COMMISSIONER OF WEALTH TAX VS P. NAINAKHAN
1998 P T D 2196
[221 I T R 805]
[Madras High Court (India)]
Before Thanikkachalam and N. V. Balasubramanian, JJ
COMMISSIONER OF WEALTH TAX
versus
P. NAINAKHAN
Tax Cases Nos.1134, 1135 (References Nos.689 and 690 of 1982), decided on 10/01/1996.
Income-tax---
----Penalty---Delay in filing wealth tax return---Not for Department to establish contumacious conduct of assessee---Assessee to plead and prove reasonable cause for delay in filing of returns---Reasonable cause was not pleaded by assessee---Penalty justified---Indian Wealth Tax Act, 1957, S.18(1)(a).
The assessee, an individual, filed the wealth tax returns for the assessment years 1974-75 and 1975-76 belatedly. Though he applied for extension of time, the returns were filed after the expiry of the periods of extension. The Wealth Tax Officer levied penalties under section 18(1)(a), of the Wealth Tax Act, 1957-. The Tribunal held in favour of the assessee. On a reference:
Held, that as there was no application for extension of time for the rest of the period of delay and the assessee also did not reply to the penalty notices, the facts would go to show that the assessee was conscious of the fact that the wealth tax return should be filed within the time stipulated under section 14(1) of the Act. It was not for the Department to establish that the assessee was guilty of contumacious conduct and acted in conscious disregard of his obligation. It was for the assessee to plead and prove that the delay in tiling the returns was due to reasonable cause. Such reasonable cause was not pleaded. Hence, the Tribunal was not justified in condoning the delay in filing the return.
CIT v. I.M. Patel & Co. (1992) 196 ITR 297 (SC) and Gujarat Travancore Agency v. CIT (1989) 177 ITR 455 (SC) fol.
Devassy (P.V.) v. CIT (1972) 84 ITR 502 (Ker.) and S. Loonkaran & Sons v. CIT (1977) 108 ITR 92 (Mad.) ref. '
C.V. Rajan for the Commissioner. Nemo for the Assessee.
JUDGMENT
THANIKKACHALAM, J.---Pursuant to the directions of this Court in T.C.P. Nos.224 and 225 of 1981, the Tribunal referred the following two common questions of law for the assessment years 1974-75 and 1975-76, under section 27(3) of the Wealth Tax Act, 1957 (hereinafter referred to as "the Act"), for the opinion of this Court:
"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in cancelling the penalty levied under section 18(1)(a) of the Wealth Tax Act, 1957?
(2) Whether the Appellate Tribunal had any valid material to hold that the assessee has no mens rea for furnishing the return belatedly and as such the penalty levied under section 18(1)(a) was not warranted?"
The assessee is an individual. For the assessment year 1974-75, the assessee filed his wealth tax return belatedly on January 16, 1976, after having filed an application for extension of time up to November 30, 1974. The Wealth Tax Officer initiated penalty proceedings under section 18(1)(a) of the Act for the delay in filing the wealth tax return. The assessee had not replied to the penalty notice issued under section 18(1)(a) of the Act. The Wealth Tax Officer pointed out that the assessee has applied for extension of time only up to November 30, 1974.
The assessee had been assessed to Wealth Tax from the assessment year 1970-71 onwards. The Wealth Tax Officer held that, therefore, the assessee should have promptly filed his Wealth Tax Return within the time limit under section 14(1) of the Act. Since the assessee failed to do so, penalty was levied at Rs.20,605.
For the assessment year 1975-76, the assessee filed his Wealth Tax Return on January 16, 1976, after having applied for extension of time up to September 30, 1975. The Wealth Tax Officer initiated proceedings under section 18(1)(a) of the Act. In this year also, the assessee did not reply to the penalty notice. For the reasons stated in the earlier assessment order, the Wealth Tax Officer levied penalty of Rs.2,250 under section 18(1)(a) of the Act.
The assessee filed appeals before the Appellate Assistant Commissioner for both the assessment years under consideration. According to the Appellate Assistant Commissioner, the returns were not filed due to the assessee's ignorance of law as per the decision in P.V. Devassy v. CIT (1972) 84 ITR 502 (Ker.). The Appellate Assistant Commissioner further pointed out that the Wealth Tax Officer had not established that the assessee was guilty of contumacious conduct and acted in conscious disregard of his obligation. Thus the Appellate Assistant Commissioner cancelled the penalties levied in both the assessment years under consideration. Aggrieved; the Department filed appeals before the Tribunal. The Tribunal pointed out that there could be not mens rea in withholding a small amount of tax payable by the assessee. According to the Tribunal, the assessee is not liable to be penalised unless the Department established that he had acted in deliberate disregard of his statutory obligation. Relying upon the decision in S. Loonkaran & Sons v. CIT (1977) 108 ITR 92 (Mad.) and considering the fact that the returns were filed voluntarily, the Tribunal held that there is no infirmity in the order passed by the Appellate Assistant Commissioner in cancelling the penalties levied in both the assessment years under consideration. Accordingly, the appeals filed by the Department were dismissed.
Learned standing counsel appearing for Department submitted that it is no doubt true that the Department need not prove the mens rea on the part of the assessee in filing the return belatedly. But the assessee must prove that there is reasonable cause for the delay in filing the return. Learned standing counsel pointed out that in the present case, the assessee had applied for extension of time for part of the period of delay. But no application was filed for the rest of the period of the delay in filing the return. Therefore, the assessee was conscious of the fact that the return should be filed in time. It was further submitted that ignorance cannot be pleaded in the matter of condonation of delay. Therefore, according to standing counsel, it is for the assessee to prove that there is reasonable cause for the delay in filing the return and such reasonable cause was not proved in the present case. Hence, it was submitted that the Tribunal was not correct in upholding the order passed by the Appellate Assistant Commissioner in cancelling the penalties levied under section 18(1)(a) of the Act in both the assessment years under consideration.
We have heard learned standing counsel for the Department and perused the records carefully. It remains to be seen that the wealth tax returns for the assessment years 1974-75 and 1975-76 were filed belatedly. The assessee filed application for extension of time up to November 30, 1974, in the assessment year 1974-75 and up to September 30, 1975, in the assessment year 1975-76. For the rest of the period of delay, there was no application for extension of time. The assessee also did not reply to the penalty notice sent by the Wealth Tax Officer in both the assessment years under consideration. These facts would go to show that the assessee was conscious of the fact that the Wealth Tax Returns should be filed within the time stipulated under section 14(1) of the Act. The Tribunal was of the view that it is for the Department to establish that the assessee was guilty of contumacious conduct and acted in conscious disregard of his obligation in filing the returns belatedly. But this view taken by the Tribunal is not in accordance with the decisions in Gujarat Travancore Agency v. CIT (1989) 177 ITR 455 (SC) and CIT (Addl.) v. I.M. Patel & Co. (1992) 196 ITR 297 (SC). These decisions were followed by the various High Courts in subsequent decisions on this aspect. Therefore, it is not for the Department to establish that the assessee was guilty of contumacious conduct and acted iii conscious disregard of his obligation. It is in fact, for the assessee to plead and prove that the delay in filing the returns was due to reasonable cause. Such reasonable cause was not pleaded in the present case. It is well -established that in the matter of levying penalty under section 18(1)(a) of the Act, mens rea need not be proved as per the decisions cited supra. In view of the foregoing legal principles, it is not correct on the part of the Tribunal to say that the Department has not proved the mens rea in the present case on the part of the assessee in filing the return belatedly. Inasmuch as the assessee has not offered any reasonable cause for not filing the returns in time, it is not possible to condone the delay in filing the return. Accordingly, we hold that the order of the Tribunal in cancelling the penalties under section 18(1)(a) of the Act in both the assessment years under consideration, is not sustainable. In that view of the matter, we answer both the questions referred to us in the negative and in favour of the Department. No costs.
M.B.A./1329/FC Order accordingly.