K.L. JAISWAL VS WEALTH TAX OFFICER, 1998 PTD-MADHYA-PRADESH-HIGH-COURT-INDIA 1092 (1993)

Wealth tax------

----Penalty---Delay in filing returns---Waiver of penalty---Meaning of "genuine hardship" in S.18-B---Genuine hardship does not mean financial hardship only---Petitioner depositing amount of penalty ---SWT cannot reject petition for waiver of penalty on the ground that there was no genuine hardship---Indian Wealth Tax Act, 1957, Ss. l8(1)(a) & 18-B.

Subsection (4) of section 18-B of the Wealth Tax Act, 1957, confers additional powers on the Commissioner of Wealth Tax to waive or reduce the amount of any penalty payable by the assessee under the Wealth Tax Act, after recording his reasons for doing so, if he is satisfied, that to do otherwise would cause genuine hardship to the assessee, having regard to the circumstances of the case, and the assessee has cooperated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him. The "case" referred to in clause (i) of subsection (4) of section 18-B has reference to the entire case commencing from the filing of the return of wealth till the final adjudication and the assessment of the tax liability, penalty proceedings, proceedings for waiver or reduction of the penalty, and not the proceedings which commence from the filing of the application under subsection (4) of section 18-B for waiver or reduction of the penalty. This interpretation is borne out and is commensurate with clause (ii) of subsection (4) of section 18-B, wherein the Commissioner of Wealth Tax is required to take into consideration the assessee's cooperation in assessment proceedings or any proceedings for the recovery of any amount due from him. The rejection of the petitioner's application on the ground that he has already deposited the amount of penalty and, therefore, there is no genuine hardship caused to the assessee cannot be said to be a valid reason for rejection of an application under clause (ii) of subsection (4) of section 18-B. The Commissioner of Wealth Tax is also required to be satisfied that the assessee has cooperated in the inquiry relating to the assessment or has cooperated in any proceedings for recovery of any amount due from him. If the assessee has cooperated in recovery of the amount of penalty by depositing the same, the cooperation so given by the assessee cannot be considered an act prejudicial to his interest in claiming waiver or reduction in the penalty. The deposit of the amount of penalty by the assessee is, in fact, a factor in favour of the assessee for the exercise of the powers under subsection (4) of section 18-B by the Commissioner of Wealth Tax. In the context of section 18-B, the words "genuine hardship" used in clause (i) of subsection (4) of section 18-B cannot be construed as financial hardship only. The words "genuine hardship" are comprehensive enough to include other hardships arising out of the facts and circumstances of the entire case, commencing from filing of the Wealth Tax Return.

JUDGMENT

P.P. NAOLEKAR, J.---The petitioner is a P.W.D. contractor at Ambikapur and has challenged in this petition the dismissal of his application under section 18-B(4) of the Wealth Tax Act, 1957, for waiver of penalty amounting to Rs.16,880. The penalty was imposed under section 18(1)(a) of the Wealth Tax Act, 1957, of Rs.16,880 over the petitioner for delay in filing the return. After the imposition of penalty, the petitioner moved an application under section 18-B(4) of the Wealth Tax Act contending therein that on the assessed tax of only Rs.500, the penalty has been levied of Rs.16,880 for delay in filing of the return. Levy of penalty is not in consonance with the default committed by the petitioner and the assessment of the Wealth Tax, the petitioner further stated that in fact the return has been submitted by him during the period, however, on account of some mistake, the office has not put the correct date of the filing of the return. Looking to the circumstances and the quantum of tax the penalty is very heavy and the recovery of the same will result in genuine hardship to the petitioner. The Commissioner of Wealth Tax by his order, dated January 19, 1984 (Annexure "D"), has rejected an application filed by the petitioner under section 18-B(4) of the Wealth Tax Act 1957, on the ground that the assessee had already paid the penalty demanded and he has not produced any documentary evidence to support of his claim that the petitioner's financial position was not sound and thus there is no genuine hardship to the assessee having regard to the circumstances of the case.

The petitioner has moved an application under section 18-B(4) of the Wealth Tax Act, 1957. Subsection (4) of section 18-B reads as under:

" 18-B. (4) Without prejudice to the powers conferred on him by any other provision of this Act, the Commissioner may, on an application made in this behalf by an assessee, and after recording his reasons for so doing, reduce or waive the amount of any penalty payable by the assessee under this Act or stay or compound any proceeding for the recovery of any such amount, if he is satisfied that---

(i) to do otherwise would cause genuine hardship to the assessee, having regard to the circumstances of the case, and

(ii) the assessee has cooperated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him."

This subsection confers additional powers on the Commissioner of Wealth Tax to waive or reduce the amount of any penalty payable by the assessee under the Wealth Tax Act, after recording his reasons for doing so, if he is satisfied, that to do otherwise would cause genuine hardship to the assessee, having regard to the circumstances of the case, and the assessee has cooperated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him. The "case" referred to in clause (i) of subsection (4) of section 18-B of the Act has a reference to the entire case commencing from filing of the return of the Wealth Tax till the final adjudication and the assessment of the tax liability, penalty proceedings, proceedings for waiver or reduction of the penalty, and not the proceedings which commences from filing of the application under subsection (4) of section 18-B for waiver or reduction of the penalty. This interpretation is borne out and is commensurate with clause (ii) of subsection (4) of section 18-B of the Act, wherein the Commissioner is required to take into consideration the assessee's cooperation in assessment proceedings or any proceedings for the recovery of any amount due from him.

The rejection of the petitioner's application on the ground that he has already deposited the amount of penalty and, therefore, there is no genuine hardship caused to the assessee cannot be said to be a valid reason for rejection of an application under clause (ii) of subsection (4) of section 18-B of the Act. The Commissioner is also required to be satisfied that the assessee has cooperated in the inquiry relating to the assessment or has cooperated in any proceedings for recovery of any amount due from him. If the assessee has cooperated in the recovery of the amount of penalty by depositing the same, the cooperation so given by the assessee cannot be considered an act prejudicial to his interest for claim of waiver or reduction in the penalty. The deposit of the amount of penalty by the assessee is, in fact, a factor in favour of the assessee for the exercise of the powers under subsection (4) of section 18-B by the Commissioner of Wealth Tax. In the context of section 18-B, the words "genuine hardship" used in clause (i) of subsection (4) of section 18-B cannot be construed as financial hardship only. The words "genuine hardship" are comprehensive enough to include other hardships arising out of the facts and circumstances of the entire case, commencing from filing of the Wealth Tax Return. No doubt, the powers conferred on the Commissioner under subsection (4) of section 18-B are discretionary powers, and normally the discretion exercised by the authority shall not be interfered with by this Court in the exercise of writ jurisdiction. But, in the circumstances of the case, the Commissioner of Wealth Tax who has been entrusted with the discretionary powers has misdirected himself in law and has not considered the entire case which he is bound to consider and thus the discretion exercised by the Commissioner of Wealth Tax cannot be said to be a judicious exercise of discretion vested in him. Under clause (i) of subsection (4) of section 18-B, the Commissioner is required to consider the genuine hardship looking to the entire case, i.e., the proceedings commencing from the filing of the Wealth tax return and the circumstances arising there from and not only the circumstances which are existing or have ' arisen at the time of filing of an application under section 18-B(4) of the Wealth Tax Act. The Commissioner's Order is based on reasons which are not germane to the requirement of the section. The conclusion reached by the Commissioner of Wealth Tax that the imposition of penalty does not have the effect of genuine hardship to the petitioner is based on the fact which should have been taken to be in favour of the petitioner.

Under the circumstances, we quash the order of the Commissioner of Wealth Tax (Annexure ' D'), dated January 19, 1984, and direct the Commissioner of Wealth Tax, Jabalpur, to reconsider the application of the petitioner filed on April 1, 1.981, under section 18-B(4) of the Wealth Tax Act in accordance with law and keeping in mind the observation made hereinabove. Looking to the pendency of the matter for a considerably long period we direct that the matter shall be decided within the period of two months from today. In the circumstances of the case, there shall be no order as to costs. The security amount deposited by the petitioner shall be refunded.

M.B.A./1273/FC Order accordingly.