a revised return in terms of section 15 before the assessment was made. He failed to do so, In the circumstances, the failure to disclose the additional amount amounted to concealment. The Explanation to section 18(1)(c) applied. The levy of penalty was, therefore, justified.

Cement Marketing Co. of India Ltd. v. Assistant C.S.T. (1980) 124 ITR 15; (1980) 45 S.T.C. 197 (SC); C.I.T. v. Muhammad Haneef (NA.) (1972) 83 ITR 215 (SC) and C.W.T. v. Vatsala (V.) (1989) 177 ITR 120 (Mad.) distinguished.

S.C. Sibal, Senior Advocate and Deepak Sibal for the Assessee.

R.P. Sawhney for the Commissioner.

JUDGMENT

A.P. CHOWDHRI, J: --In this reference under section 27(1) of the Wealth Tax Act, 1957 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal, Amritsar Bench (hereinafter referred to as "the Tribunal"), has referred the following questions for the opinion of this Court:

"(1) Whether, in view of the facts and in the circumstances of the case, the Tribunal was legally right in holding that the assessee had concealed the particulars of his net wealth to the extent of Rs.39,191?

(2) Whether, in view of the facts and under the circumstances of the case, the Tribunal was legally justified in holding that penalty was leviable on the assessee under section 18(1)(c) of the Wealth Tax Act, 1957?"

Briefly stated, the material facts are that the Income-tax Department conducted a raid on the business premises of the firm, Messrs Lekh Raj Manekchand, 51, Indira Market, Subzi Mandi, Delhi, of which the assessee was the sole proprietor. In the raid, certain incriminating documents were seized. The assessee came forward and filed a settlement-cum-disclosure petition, dated March 24, 1971, addressed to the Commissioner of Income-tax (Central). New Delhi, alongwith certain amounts which were to be brought to assessment. The assessee also requested that he should be allowed the benefit of capitalization in respect of the additions pertaining to the assessment years 1962-63 to 1964-65. The request of the assessee was accepted by the Commissioner of Income-tax and, in pursuance thereof, the assessee introduced the above amounts in his books of account on April 24, 1971. The assessee also filed two returns under the Act for the assessment years 1968-69 and 1969-70. The returns were filed on April 30, 1969, and September 29, 1969, respectively. The Wealth-tax Officer framed orders of assessment on the basis of the said returns, vide orders of the same date, namely, January 29, 1972. These are Annexures `A' and `A-1' with the reference.

On a subsequent application of the assessee, the Wealth-tax Officer rectified the error apparent from the record when it was brought to his notice that the Department had not allowed deduction on account of penalty levied under section 271(1)(c) as per the terms of the settlement proposed by the assessee. In other words, the amounts added in the assessment orders, Annexures `A' and `A-1', were revised as given in the orders Annexures `B' and `B-1'. According to the Wealth-tax Officer, the assessee had concealed the particulars of the amount under section 18(1)(c) of the Act brought in his books of account following the raid, which amount was added by him at the time of framing the assessments referred to above. The Inspecting Assistant Commissioner of wealth tax, by his orders, dated March 14, 1974, and March 15,1974 respectively, Annexure `E' held that the assessee had concealed true particulars of his wealth and had furnished inaccurate particulars of the net wealth in his returns. He, accordingly, imposed penalties to the extent of Rs.39,191 for each of the assessment years in question. Against the orders of the Inspecting Assistant Commissioner, the assessee filed an appeal before the Tribunal, which was dismissed by order, dated January 20, 1976. It is out of that order that the present questions are said to have arisen and reference thereof made to this Court on the application of the assessee.

We have heard Mr. Satish Sibal, Senior Advocate, learned counsel for the assessee, and Mr. R.P. Sawhney, learned counsel for the Revenue.

Mr. Sibal contended that the returns, Annexures `A' and `A-1', in this case were filed on April 30, 1969, and September 29, 1969, respectively, and the application for settlement, Annexure `C', was made later on March 24, 1971. That being so, Mr. Sibal contended that there was no question of any concealment.

This contention has no force. The assessment order on the said returns is of the same date, namely, January 29, 1972, i.e., more than eight months after the application for settlement, Annexure `C', dated March 24, 1971. Section 15 of the Act lays down that, if any person has not furnished a return within the time allowed under section 14, or having furnished a return under that section discovers any omission or a wrong statement therein, he may furnish a return or a revised return, as the case may be, at any time before the assessment is made. With the making of the application for settlement, Annexure `C', dated March 24, 1971, it became necessary for the assessee to file a revised return in terms of the above-quoted section 15 before the assessment was made. He failed to do so. In the circumstances, failure to disclose the additional amount amounted to concealment.

By the Finance Act, 1968, clause (iii) of section 18(1)(c) of the Act had been amended with effect from April 1, 1968. The amended provision, in so far as material for the present purposes, reads as under:

"(iii) in the cases referred to in clause (c), in addition to any wealth tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount representing the value of any assets in respect of which the particulars have been concealed or any assets or debts in respect of which inaccurate particulars have been furnished...

Explanation 1.---Where, --

(i) the value of any asset returned by any person is less than seventy-five per cent of the value of such asset as determined in an assessment under section 16 or section 17 (the value so assessed being referred to hereafter in this Explanation as the correct value of the asset), or

(ii) the value of any debt returned by any person exceeds the value of such debt as determined in an assessment under section 16 or section 17 by more than twenty-five per cent. of the value so assessed (the value so assessed being referred to hereafter in this Explanation as the correct value of the debt), or

(iii) the net wealth returned by any person is less than seventy-five per cent. of the net wealth as assessed under section 16 or section 17 (the net wealth so assessed being referred to hereafter in this Explanation as the correct net wealth),

then, such person shall, unless he proves that the failure to return the correct value of the asset or, as the case may be, the correct value of the debt or the correct net wealth did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of assets or furnished inaccurate particulars of assets or debts for the purposes of clause (c) of this subsection."

It is not disputed that the above provision was applicable to the assessments in question. It is further not disputed that the amount which is stated to have been concealed attracted the application of the above Explanation. It follows that the assessee must be deemed to have concealed the said wealth in his returns in question.

Mr. Sibal next contended that condition No. 15 in the application for settlement made by the assessee was to the effect that the assessee will file wealth tax returns for the years for which he is liable to wealth tax and that penalty for the purpose of wealth tax will be waived by the Commissioner of Income-tax under section 18(2-A) of the Act. In other words, the understanding reached with the Revenue under which the various terms were stated in the settlement application included that penalty for purposes of wealth tax will be waived by the Commissioner of Income-tax. The settlement application was disposed of by the Commissioner of Income-tax by order, Annexure `D', dated March 26, 1971. In regard to waiving of penalty under section 18(2-A) of the Act, it was stated by the Commissioner of Income-tax in paragraph D that the same will be considered on merits for each year. In other words, the term for settlement proposed in paragraph 15 was not accepted by the Commissioner of Income-tax and the case was to be decided according to the merits of the case for each year. The assessee cannot, therefore, take any benefit on this account.

Mr. Sibal vehemently contended that, in the case of concealment, an element of deliberateness is the sine qua non and the same being absent, it could not be held to be a case of concealment. He relied on:

(1) Cement Marketing Co. of India Ltd. v. Assistant C.S.T. (1980) 124 ITR 15 (SC);

(2) C.I.T. v. NA. Muhammad Haneef (1972) 83 TTR 215 (SC); and

(3) C.W.T. v. V. Watsala (1989) 177 ITR 120 (Mad.). .

These authorities are clearly distinguishable on facts. In the decision first referred to above, the assessee did not include in its return of turnover the amount of freight included in the price sugar in the bona fide belief that it was not liable to be included in the taxable turnover. It was held that the assessee could not be said to have filed a false return and penalty could not be imposed on the assessee under section 43 of the M.P. General Sales Tax Act, 1958, and section 9(2) of the Central Sales Tax Act, 1956. It was laid down by the apex Court that a return cannot be false unless there is an element of deliberateness in it. Their Lordships hastened to clarify that it was possible that even where the incorrectness of the return is claimed to be due to want of care on the part of the assessee, and there is no reasonable explanation forthcoming from the assessee for such want of care, the Court may, in a given case, infer deliberateness and the return may be liable to be branded as a false return in the facts and circumstances of that particular case, however, the conclusion reached by the Supreme Court was that non-inclusion of the item relating to freight was on account of a bona fide mistake.

In N.A. Muhammad Haneefs case (1972) 83 ITR 215 (SC), it was held in the facts of the case that there was no basis for coming to a firm conclusion that the assessee deliberately supplied wrong particulars and, therefore, the penalty could not be imposed.

In Vatsala's case (1989) 177 ITR 120 (Mad.), the assessee included, inter alia, the value of a certain immovable property at Rs.40,000. Four months after filing the return, the assessee entered into an agreement for sale of the said property for Rs.75,000. Thereafter, the assessee filed a revised wealth tax return by including the value of certain jewellery, which had not been originally returned. In the revised return, the assessee retained the value of immovable property as shown earlier. It was held that there was no concealment and penalty proceedings would not be attracted because there was no material to show that on the valuation date the said immovable property had a market value of Rs.75,000.

For the foregoing reasons, we are of the opinion that the Tribunal was right in holding that the assessee had concealed the particulars of his net wealth to the extent of Rs.39,191. Question No. 1 is, therefore, answered in the affirmative. The answer to question No. 2 is also in the affirmative.

M.BA./159/T.F

Order accordingly.