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Petitioner: Smt. KRISHNA GUPTA VS Respondent: COMMISSIONER OF WEALTH TAX
Court Name: Punjab and Haryana High Court Judge(s): A. L. Balui, V. K. Bali Title: Smt. KRISHNA GUPTA vs COMMISSIONER OF WEALTH TAX Case No.: Wealth Tax Reference No,5 of 1980 Date of Judgment:1992-03-04 Reported As: 1993 PTD 593 Result: Reference answered
JUDGMENT
JUDGMENT ' A.L. BAHRI, J.---The following question has been referred to this Court by the Income-tax Appellate Tribunal under section 27 of the Wealth Tax Act, 1957: "Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was, in law, right in sustaining the penalty of Rs,50,000". ' The aforesaid reference was made under orders of the Supreme Court. Earlier, the High Court had declined the prayer of the assessee for directing the Tribunal to refer the question. ' The facts of the case are not very much in dispute; only a brief narration is considered necessary for deciding the reference. The assessee, Smt. Krishna Gupta, purchased a plot of land measuring 500 sq. Yards situated at premises No, 80/Block No, West Greater Kailash No,1, New Delhi, from Ram. Gopal Podar, on March 4, 1966. The assessee filed a return for the assessment year 1968-69 on November 14, 1968, without declaring the aforesaid plot of land or the value thereof as part of her assessable wealth. Assessm ent was finalised on February 28, 1969. Subsequently, a notice under section 17 of the Wealth Tax Act (hereinafter called "the Act") was issued to the assessee and on October 14, 1970, the assessee filed a fresh return disclosing the purchase of the aforesaid plot, as on March 31, 1968, fixing its value at Rs,50,000. The assessment was finalised and ,subsequently penalty proceedings were initiated against the assessee for concealment of the item of wealth aforesaid. The Inspecting Assistant Commissioner imposed penalty under section 18(1)(c) of the Act to the tune of Rs,50,000, vide order, dated August 29, 1973. Some other items were also assessed with which we are not concerned in this reference. Against the order of the Inspecting Assistant Commissioner, the assessee filed an appeal before the Tribunal. The order of the Inspecting Assistant Commissioner imposing a penalty of Rs,50,000 was maintained.
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' According to the assessee's application filed unde section 25 of the Act, the return of net wealth for the assessm ent year 1968-69 was filed on November 14, 1968, declaring the total wealth at Rs,6,82,904. The said declaration was accepted by the Wealth Tax Officer, 'C' Ward, Ludhiana, vide order, dated February 28, 1969. It was due to oversight that certain amounts to be shown escaped notice while filing the return which was stated to be as under: (a) Value of plot in Greater Kailash, New Delhi, estimated value of Rs,50,000. (b) Value of deferred share in Messrs Daulal Industrial Corporation (Pvt.) Ltd. Ludhiana, shown at Rs,293.50 instead of at Rs,2,936. ' On the total wealth declared of Rs,6,82,904, the tax paid was Rs,1,03,100, which was left by oversight to be deducted out of the total value. This resulted in over assessment of wealth and the mistake was again by an oversight. It was further asserted that the assessee had cooperated with the Department and had voluntarily disclosed her assets and, thus, a lenient view be taken and penalty proceedings be not initiated against her. The Inspecting Assistant Commissioner, in his order, Annexure 'A', observed that, while going through the assessee's capital account in the books of Messrs Rajan & Co., her proprietary concern, it was noticed that there was a debt of Rs,38,500, which amount was utilised for purchase of the aforesaid plot and thus the Wealth Tax Officer came to the conclusion that the wealth of the assessee had escaped assessment and a notice under section 17(1) read with section 18(1)(c) was served on the assessee on February 14, 1969. On May 13, 1969, the assessee submitted a petition pointing out that there was an overassessment of the assessee's wealth by a sum of Rs,1,03,100 but failed to report the fact that she had not reported the ownership of the New Delhi plot of land in a petition filed under section 35 of the Act. On September 29. 1970, the Wealth Tax Officer wrote to the assessee, with reference to the order of the Appellate Assistant Commissioner, dated August 18, 1970, for the assessment year 1966-67, that she had purchased the plot in question and asked for the production of books of account. On September 23, 1970, the Wealth Tax Officer issued a notice under section 16(4) of the Act calling upon the assessee to furnish a description of all immovable properties owned by her as on March 31, 1968. It was at that stage that on October 14, 1970, a return of net wealth was filed showing the value of the New Delhi plot of land at Rs,50,000. For the assessment year 1966-67, the purchase of the plot was not shown. Again, for the assessm ent year 1967-68, the same was not shown. ' On appeal, the Appellate Tribunal, in its order, dated May 31, 1975, with respect to the aforesaid item, held as under in paragraphs 5, 6 and 7: "An addition of Rs,50,000 had been made at the stage of reassessment under section 17(1) of the Wealth Tax Act as being the value of a plot purchased by the assessee on March 4, 1966, located in Greater. Kailash, New Delhi. The original return was filed in the instant case on November 14, 1968. The assessm ent was completed on Febraury 28, 1969, in respect of a net wealth of Rs,6,82,904 as against the returned net wealth of Rs,6,80,093. Notice under section 17(1) of the Wealth Tax Act had been served on the assessee on August 12, 1970, the revised wealth tax return in compliance with the said notice was filed on October 14, 1970. The said revised return did include the Greater Kailash plot. The assessee's explanation for her failure to include the said asset in her original return dated. October 14, 1968, is that she made the omission inadvertently and that she had disclosed this asset firstly in her revised wealth tax return dated July 10, 1969, filed in back assessment proceedings relating to the assessm ent years 1966-67 and 1967-68., There is a controversy between the parties as to whether the section 17, Wealth Tax Act, notices relating to the assessment years 1966-67 and 1967-68 had or had not mentioned the Greater Kailash plot. The Department was unable to show that such a mention had been made in those notices and thus we are inclined to accept the assessee's version that she disclosed the asset in question on July 10, 1969, without the same having been detected earlier by the Department. The assessee pressed this argument in support of
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her contention that the mistake constituted by the non-inclusion of that asset in the original return relating to the assessm ent year 1968-69 was a bona fide one. ' We are, however, of the view that the fact that the Department had not earlier detected the asset in question before its disclosure by the assessee on July 10, 1969, as aforesaid, is just one of the considerations relevant for determining the question of existence of mens rea on the part of the assessee. The fact remains that the assessee had purchased' the plot in question on March 4, 1966, for Rs, 38,500 after withdrawing a sum a little higher than that from her capital account. Admittedly, there was no dispute about the assessee's title or ownership of the said plot on March 31, 1968, the relevant valuation date. The assessee's explanation before us is that her old accountant, one Shri B.D. Sharma, left service in December, 1966, and that he was succeeded by the new accountant, Shri K.L. Suri, in April, 1968; that there arose some confusion about the valuation dates relevant to the assessm ent years 1966-67 and 1967-68; that the Wealth Tax Officer had completed the assessm ent for the assessm ent year 1966-67 treating December 31, 1965, as the relevant valuation date; and he had completed the assessment for the assessment year 1967-68 treating not December 31, 1966, but March 31, 1967, as the relevant valuation date; that the plot in question having been purchased in 1966 was not shown in the wealth tax return for the assessment year 196667 -- December, 31, 1965, being the relevant valuation date; that the plot was again not shown in the return for the assessm ent year 1967-68 for the reason that the new accountant looked into the accounts of 12 months from March 31, 1967, backwards to find out whether there had been any outgoings from the capital account and for the rest he adopted the wealth-tax return for the assessm ent year 1967-68 and that the said mistake of omission of the plot in question came to be repeated in the return filed forthe assessment year 1968-69. ' The story put forward before us does have a ring of plausibility. There is, however, no material on record to show firstly as to the succession of accountant, Shri B.D. Sharma, by accountant, Shri K.L. Suri, as aforesaid, secondly as to the omission by Shri K. L. Suri to look into the assessee's capital account for the period from January 1, 1967 to March 31, 1967. What is significant in this regard is that the assessee had furnished on August 8, 1973, a written explanation during the penalty proceedings before the learned Inspecting Assistant Commissioner and the explanation as put forward before us has not been spelt out in the letter dated August 8, 1973, addressed to the Inspecting Assistant Commissioner. When specifically questioned on the aspect, the assessee's authorised representative admitted that the explanation before the Inspecting Assistant Commissioner merely stated that so far as the non-inclusion of the Greater Kailash plot in the wealth tax return was concerned, there was no mala fide intention on the assessee's part to conceal any wealth. We are of the opinion that the assessee's failure to spell out the present explanation before the Inspecting Assistant Commissioner substantially detracts from the value and credibility thereof. It is again significant that the assessee has not shown as to tinder what circumstances she detected her mistake when she included the said asset in the revised wealth tax returns dated July 10, 1969, furnished in respect of the assessment years 1966-67 and 1967-68. The assessee's learned representative more than once referred us to the observations of the Appellate Assistant Commissioner of Wealth tax made in the appeal order against the back assessm ent to wealth tax regarding assessment year 1966-67 to emphasise as to how the assessee justifiably did not include the plot in question in her original return for the assessment year 196667. The learned Appellate Assistant Commissioner's order, we are afraid, does not, in our opinion, lend support to the assessee's case so far as the concealment of the plot in question in the original return for the assessm ent year 1968-69 is concerned. We are of the view that the assessee's failure to include the said plot in her return, as aforesaid, calls for imposition of penalty for concealment of particulars."
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' It is on the facts and circumstances, as found by the authorities, that the question aforesaid has been referred to this Court. In order to appreciate the legal position, several judgments have been referred to by learned counsel for the parties relating to cases under the Income Tax Act. Some of them are before the amendment of section 271 of the Income Tax Act, and some after the amendment. The relevant extract of section 18 of the Wealth-tax Act as in force on April 1, 1969, is reproduced below: "18. Penalty for failure to furnish returns, to comply with notices and concealment of assets, etc.--- (1) If the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals), Chief Commissioner or Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person-- .. (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-- (iii) in the cases referred to in clause (c), in addition to any wealth tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount representing the value of any assets in respect of which the particulars have been concealed or any assets or debts in respect of which inaccurate particulars have been furnished. Explanation 1.---Where--- (i) the value of any asset returned by any person is less than seventy-five per cent of the value of such asset as determined in an assessment under section 16 or section 17 (the value so assessed being referred to hereafter in this Explanation as the correct value of the asset), or (ii) the value of any debt returned by any person exceeds the value of such debt as determined in an assessm ent under section 16 or section 17 by more than twenty-five per cent. Of the value so assessed (the value so assessed being referred to hereafter in this Explanation as the correct value of the debt), or (iii) the net wealth returned by any person is less than seventy-five per cent. Of the net wealth as assessed under section 16 or section 17 (the net wealth so assessed being referred to hereafter in this Explanation as the correct net wealth), then, such person shall, unless he proves that the failure to return the correct value of the asset, or, as the case may be, the correct value of the debt or the correct net wealth did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of assets or furnished inaccurate particulars of assets or debts for the purposes of clause (c) of this subsection. Explanation 2.---For the purposes of clause (iii)--- (a) the amount representing the value of any assets in respect of which the particulars have been concealed or any assets in respect of which inaccurate particulars have been furnished, shall be the value of such assets determined for the purposes of this Act as reduced by the value thereof, if any, declared in the return made under section 14 of section 15; (b) the amount representing the value of any debts in respect of which inaccurate particulars have been furnished, shall be the amount by which the value of such debts declared in the return made under section 14 or section 15 exceeds the value thereof determined for the purposes of this Act." ' The word "deliberately" before the words "furnished inaccurate particulars" was omitted from sub- clause (c) of subsection (1) of section 18 of the Act as originally existed, vide amendment, which came into force with effect from April 1, 1965. The plot was purchased in March, 1966, and the relevant assessm ent year is 1968-69 as the revised return was filed during this year. It is the amended provision of section 18 as reproduced above which is to be applied to the facts of the case in hand. ' Earlier, the Supreme Court had occasion to consider the provisions of section 28(1)(c) of the Income-tax Act relating to imposition of penalty in CIT v. Anwar Ali (1970) 76 ITR 6% (SC) and had held as under (headnote):
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"Proceedings under section 28 of the Income-tax Act, 1922, are penal in character. The gist of the offence under section 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and the burden is on the Department to establish that the receipt of the amount in dispute constitutes income of the assessee. If there is no evidence on the record except the explanation given by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. Before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars." ' It was further held: "... That, in the absence of cogent material evidence, apart from the falsity of the respondent's explanation from which it could be inferred that the respondent had concealed the particulars of his income or had deliberately furnished inaccurate particulars in respect of the source and that the disputed amount was a revenue receipt, the penalty could not be imposed." ' While dealing with the penalty provisions in the Orissa Sales Tax Act, 1947, the Supreme Court, in Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26, observed that (headnote): "An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi- criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so." ' In a case covered by section 271(1)(c) of the Income-tax Act, 1961, Anwar Ali's case (1970) 76 ITR 696 (SC) was followed by the Supreme Court in Anantharam Veerasinghaiah & Co. v. CIT (1980) 123 ITR 457, where it was observed (headnote): "Before a penalty can be imposed the entirety of the circumstances must be taken into account and must point to the conclusion that the disputed amount represents income and that the assessee has consciously concealed particulars of his income or deliberately furnished inaccurate particulars. The mere falsity of the explanation given by the assessee is insufficient without there being, in addition, cogent material or evidence from which the necessary conclusion attracting a penalty could be drawn." ' Anwar Ali's case (1970) 76 ITR 696 (SC) was considerd by this Court in CIT v. Malawa Ram Handa and Sons (1984) 19 Taxman 26 (P&H), and relied upon. Two other decisions were cited which were distinguished on ground that Anwar Ali's case (1970) 76 ITR 696 (SC) was not brought to notice. Those decisions are : Shiv Narain Khanna v. CIT (1977) 107 ITR 542 (P&H) and Kedar Nath Sanwal Dass v. CIT (1978) 111 ITR 440 (P&H). In the Income Tax Act, 1961, the penalty provision is contained in section 271. The Supreme Court considered section 271(1)(a) of the Income Tax Act, 1961, in Gujarat Travancore Agency v. CIT (1989) 177 ITR 455. It was held as under (headnotc): "In the case of section 271(1)(a) of the Income Tax Act, 1961, which provides that a penalty may be imposed if the Income-tax Officer is satisfied that any person has, without reasonable cause, failed to furnish the return of total income, what is intended is a civil obligation, while in the case of section 276C of the Act, which provides for punishment if a person wilfully fails to furnish in due time the return of income, what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of section 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence
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can be imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. The creation of an offence by statute proceeds on the assumption that society suffers injury by the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence." ' The decision of the Kerala High Court in CIT v. Gujarat Travancore Agency (1976) 103 ITR 149 (FB), was affirmed by the Supreme Court (see (1989) 177 ITR 455). ' The matter was considered by the Full Bench of this Court in Vishwakarma Industries v. CIT (1982) 135 ITR 652. The amended provision was taken into consideration and with respect to omission of 80 per cent. Of the wealth, the burden was held to be on the assessee to explain, otherwise a presumption would be drawn that it was a case of concealment. With respect to the remaining category of cases the old principle governing the imposition of penalty was to be applied. It would be useful to reproduce the relevant passages from this judgment which are as under (headnote): "The significant thing about the change made in clause (c) of section 271(1) is the designed omission of the word 'deliberately' therefrom, whereby the requirement of a designed furnishing of inaccurate particulars of income was obliterated. The Legislature has deleted the word in order to bring it in harmony and in consonance with the intent and purpose of the Explanation added to the section. As long as the word 'deliberately' existed in caluse (c), a conscious mental element was required to be established thereunder and inevitably the burden of proving thereof was on the Department. When the Legislature contemplated a reversal or a change in the burden of proof by the addition of the Explanation thereto, it necessarily neutralised the provisions of clause (c) by taking out therefrom the word 'deliberately' and the consequential requirement of a designed mental element." ' It was further held (headnote): "The language of the Explanation indicates that for the purpose of levying penalty the Legislature has made two clear-cut divisions. This has been done by providing a strictly objective and an almost mathematical test. The touchstone therefor is the income returned by the assessee as against the income assessed by the Department which is designated as the correct income. A case where the returned income is less than 80 per cent of the assessed income can be squarely placed into one category. Where, however, such a variation is below 20 per cent that would fall in the other category. To the first category where there is a larger concealment of income, the provisions of the Explanation become at once applicable with the resultant attraction of the presumptions against such an assessee. However, those falling in the second category, where the variation between the returned income and the assessed income is less than 20%. Would be out of the net of the Explanation and continue to be governed by the law as it existed prior to the amendment of section 271(1)(c) by the Finance Act, 1964. ' Once the Explanation is held to be applicable to the case of an assessee, it straightaway raises three legal presumptions, viz.: (i) that the amount of the assessed income is the correct income and it is in fact the income of the assessee himself; (ii) that the failure of the assessee to return the correct assessed income was due to fraud; or (iii) that the failure of the assessee to return the correct assessed income was due to gross or wilful neglect on his part." ' In view of the Full Bench decision referred to above, it is not considered appropriate to refer to other decisions of this Court rendered prior to the same. ' Learned counsel for the petitioner, the assessee, also referred to some decisions of other High Courts which may briefly be noticed. The Bombay High Court in D.M. Dahanukar v. CIT (1967) 65 ITR 280, observed that mere omission will not amount to concealment or deliberate furnishing of
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inaccurate particulars unless an omission was intentional or made by the assessee with a desire to hide or conceal the income to avoid imposition of tax. The Madras High Court in M. Hussain Ali and Sons v. CIT (1965) 58 ITR 787, held that omission per se was not sufficient to impose penalty unless it was deliberate or wilfully false. The present case is to be considered in the perspective of the rule of law as laid down in the authorities mentioned above. The history of section 18 of the Wealth Yax Act is almost similar to that of section 271 of the Income Tax Act. Almost similar amendments were made in these Acts in respect of the penalty provisions. Under these provisions, as they stood before their amendment by the Finance Act, 1968, the scale of penalty imposable for concealment or understatement of wealth was a minimum amount of 20% of the wealth tax sought to be evaded and a maximum of 150% of the amount of such wealth tax. It was also provided, in substance, in the Explanation to section 18(1), prior to its amendment, that, where the net wealth declared by a person in his return of net wealth fell short of the wealth as assessed (either in original assessment proceedings or in proceedings for assessing or reassessing wealth escaping assessment) by more than 20% of the assessed wealth, such person would be deemed to have concealed the particulars of…
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