Wealth tax--

----Penalty---Failure to furnish returns in time---Delay in filing returns for reasonable cause---Meaning of "reasonable cause"---Bona fide belief that total wealth was below taxable limit---Penalty cannot be levied---Indian Wealth Tax Act, 1957, S. 18(1)(a).

The requirement of section 18(1)(a) of the Wealth Tax Act, 1957, at the relevant time was that the penalty could be levied if the failure to furnish the return within the time allowed was without reasonable cause. The reasonable cause has to be explained by the assessee and the cause should be so reasonable that a person instructed under law should believe the explanation as plausible. If the explanation is supported by evidence, then the veracity of such evidence is to be examined and in case of doubt, the benefit has to be given to the assessee.

There was a delay in the furnishing of returns of wealth for the

assessment year 1972-73. There was a dispute with regard to the property situated at Ajmer, which was declared at a figure of Rs.85,200 but the value of which was enhanced by the Wealth Tax Officer to Rs.1,70,000. The basis of such enhancement was that the assessee entered into a contract of sale of such building on February 3, 1973, for a sum of Rs.1,75,000. This agreement did not materialise and the property was ultimately sold on January 4, 1975, for a sum of Rs.1,82,500. The assessee submitted that he was under the bona fide impression that the total wealth was below the taxable limit as he had valued the property at 20 times the annual letting value. It was submitted that the value of the property was accepted in the past by the Department and that the agreement dated February 3, 1973, was not in existence on the valuation date, namely, March 31, 1972. The Wealth Tax Officer did not accept this explanation and levied penalty under section 18(1)(a) of the Act, but the Tribunal cancelled it. On a reference:

Held that the Tribunal had proceeded on the basis that the valuation in the past had been on rent capitalization method. In the present case, in the quantum appeal before the Appellate Assistant Commissioner of Wealth Tax, the valuation was reduced by a sum of Rs.15,000. The finding that there was reasonable cause for the delay in filing return was primarily a finding of fact. It could not be said to be perverse or unreasonable and, therefore, the Tribunal was justified in cancelling the penalty.

CWT v. Raj Mata Smt. Geeta Kumari of Kishangarh (1987) 163 ITR 417 (Raj.); CWT v. Rajmata Smt. Geeta Kumari (1987) 163 ITR 570 (Raj.) and CIT v. N. Khan and Bros. (1973) 92 ITR 338 (All.) ref.

G.S. Bapna for the Commissioner.

JUDGMENT

V.K. SINGHAL, J.---The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has referred the following question of lain arising out of its order dated June 28, 1980, in respect of the assessment year 1972-73:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty of Rs. 12,423 levied under section 18(1)(a) of the Wealth Tax Act, 1957?"

The brief facts of the case are that the assessee was required to furnish the return of wealth as on March 31, 1972, on or before July 31, 1972. The return was filed on January 14, 1976, and thus there was a delay of 41 months. In the return submitted by the assessee, net wealth of Rs.91,704 was declared but the assessment was made at a figure of Rs.74,596 (sic). The main dispute is with regard to the property situated at Ajmer which was declared at a figure of Rs.85,200, but the value of which was enhanced by the Wealth Tax Officer to Rs.1,70,000. The basis for such enhancement was that the assessee entered into a contract of sale of such building on February 3, 1973, for a sum of Rs.1,75,000. This agreement did not materialise but the property was ultimately sold on January 4, 1975, for a sum of Rs.1,82,500. The Wealth Tax Officer found that since the assessee has not got it valued by the approved valued, the fair market value has to be taken on the basis of the sale agreement and sale ultimately effected before filing of the return. The Income-tax Officer passed an order under section 18(1)(a) and levied a penalty of Rs.12,423 as he was not satisfied with the explanation submitted by the assessee for not filing the return.' The assessee has submitted that he was under the bona fide impression that the total wealth is below the taxable limit as he has valued the property at 20 times the annual letting value. It was submitted that the value of the property was accepted in the past by the Department and that the agreement dated February 3, 1973, was not in existence on March 31, 1972. Therefore, he could not be expected to show any other value other than on the basis of actual income earned by him and accepted by the department in the past. The appeal preferred to the Appellate Assistant Commissioner of Wealth Tax was dismissed and the matter was challenged before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal came to the conclusion that, in the immediately preceding assessment year, the wealth of the assessee was Rs.1,46,835 and if the relief in respect of the property under section 5(1)(iv) of Rs.1,00,000 is allowed, the net wealth would be below the taxable limit. It was further observed by the Tribunal that the house was always valued on the rent capitalisation method and, therefore, the transaction of sale, which has subsequently taken place after the valuation date should not be taken into account and there will be a marginal difference in the wealth of the assessee for which no penalty could be levied. It may be noted that, in the quantum appeal, the Appellate Assistant Commissioner of Wealth Tax has reduced the value of the property by Rs. 15,000.

The submission of learned counsel for the Revenue is that there was no reasonable cause and the Income-tax Tribunal has erred in setting aside the penalty.

The matter whether there is reasonable case or not is a question of fact and this point has already been concluded by the decisions given by this' Court in CWT v. Raj Mata Smt. Geeta Kumari of Kishangarh (1987) 163 ITR 417 and CWT v. Rajmata Sint. Geeta Kumari (1987) 163 ITR 570. The Income-tax Appellate Tribunal has relied upon the decision of the Allahabad High Court in CIT v. N. Khan and Bros. (1973) 92 ITR 338, where the levy of penalty was set aside on the ground that the income was below the taxable limit and he was not required to file the return. It was observed that the only thing required is that the belief of the assessee must be bona fide. Looking to the facts of the present case, it is an admitted position that the valuation of the property in the past by the. Department was accepted on the basis of rent capitalization method and, therefore, the belief that the assessee had, for the valuation of the property as on March 31, 1972, cannot be said to be not bona fide. The requirement of the section at the relevant time was that the penalty could be levied if the failure to furnish the return within the time allowed was without reasonable cause. The reasonable cause has to be explained by the assessee and the cause should be so reasonable that a person instructed under law should believe the explanation as plausible. If the explanation is supported by evidence, then the veracity of such evidence is to be examined and in case of doubt the benefit has to be given to the assessee. In the present case, the Income-tax Appellate Tribunal has proceeded on the basis that the valuation in the past had been on rent capitalization method. In the present case, the Income-tax Appellate Tribunal has proceeded on the basis that the valuation in the past had been on rent capitalisation method. In the present case, in the quantum appeal before the Appellate Assistant Commissioner of Wealth Tax, the valuation was reduced by a sum of Rs.15,000. It is not known as to whether the matter was taken to the Tribunal or not because the amount of tax involved was only Rs.607. The finding which has been given by the Tribunal is primarily one of fact and cannot be said to be perverse or unreasonable and, therefore, we are of the opinion that the Income-tax Appellate Tribunal was justified in cancelling the penalty of Rs. 12,423 levied under section 18(1)(a) of the Wealth Tax Act, 1957.

Accordingly the reference is answered in favour of the assessee and against the Revenue. No order as to costs.

M.BA./214/T.F.Reference answered.