RAM LAL SUNAJA VS COMMISSIONER OF WEALTH TAX, 1998 PTD-ALLAHABAD-HIGH-COURT-INDIA 1346 (1996)

Wealth tax---

----Penalty---Delay in filing returns---Commissioner---Waiver of penalty-- Conditions precedent for entertaining application for waiver---Notice under S.17 issued and service attempted---Service avoided by assessee---Return filed thereafter---Not voluntary and in good faith---Pre-condition for waiver not satisfied---Wealth Tax Act, 1957, Ss. 17, 18(1)(a) & 18-B.

The petitioner-assessee filed returns of wealth for the assessment years 1974-75 to 1978-79 on December 22, 1979. All the returns were, thus, delayed and attracted penalty under section 18(1)(a) of the Wealth Tax Act, 1957. For the assessment year 1974-75, the net wealth assessed was below the taxable limit; but for the other years, wealth tax was leviable on the petitioner, and the Assessing Officer issued notices proposing to levy penalty under section 18(1)(a) of the Act. The petitioner filed an application to the Commissioner for waiver of the penalties under section 18-B of the Act. The Commissioner rejected the petitioner's application, observing that on perusal of, the records it was noticed that for the assessment years 1976-77 1977-78 and 1978-79, notices under section 17 of the Act had been issued on December 6, 1979, and it was after the issuance of those notices, that the petitioner had filed the aforesaid returns. The petitioner filed a writ petition. In its counter-affidavit, the Department stated that the notices, dated December 6, 1979, in respect of the assessment years 1976-77, 1977-78 and 1978-79 had been sent by registered acknowledgment due post also, and the postman had tried to effect service on December 21, 1979, and December 22, 1979, but the petitioner had avoided service:

Held, (i) that admittedly, prior to the filing of the returns, the Revenue had already taken steps for the issuance of notices under section 17 of the Act for the assessment years 1976-77, 1977-78 and 1978-79, and the notices, in fact, had been issued and attempted to be served on the petitioner. Therefore, there was no case for invoking the writ jurisdiction for these three years;

(ii) that however, for the assessment year 1975-76, admittedly, no notice under section 17 of the Act was issued by the Assessing Officer. Therefore, for that year, it could not be said that the petitioner had not voluntarily and in good faith made true and full disclosure of net wealth prior to the issue of notice to him. For this year, the petitioner had fulfilled the pre-conditions for the exercise of jurisdiction by the Commissioner under section 18-B of the Act to waive or reduce the penalty,

A.M. Mahajan for Petitioner.

Ashok Kumar for Respondents.

JUDGMENT

By this writ petition, under Article 226 of the Constitution of India, the petitioner challenges the order dated December 29, 1983, passed by respondent No. 1, whereby the Commissioner of Wealth Tax, Lucknow, rejected the petitioner's application for waiver or reduction of penalties leviable under section 18(1)(a) of the Wealth Tax Act, 1957, for the assessment years 1975-76, 1976-77, 1977-78 and 1978-79. The petitioner has also prayed for a direction to respondent No. l to deal with the application of the petitioner under section 18-B of the Act, in accordance with law.

We have heard Sri A.M. Mahajan, learned counsel for the petitioner, and Sri Ashok Kumar, learned counsel for the Revenue.

The petitioner filed returns of wealth for the assessment years 1974-75 to 1978-79 on December 22, 1979. All the returns were, thus, delayed and attracted penalty under section 18(1)(a) of the Wealth Tax Act (hereinafter referred to as "the Act"), at the rate of two per cent of the assessed tax for every month during which the default continued.

The assessments for all the aforesaid years were made. For the assessment year 1974-75, the net wealth assessed was below the taxable limit; but for the other years, wealth tax leviable on the petitioner, and the Assessing Officer issued notices proposing to levy penalty under section 18(1)(a) of the Act.

The petitioner then moved an application dated May 27, 1980, a copy of which is contained in Annexure "N" to the writ petition, invoking the Commissioner's jurisdiction to waive the penalties in exercise of the power under section 18-B(1)(a) of the Act. It was stated that the returns of wealth were filed prior to the service of any notice under section 14 of the Act, and the petitioner had cooperated in the assessment proceeding, and that the admitted as well as the assessed tax had already been paid.

The Commissioner rejected the petitioner's application, observing that on perusal of the records, it was noticed that for the assessment years 1976-77, 1977-78 and 1978-79, notices under section 17 of the Act were issued on December 6, 1979, and it was after the issuance of those notices, that the assessee filed the aforesaid returns.

According to the Commissioner, the petitioner knew of his obligations to fee returns and, therefore, his conduct cannot be said to be voluntary and in good faith. The Commissioner, therefore, refused to waive the penalties imposable on the petitioner.

Aggrieved by the aforesaid order, the petitioner has preferred the present writ petition contending that all the conditions required under section 18-B of the Act were fulfilled and the Commissioner must have considered the petitioner's application for waiver or reduction of the penalty on the merits.

In the counter-affidavit filed on behalf of the respondents, it is stated that the notices under section 17 were issued on December 6, 1979, for the assessment years 1976-77, 1977-78 and 1978-79, and the assessee avoided the service thereof. It is alleged that notices were sent by registered acknowledgment due post also, and the postman tried to effect service on December 21, 1979 and December 22, 1979. It is, therefore, contended that the returns were not voluntary.

Under section 18-B of the Act, the power is conferred on the Commissioner of Wealth tax to waive or reduce the penalty levied under section 18(1)(a) of the Act, if he is satisfied that the taxpayer has, prior to the issue of a notice to him under subsection (2) of section 14 of the Act, voluntarily and in good faith, made full and true disclosure of his net wealth and has also cooperated in any inquiry relating to the assessment of his net wealth and has either paid or made satisfactory arrangements for the payment of are, tax or interest payable in consequence of an order passed under this Actin of the relevant assessment year.

As the impugned order would show, the only ground for rejection of the petitioner's application is that the returns were not voluntary because notice, under section 17 for the three assessment years had already been issued.

Learned counsel for the petitioner informs us that the penalties, ultimately levied by the Assessing Officer, for the assessment years 1975-76, 1976-77 1977-78 and 1978-79 were in the sums of Rs.8,060, Rs.1,372, Rs.393 and Rs.240, respectively. It is not disputed that prior to the filing of the returns, the Revenue had already taken steps for the issuance of notice under section 17 of the Act for the assessment years 1976-77, 1977-78 and 1978-79, and the notices, in fact, had been issued and attempted to be served on the petitioner. For this reason, and looking at the smallness of the amount of penalty levied for these years, we do not find any cause for invoking the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India for these three years.

However, as far as the assessment year 1975-76 is concerned, the amount of penalty levied is Rs.8,060, and admittedly no notice under section 17 of the Act was issued by the Assessing Officer. Therefore, for that year, it cannot be said that the assessee had not voluntarily and in good faith made true and full disclosure of net wealth prior to the issue of notice to him. There is no averment that the petitioner has not cooperated in the enquiry relating to assessment of his net wealth or has not paid the tax levied on him.

In our view, therefore, so far as the assessment year 1975-76 is concerned, the petitioner had fulfilled the pre-conditions for the exercise: of jurisdiction by the Commissioner under section 18-B of the Act to waive or reduce the penalty. Whether the Commissioner should completely waive the penalty, or reduce the same, and if so, to what extent, is for the Commissioner to determine in the exercise of his judicial discretion when he deals with the petitioner's application on the merits.

In our view, the rejection of the petitioner's application for the assessment year 1975-76 on the ground that the pre-conditions were not fulfilled, is not sustainable.

We, therefore, allow this writ petition, in part, and setting aside the impugned order dated December 29, 1983, copy whereof is contained in Annexure "S" to the writ petition, in so far as it relates to the assessment year 1975-76, we direct the Commissioner of Wealth Tax---respondent No. 1 to dispose of the petitioner's application for waiver/reduction of the penalty for the assessment year 1975-76 on merits, in accordance with law within two months from the date a certified copy of this order is filed before him. Parties will bear their own costs.

M.B.A./1402/FC Petition partly allowed.