Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss.18(1)(a), 35 & 14(1)(a)‑‑‑Penalty for concealment‑‑ Rectification of mistake‑‑‑Penalties were imposed equal to wealth tax for default of S.14(1)(a) of the Wealth Tax Act, 1963 with the approval of Inspecting Additional Commissioner which was subsequently revised under S.35 of the Wealth Tax Act, 1963 in terms of time and rate prescribed under S.18(1)(a) of the Wealth Tax Act, 1963 on pointation of Audit Authorities ‑‑‑ Validity ‑‑‑ Both the Assessing Officer as well as Inspecting Additional Commissioner had referred to the relevant law and imposed penalty equal to tax‑‑‑Could be rightly presumed that they were well aware of the existing provisions regarding imposition of penalty for the relevant default while passing order under Ss.18(1)(a)/35 of the Wealth Tax Act, 1963‑‑‑Assessing Officer had recorded the reply made to the show cause notice but had not discussed as to how the same was being rejected except that as pointed out by the Audit Authorities penalty for default of S.14(1)(a) of the Wealth Tax Act, 1963 was chargeable in terms of time and rate prescribed under S.18(1)(a) of the Wealth Tax Act, 1963‑‑‑Right of the assessee which was got secured in the light of original penalty orders had not been dislodged in any manner‑‑‑First Appellate Authority opted easy way out for rejecting grounds of appeal merely on the ground that assessee/appellant had mentioned additional tax and not the penalty‑‑‑Neither the grounds were valid nor the case of Supreme Court was relevant‑‑‑Cognizance of the facts and consequent adjudication was conspicuously missing‑‑ Assessing Officer as well as First Appellate Authority brushed aside the legal objections raised on behalf of the assessee/appellant‑‑‑Such a treatment was against the principles of natural justice and fair-play‑‑ In application of law and appreciation of fact a fair handed treatment was legally bounden duty of the judicial as well as quasi‑judicial forum‑‑‑Assumption of jurisdiction under S.35 of the Wealth Tax Act, 1963 was not sustainable on facts and law‑‑‑Penalty imposed equal to tax was reasonable for default under S.14(1)(a) of the Wealth Tax Act, 1963‑‑‑As penalty imposed equal to tax‑had already stood paid, the revised orders under Ss.18(1)(a)/35 of the Wealth Tax Act, 1963 were vacated and original .orders restored by the Appellate Tribunal.

1992 SCMR 687 = 1992 PTD 570; 2002 PTD (Trib.) 2695 and (1974) 95 ITR 532 rel.

Muhammad Ajmal Khan for Appellant.

Sabiha Mujahid, D.R. for Respondent.

Date of hearing: 12th September, 2002.

ORDER

IMTIAZ ANJUM (ACCOUNTANT MEMBER).‑‑‑All the titled appeals pertaining to the impugned assessment years 1993‑94 to 1996‑97 have been preferred on the common grounds challenging invoking of jurisdiction under section 35 bar the D.C.I.T. to enhance penalty under section 18(1)(a) and confirmed by CIT(A). The orders passed by the D.C.I.T. under sections 18(1)(a)/35 as confirmed by the CIT(A) are contested to be illegal unlawful as assumption of jurisdiction under section 35 amounts to review of the original order. Action under section 35 has further been assailed on .the plea that D.C.I.T. failed to bring any material on record to prove that returns within due date were filed without reasonable cause.

2. We have heard Mr. Ajmal Khan, Advocate, learned authorized representative of the assessee arid Mrs. Sabiha Mujahid, learned D.R.

3. Brief facts of the case are that appellant individual filed returns for all the impugned years in response to notice under section 17 of the Wealth Tax Act, 1963 (hereinafter referred to be as Act) on 25‑8‑1999. Assessments under section 16(3) for all the impugned years were completed on even date of 8‑10‑1999. A show‑cause notice under section 18(1)(a) was issued and served on 18‑10‑1999 for default under section 14(1)(a). No compliance was made in spite of two subsequent reminders as well. Assessing Officer presumed that appellant had no explanation to offer for the said default of late filing of returns. Penalty under section 18(1)(a) was imposed with the prior approval of IAC vide order even dated 21‑4‑2001. Later on a show‑cause notice was issued on 30‑7‑2001 indicating the intention to rectify orders under section 18(1)(a), dated 21‑4‑2001 for the reasons mentioned as under:‑‑‑

"The Audit Authority, has pointed out that the penalties levied as above are short/less at Rs.6,52,791 for the assessment years 1993‑94 to 1996‑97 and directed to charge the same in accordance with the provision of law, the detail of which is given as under:‑‑

From the above it is apparent that the audit of observation is based on the facts as under the provision of lave. There was no discretion with the department to impose penalty equal to tax but on the basis of period of default in accordance with the provisions of law. Therefore, the mistake being apparent on record is intended to be rectified under section 35 of the Wealth Tax Act, 1963 to retrieve the loss of revenue as pointed out by the audit authority. Objection, if any should please be submitted in writing duly supported with documentary evidence on or before 6‑8‑2001 positively."

Reply, dated 29‑11‑2001 made as also recorded in the impugned order under sections 18(1)(a)/35 was as under:‑‑‑

"It is submitted that during the hearing' of case it was thoroughly discussed with the Assessing Authority even before worthy IAC the matter of imposition of penalty after consultation with senior authority the Assessing Officer has rightly imposed the penalty by keeping into consideration both the Revenue and assessee as the same practice was adopted in many of the case reported by the higher Courts, therefore, your intention to re‑impose the penalty on the basis of number of days is baseless, unjustified and against the norms of law.

We hope the above exercise will suffice your requirement and you will be pleased to accept the penalty as imposed by the Assessing Authority while making the original assessment."

The above quoted reply was declared to be not convincing as it was mandatory to charge penalty under section 18(1)(a) at the prescribed rate for the relevant period of default under section 14(1)(a). Revised penalties as pointed out by the Audit Authorities were imposed with the prior approval of the IAC.

4. CIT(A) through consolidated order, dated 26‑2‑2002 summarily rejected the objections pertaining to assumption of jurisdiction under section 35 with remarks that judgment of Supreme Court relied upon pertained to the charge of additional tax and not penalty. Other than this there is no accusation at all.

5. Learned A.R. has pleaded that original penalties under section 18(1)(a) were imposed equal to the tax with the approval of the IAC which shows that the assessing as well as supervisory authority consciously acted in charging penalty. It, therefore, can be safely presumed that provisions of section 18(1)(a) were very much before both the authorities at the time when penalties were imposed. As a result jurisdiction under section 35 has been unlawfully assumed as no mistake apparent from the record has been detected as such. Further elaborating above contention A.R. has pointed out that any mistake brought out by the Audit Authorities cannot be made the basis of rectification. In support of this contention learned A.R. has relied upon reported judgments 1992 SCMR 687 = 1992 PTD 570, 2002 PTD (Trib.) 2695 and 1974 95 ITR 532. On the basis of ratio decided in the above quoted judgments A.R. has emphasized that ITAT vide reported judgment 2002 PTD (Trib.) 2695 held that:‑‑

"Assessing Officer while exercising powers under section 35 in order to rectify any assessment order passed by him could not rely upon or take into consideration additional evidence and then form an opinion different from the order, then it will not: amount to rectification of the order. It is worth noting that in the present case the Assessing Officer relied upon the report of the Audit and Inspection Authority while invoking section 35 of Wealth Tax Act, 1963, in order to initiate rectification proceedings which was not warranted under the law provided under section 35 of the Act."

In case of reported judgment of Indian jurisdiction following extract has been relied upon:

"It is, therefore, apparent that in the case the I.T.O. acted under the instructions of the C.I.T. in issuing the notice under section 35 of the Act. The decision of their lordships of the Supreme Court in Sirpur Paper Mills' case (1970) 77 ITR 6 (SC) is fully applicable to the facts of the Writ Petition No.133 of 1963. It cannot be disputed that functions performed by the I.T.O. under section 35 of the Act are quasi‑judicial in nature and a discretionary power has been given by the Act to the I.T.O. to rectify the mistake which might have crept in the original order of assessment. The Supreme Court has clearly laid down the law on the subject in Sirpur Paper Mills' case (1970) 77 ITR 6 (SC), that when the authority concerned is exercising quasi‑judicial powers then he must act with an unbiased mind consider the matter impartially and according to the principles of natural justice. As the I.T.O. appears to have issued a notice under section 35 of the Act to the petitioner in Writ Petition No. 133 of 1963 on the instruction of the C.I.T., it is clear that he did not apply his own mind independently to the facts of the case but he simply acted on the instructions or directions given to him by the C.I.T.

As such, we hold that the notice issued by the I.T.O., C‑Ward, Kota in Writ Petition No.133 of 1963 was invalid for the aforesaid reason and the same deserves to be set aside."

6. D.R. has supported the rectification under section 35 on the ground that since it was mandatory to observe the provisions of section 18(1)(a) in terms of default of time and rate prescribed Assessing Officer acted lawfully. The pointation of the defect/ mistake by Audit Authorities does not place any bar in this regard.

7. We have considered the facts of the case, arguments/contentions of both the parties and consulted case‑law cited at bar. We have observed that:‑‑‑

(i) It is an admitted position that penalties under sec tion 18(1)(a), dated 21‑4‑2001 were imposed equal to wealth tax for all the impugned years. There is no confusion or contradiction as far as application of relevant provisions of section 18(1)(a) invoked for charge of penalties for default of section 14(1)(a) is concerned.

(ii) Both the Assessing Officer as well as IAC have referred to the relevant law and imposed penalty equal to tax. It, therefore, can be rightly presumed that they were well‑aware of the existing provisions for purposes of imposition of penalty for the relevant default while passing order under sections 18(1)(a)/35. At the same time although Assessing Officer has recorded the reply made to the show‑cause notice but has not discussed as to how the same is being rejected except that as pointed out by the Audit Authorities penalty for default of section 14 (1)(a) of the Act was chargeable in terms of time and rate prescribed under section 18(1)(a).

(iii) In whatever way vested right of the appellant got secured in the light of original penalty orders has not been dislodged in any manner.

(iv) CIT(A) in his turn opted easy way out for rejecting grounds of appeal merely on the ground that appellant has mentioned additional tax and not the penalty. Neither the grounds were valid nor the relevant case of Supreme Court. Obviously cognizance of the facts and consequent adjudication is conspicuously missing.

In the light of the facts and factors highlighted above we are of the view that D.C.I.T. as well as CIT(A) brushed aside the legal objections raised on behalf of the appellant. Such a treatment is obviously against the principles of natural justice and fair-play. It has been held time and again by the superior Courts that in application of law and appreciation of fact a fair handed treatment is legally bounden duty of the judicial as well as quasi‑judicial forum. Having considered various aspects of the case discussed above we are of the view that in this case assumption of jurisdiction under section 35 is not sustainable on facts and law. The ratio decided in case‑law relied upon by the A.R. weights heavily in favour of the appellant. We are also of the view that penalty imposed equal to tax is reasonable for default under section 14(l)(a). This conclusion is further supported by the fact that penalty imposed equal to tax as already stands paid the impugned orders under sections 18(1)(a)/35 are, therefore, vacated and original orders restored. Appeals are allowed accordingly.

C.M.A./554/Tax (Trib.)Appeals allowed.