Wealth tax---

----Penalty---Appeal---Competency of appeal---Delay in filing return---Levy of penalty---Application for waiver or reduction of penalty under S.18(2-A)- Assessee can also prepare appeal against order levying penalty---Wealth Tax Act, 1957, S.18---Smt. Ichhabai Panchal v. CWT (1982) 137 ITR 232 (Cal.) dissented from.

It is clear from a bare reading of section 18(2-A) of the Wealth Tax Act, 1957, that the Commissioner can merely reduce or waive the amount of minimum penalty imposable on a person subject to fulfilment of the conditions specified in that subsection, whereas the power of the appellate authorities to confirm or reduce the penalty levied under section 18(1) is unconnected with the said requirement or conditions as specified under section 18(2-A) of the Act. Section 23(1)(d) confers a statutory right upon an assessee to prefer an appeal before the Appellate Assistant Commissioner objecting to any penalty as may be imposed by the Wealth Tax Officer under section 18. This right is an independent right, which has not been taken away either expressly or by necessary implication. The powers of the Commissioner to reduce or waive the amount of minimum penalty under section 18(2-A) and the appellate power of the Appellate Assistant Commissioner under section 23(1)(d) operate in different fields and directions. While exercising the power under section 23(1)(d) of the Act, the appellate authority is not circumscribed by any such considerations as envisaged under section 18(2-A). No doubt he also may reduce the quantum of penalty. In an appropriate case he may set aside the order itself, a power which cannot be exercised by the Commissioner, or impose minimum penalty in certain situations. If reasonable cause is shown the appellate authority under section 23(1)(d) may set aside the whole order; where such reasonable cause is not shown he may still reduce the quantum of penalty. But he cannot reduce it below the minimum imposable on the person. This can be done under section 18(2-A) of the Act. Hence, merely because the assessee chooses to move the Commissioner under section 18(2-A) of the Act .his statutory right for appeal under section 23(1)(d) is not lost.

CWT v. Kempanna B. (1980) 126 ITR 825 Kar. and CWT v. Mirza Mahmood Ali Baig, Lt.-Col. (1985) 152 ITR 740 (AP) fol.

Smt. Ichhabai Panchal v. CWT (1982) 137 ITR 232 (Cal.) dissented from.

However, the exercise of the power of the Commissioner under section 25 is distinct from the exercise of the power under section 18(2-A) of the Act. In other words, where an assessee has moved the Commissioner under section 25(1) or the Commissioner has passed orders suo motu under section 25(1) or section 25(2), the appeal under section 23 cannot be said to be maintainable against the same orders of the Wealth Tax Officer thereafter, the reason being that the Commissioner while exercising the power under section 25 acts in the same hierarchy of powers, which is not the case when he exercises the power under section 18(2-A) of the Act.

S.K. Sharan for the Commissioner.

Nemo for the Assessee.

JUDGMENT

SACHCHIDANAND JHA, J.--These references under section 27(1) of the Wealth Tax Act, 1957, at the instance of the Revenue with respect to the same assessee involving the same question of law have been heard together. The material facts are as follows:

The assessee, since represented by his legal representative upon his death, filed returns of his net wealth for the assessment years 1968-69 and 1969-70 on June 29, 1973, and for the assessment years 1970-71 to 1973-74 on July 25, 1973. The Wealth Tax Officer initiated penalty proceedings. The assessee pleaded reasonable cause which was not accepted. The Wealth Tax Officer imposed penalties under section 18(1)(a) of the Wealth Tax Act, 1957 (for short, "the Act"), at half per cent. of the Wealth Tax assessed by him for each default. The assessee moved the Commissioner of Wealth Tax under section 18(2-A) of the Act, which was rejected on December 21/24, 1974. The assessee thereafter on June 9, 1978, preferred appeals against the imposition of penalty before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, by his order, dated October 29, 1979, rejected the appeals as not maintainable. The second appeal was preferred before the income-tax Appellate Tribunal. By order dated January 20; 1981, the Tribunal following the decision of the Karnataka High Court in CWT v. B. Kempanna (1980) 126 ITR 825 held that the appeals were maintainable before the Appellate Assistant Commissioner. Since there had been no decision on the merits by the appellate authority, the appeals were remanded to the Appellate Assistant Commissioner. Later, on the application by the Department, the Tribunal referred the following question of law for opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal misdirected itself in holding that even after the rejection of the assessee's petition under section 18(2-A) by the Commissioner of Wealth Tax the appeals filed by the assessee before the Appellate Assistant Commissioner are maintainable?"

A period of fifteen years having gone by counsel for the Department agreed that in the absence of the stay order the appeals must have been disposed of on the merits by the appellate authority in the meantime. And, therefore, these references so far as the assessee is concerned must have become infructuous. It appears further that substantial amendments were incorporated in subsection (1) of section 18 and subsection (2-A) has been omitted and replaced by a new section 18-B by the Taxation Laws (Amendment) Act, 1975. The question perhaps, therefore, has only academic importance. We have, however, heard counsel and considered the matter on the merits as we are given to understand that some more matters involving the same question relating to the period prior to April, 1976, when the aforesaid amendments came into force, might be pending.

Subsection (2-A), so far as relevant, and subsection (2-B) of section 18 of the Act may be noticed at this stage:

"(2-A) Notwithstanding anything contained in clause (i) or clause (iii) of subsection (1), the Commissioner may, in his discretion,---

(i) reduce or waive the amount of minimum penalty imposable on a person under clause (i) of subsection (1) for failure, without reasonable cause, to furnish the return of net wealth which such person was required to furnish under subsection (1) of section 14; or

(ii) reduce or waive the amount of minimum penalty imposable on a person under clause (iii) of subsection (1),

if he is satisfied that such person--- ....

(2-B) An order under subsection (2-A) shall be final and shall not be called in question before any Court of law or any other authority".

It will appear from the appellate order of the Appellate Assistant Commissioner that it took the view that section 18(2-A) of the Act overrides section 18(1-A) and there is nothing in the Act to suggest that the Legislature intended to keep the right of the assessee to contest the order of imposition of penalty on the merits intact after going in for waiver/reduction of the amount of penalty. As stated above, the Tribunal did not agree with the Appellate Assistant Commissioner and held that the right of appeal under section 23(1)(d) of the Act is not lost merely because the assessee has invoked the provision of section 18(2-A) by filing an application for waiver/reduction of the amount of penalty before the Commissioner.

Counsel for the Department, Mr. S.K. Sharan, relied on Smt. Ichhabai Panchal v. CWT 1982 137 ITR 232 (Cal) in support of the stand about non-maintainability of appeal. The Andhra Pradesh High Court, apart from the Karnataka High Court in B. Kempanna's case (1980) 126 ITR 825 referred to above, has taken the contrary view in CWT v. Lt. Col. Mirza Mahmood Ali Baig (1985) 152 ITR 740. We have examined the aforesaid decisions and we are inclined to agree with the view taken by the Karnataka High Court and the Andhra Pradesh High Court in the aforesaid cases.

It would be appropriate at this stage to notice the scheme of the Act so far as relevant for the purpose of this case. Section 14 provides for filing of returns. Section 16 provides for assessment. Section 18 provides for imposition of penalty for failure to furnish returns or to comply with notice (asking the assessee to file returns) and concealment of assets. Subsection (1) of this section as it stood during the relevant period up to March, 1976, was in these terms:

"(1) If the Wealth Tax Officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person---

(a) has without reasonable cause failed to furnish the return which he is required to furnish under subsection (1) of section 14 or by notice given under subsection (2) of section 14 or section 17, or has without reasonable cause failed to furnish within the time allowed and in the manner required by subsection (1) of section 14 or by such notice, as the case may be; or

(b) has without reasonable cause failed to comply with a notice under subsection (2) or subsection (4) of section 16; or

(c) has concealed the particulars of any assets or furnished inaccurate particulars of any assets or debts;

he or it may, by order in writing, direct that such person shall pay by way of penalty---

Subsections (2-A) and (2-B) as they stood prior to the amendment have already been quoted above. Section 23 contains a provision regarding appeal. It confers a right upon any person to prefer appeal against the assessment order, inter alia, "objecting to any penalty imposed by the Wealth Tax Officer under section 15-B or section 18", vide section 23(1)(d). Section 24 entitles an assessee objecting to any order passed by the Appellate Assistant Commissioner under section 18 or section 23 or section 37(2), etc., to prefer second appeal to the Appellate Tribunal. Section 25(1) confers power upon the Commissioner of Wealth Tax to revise orders of subordinate authorities. It lays down, inter alia, that the Commissioner may, either of his own motion or an application made by an assessee, call for the record of any proceeding under the Act in which an order has been passed by the authority subordinate to him, and may pass such orders thereon after enquiries as he thinks fit. The power is circumscribed by certain conditions as mentioned in the proviso with which we are not concerned in this case. The Commissioner can also under section 25(2) without prejudice to the provisions of section 25(1) pass appropriate orders as the circumstances of the case may justify, including an order enhancing or modifying the assessment or cancelling it and directing a fresh assessment, if he considers that any order passed by the Wealth Tax Officer is erroneous and prejudicial to the interests of the Revenue. Exercise of the power by the Commissioner under section 25(2) of the Act is subject to appeal before the Appellate Tribunal. Section 27 provides for reference to the High Court on a question of law.

The argument that the appeal against the order of imposition of penalty after rejection of the application under section 18(2-A) of the Act is not maintainable, rests on the provision as contained in section 18(2-B). But as is apparent from a plain reading of the provision, it only provides that the order of the Commissioner under section 18(2-A) shall be final and shall not be called in question before any Court of law or any other authority. In the appeals which the assessee preferred in the instant case against the imposition of penalty under section 18(l), the order of the Commissioner was not under challenge. And it could not be, as is clear from a bare reading of section 18(2-A), the Commissioner can merely reduce or waive the amount of minimum penalty imposable on a person subject to fulfilment of the conditions specified in that subsection. Whereas the power of the appellate authorities to confirm or reduce the penalty levied under section 18(1) is unconnected with the said requirement or conditions as specified under section 18(2-A). Section 23(l)(d) confers a statutory right upon an assessee to prefer appeal before the Appellate Assistant Commissioner objecting to any penalty as may be imposed by the Wealth Tax Officer under section 18. This right is an independent right, which has not been taken away either expressly or by necessary implication. The powers of the Commissioner to reduce or waive the amount of minimum penalty under section 18(2-A) and the appellate power of the Appellate Assistant Commissioner under section 23(1)(d) operate in different fields and directions.

Section 18 contemplates imposition of minimum penalty. The Commissioner under section 18(2-A) is empowered to reduce or waive the amount of minimum penalty imposed on a person under clause (i) or clause (iii) of subsection (1) of section 18. This power can be exercised by the Commissioner notwithstanding the default and even where no reasonable cause for the failure to file returns within the stipulated time has been shown. The fact that the aforesaid power is an independent power is clear from the non obstante clause with which subsection (2-A) begins implying that notwithstanding anything contained in clause (i) or clause (iii) of sub section (1) and notwithstanding any other provision in the Act, the Commissioner can reduce or waive the amount of minimum imposable penalty. The exercise of that power cannot take away the right of the assessee to challenge the order of the Wealth Tax Officer imposing penalty upon him as per the usual channel of challenge provided by sections 23, 24, 25 and, of course, section 27.

While exercising the power under section 23(1)(d) of the Act, the appellate authority, is not circumscribed by any such consideration as envisaged under section 18(2-A). No doubt, he also may reduce the quantum of penalty. In an appropriate case he may set aside the order itself, a power which cannot be exercised by the Commissioner under section 18(2-A). It would appear that the Act provides for imposition of minimum penalty in certain situations. If a reasonable cause is shown the appellate authority under section 23(1)(d) may set aside the whole order; where such reasonable cause is not shown he may still reduce the quantum of penalty. But he cannot reduce it below the minimum penalty imposable on the person. This can be done by the Commissioner under section 18(2-A). No doubt, a prudent assessee should first try to exhaust the remedies available to him by way of two appeals under sections 23 and 24 and revision under section 25 and reference under section 27 and only thereafter take resort to the powers of the Commissioner under section 18(2-A). But it does not mean that where an impatient assessee instead of going in for usual remedies of appeal, etc., straightaway moves the Commissioner under section 18(2-A), his statutory rights are lost. There may be various reasons and considerations weighing with the assessee for making application under section 18(2-A). He may not like to go in for the time consuming process which the appeals, etc., are bound to take and, therefore, to buy peace of mind and for expeditious disposal of the matter, he may like to go in for waiver/reduction. The analogy of a plaintiff/defendant of a civil suit going in for a compromise, agreeing to forgo some of his rights and claims may clarify the point. It is well-settled that merely because the plaintiff/defendant of any civil suit agrees to forgo his rights and claim in the suit that does not stand against him where the compromise is not ultimately accepted and he is compelled to contest the suit. He forgoes part of his claim in consideration of getting something in lieu thereof. After the compromise fails for any reason he is not debarred from contesting the suit. I am, therefore, of the opinion that merely because the assessee chooses to move the Commissioner under section 18(2-A) of the Act his statutory right of appeal under section 23(1)(d) is not lost.

I would, however, like to make it clear that the exercise of the power of the Commissioner under section 25 is distinct from the exercise of the power under section 18(2-A) of the Act. In other words, where an assessee has moved the Commissioner under section 25(1) or the Commissioner has passed orders suo motu under section 25(1) or section 25(2), the appeal under section 23 cannot be said to be maintainable against the same orders of the Wealth tax Officer thereafter. The reason being that the Commissioner while exercising the power under section 25 acts in the same hierarchy of powers, which is not the case when he exercises the power under section 18(2-A).

The Calcutta High Court in Smt. Ichhabai Panchal's case (1982) 137 ITR 232 no doubt took the view which the Appellate Assistant Commissioner in the present case precisely had taken, namely, that where the assessee chooses to go to the Commissioner for reduction or waiver of penalty, he admits the position that penalty was imposable and, therefore, once any order on that basis is passed, he cannot feel aggrieved by such an order and cannot contend that the order imposing penalty itself was unjustified and illegal. For the reasons stated above, I have not been able to persuade myself to accept these views of the Calcutta High Court to be correct. As indicated above, we are inclined to endorse the view expressed by the Karnataka High Court and the Andhra Pradesh High Court referred to above. Accordingly, I do not find any error in the order of the Tribunal.

I would thus answer the question in the affirmative, that is, in favour of the assessee and against the Revenue. Since the assessee was not represented at the hearing of these cases, I would make no order as to costs.

AFTAB ALAM, J.---I agree.

M.B.A./1234/FCReference answered.