COMMISSIONER OF WEALTH TAX VS B. IMRAN HUSSAIN, 1995 PTD-MADRAS-HIGH-COURT-INDIA 1300 (1994)

Wealth Tax---

----Penalty---Delay in filing returns---Finding that default was not deliberate-- Penalty cannot be imposed---Indian Wealth Tax Act, 1957, S. 18(1)(a).

The Tribunal found that the assessee was a minor, who attained majority only in 1969; that the guardian was looking after his affairs and in 1967 the guardian intimated the Wealth Tax Officer about the liability-to pay wealth tax and had voluntarily made a payment of Rs.4,500; that there was no intention to avoid payment of tax or not to comply with the statutory regulations; that there was no doubt a lapse after 1967 and the wealth tax returns were filed only after issue of notice under section 17 of the Wealth tax Act, 1957. However, even if the lapse could be construed as a default it was only a technical or venial breach. The Tribunal cancelled the penalty under section 18(1)(a) of the Act. On a reference:

Held, that the Tribunal had given sufficient reasons for coming to the conclusion that the default was only venial. The tribunal was correct in holding that penalty could not be imposed under section 18(1)(a).

Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26; (1970) 25 STC 211(SC) applied.

CGT v. C. Muthukumaraswamy Mudaliar (1975) 98 ITR 540 (Mad) and CIT v. Kalyan Das Rastogi (1992) 193 ITR 713 (SC) ref.

N. V. Balasubramanian for Commissioner.

P. P. S. Janarthana Raja, for Assessee.

JUDGMENT

VENKATASWAMI, J: -- 1n all these tax cases the assessee is common. Common arguments were addressed and, therefore, the cases are disposed of by this common order.

Pursuant to the order of this Court under section 27(3) of the Wealth Tax Act, 1957, the Tribunal referred the following common question for our decision:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding and had valid materials to hold that the assessee's case does not warrant levy of penalty under section 18(1)(a) of the Wealth Tax Act, 1957?"

The brief facts leading to the reference are the following : The cases relate to the assessment years 1963-64 to 1969-70. On March 30, 1967, the assessment representative wrote a letter to the Wealth Tax Officer informing him that the wealth tax returns for the assessment years 1962-63 to 1966-67 were due and that it would take some time for them to finalise the return. In the meanwhile, a sum of Rs.4,500 was paid towards probable wealth tax payable for the assessment years 1962-63 to 1966-67. Thereafter nothing happened. While so, on January 5, 1971, the Wealth Tax Officer issued a notice under section 17 of the Act calling upon the assessee to file returns of wealth. In response to that the assessee furnished the returns on March 31, 1971. As there was a delay in the submission of the returns, the Wealth Tax Officer initiated penalty proceedings under section 18(1)(a) of the Act and called upon the assessee to show cause why penalties should not be imposed. The assessee contended before the Wealth Tax Officer that he was only a minor at the relevant time, that his guardian-father was not quite clear about the extent of wealth and with the assistance of 'the official trustee he had to get information for submitting the returns and all these things have contributed for the delay in the filing of the returns, and, therefore, there was a reasonable cause for the delay in the submission of .the returns. However, the Wealth Tax Officer, not satisfied with the reasons given by the assessee, levied penalties for the assessment years from 1962-63 onwards in the following manner:

Aggrieved by the levy of penalties, the assessee preferred appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner though held that there was no reasonable cause for the belated submission of the returns, applying the ratio laid down by this Court in CGT v. C. Muthukumaraswamy Mudaliar (1975) 98 ITR 540 reduced the penalties. Against the orders of the Appellate Assistant Commissioner, the assessee as well as the Department preferred further appeals to the Tribunal for the assessment years 1963-64 to 1968-69 while the assessee alone preferred an appeal for the assessment year 1969-70. The Tribunal after considering the submissions made before it held as follows:

"The assessee, as stated as earlier, was a minor, who attained majority only in 1969. During the periods in which the default took place, therefore for almost the entire period he was a minor. The guardian was looking after his affairs and in 1967 the guardian did intimate the Wealth Tax Officer about the liability to pay wealth tax and had voluntarily made a payment of Rs.4,500. It is, therefore, clear that there was no intention to avoid payment of tax or not to comply with the statutory regulations, there was no doubt a lapse after 1967 and the wealth tax returns were filed only after issue of notice under section 17. Thus, we consider that even if the lapse can be construed as a default, the lapse was in the' circumstance and looking to the background only a technical or venial breach. In Hindustan Steel Limited v. State of Orissa (1972) 83 ITR 26, it was observed by the Supreme Court at page 29 as under:

`Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.'

Looking to the aforesaid observations and in view of our finding that the breach if anything was only technical or venial, we hold that the facts of the case do not warrant the imposition of penalty under section 18(1)(a). In view of this finding, the appeals of the Department would automatically fall to be dismissed as no penalty survives."

Aggrieved by the above order of the Tribunal, the Revenue has caused the reference to be made as stated above.

Mr. Balasubramanian, learned counsel appearing for the Revenue,' placing reliance on a judgment of the Supreme Court in CIT v. Kalyan Das Rastogi (1992) 193 ITR 713, submitted that the reasoning given by the Tribunal, placing reliance on Hindustan Steel Limited v. State of Orissa (1972) 83 ITR 26 (SC) cannot be sustained. According to learned 'counsel, the burden of showing reasonable cause is on the assessee and it has not been discharged in the facts and circumstances of the case. He further submitted that the finding of the Tribunal that the default is only venial is not correct on the facts. On the other hand, learned counsel appearing for the assessee submitted that the finding given by the Tribunal was on the basis of the facts placed before it and on an appreciation of the facts, and that finding cannot be lightly interfered with in the reference.

We have considered the rival submissions and we are of the view that the Tribunal has given sufficient reasons for coming to the conclusion that the default is only venial and, therefore, the ratio laid down by the Supreme Court in Hindustan Steel Limited v. State of Orissa (1972) 83 ITR 26 applied to the facts of these cases. The reliance placed by learned counsel for the Revenue in CIT v. Kalyan Das Rastogi (1992) 193 ITR 713 (SC) is not opposite to the facts of these cases, for the ratio laid down in that case was to the effect that mens rea was an essential ingredient for levying penalty under section 27(1)(a) of the Income-tax Act which is analogous to section 18(1)(a) of the Act (?)

We are satisfied with the finding of the Tribunal and we also find that the finding is on the basis of the material placed before it and we also find that the Tribunal has not taken into account any irrelevant matter and has not Pro-omitted to take into account relevant factors. There is no cause for interference with the common order of the Tribunal. We, therefore, answer the question referred to us in the affirmative and against the Revenue. The assessee will be entitled to the costs of this reference. Counsel's fee Rs.500. One set.

M.BA./960/T.FOrder accordingly.