Income Tax Appellate Tribunal - Jodhpur
Lake Palace Hotels & Motels Ltd. vs Deputy Commissioner Of Wealth Tax on 22 September, 2000
Equivalent citations: [2002]83ITD286(JODH)
JUDGMENT
P.M. Jagtap, AM.
1. This appeal of the assessee is directed against the order of the CWT(A), Udaipur, dt. 6th Oct., 1994, confirming the penalty imposed under Section 18(1)(c) for furnishing inaccurate particulars of assets.
2. The brief facts giving rise to this appeal are that the wealth-tax assessment of the assessee for asst. yr. 1984-85 was completed by the AO wherein the outer and inner portions of Handasji ki Magri were valued at Rs. 11,51,640 and Rs. 20 lakhs against the value declared by the assessee at Rs. 3,45,000 and Rs. 5,99,000, respectively. Consequently, penalty proceedings were initiated against the assessee under Section 18(1)(c) by issuing show-cause notice. As the assessee could not establish the value of these assets returned by him as the correct value, a minimum penalty of Rs. 46,150 was imposed by the AO in view of Expln. 4 to Section 18(1)(c). The matter was carried before the CWT(A) who confirmed the said penalty. Aggrieved by the same, the assessee is in appeal before us.
3. The learned counsel for the assessee Sr. Advocate Shri N.M. Ranka submitted that the Department has adopted the value of immovable properties on estimate basis whereas the assessee had returned the value determined by the Land and Building Taxes Department for the purpose of levy of tax. He further submitted that such valuation made by the Land and Building Taxes Department is considered as fair market value of the property under Rajasthan Land and Building Taxes Act, 1964, He also submitted that the AO has adopted the value of these properties on the basis of agreement to sell entered into in the year 1980 and stated that the said agreement was not fully implemented till the relevant valuation date i.e., 31st March, 1984. He also explained the different factors affecting the valuation of the inner portion as compared to outer portion of the said property and contended that these factors have not been considered by the AO while adopting the values of the said property. He also drew our attention to the penalty notice issued by the AO on 26th March, 1989, and submitted that it has been titled as penalty notice issued under the IT Act, 1961. He, therefore, contended that such a notice is bad in law and consequently the penalty order passed in pursuance of the same is void because basic legal requirements are absent in the said notice dt. 26th March, 1989. He also submitted that the penalty notice dt. 26th March, 1989, has been issued by one officer whereas the penalty order in this case has been passed by another one. He, therefore, contended that in such a case, there being no valid satisfaction of AO penalty order cannot be considered as a valid one. He also submitted that Expln. 4 to Section 18(1)(c) has not been clearly invoked in the penalty proceedings and, therefore, contended that the Department has not discharged its burden in this case. In support of this contention, he placed reliance on the decision of the Hon'ble M.P. High Court in the case of CIT v. Ganesh Prasad Badu Prasad & Co. (1998) 231 ITR 951 (MP). He also submitted that the evidence relied upon by the Department in this case is not a conclusive evidence, whereas the assessee had taken the value placing reliance on the valuation of the property determined under the Land and Building Taxes Act, 1964. He further submitted that the estimated value can be considered for assessment purpose only and not for levying penalty. He cited various decisions--Addl. CIT v. Noor Mohd. & Co. (1974) 97 ITR 705 (Raj), CWT v. Akshay Kumar Sanghi (1987) 163 ITR 43 (Raj), WTO V. Smt Sudha Chopra (1988) 30 TTJ (Del) 248 : (1987) 23 ITD 552 (Del) and Meghraj Tusnilal and Anr. v. CWT (1996) 222 ITR 397 (Gau) in support of his contentions. He, therefore, contended that the CWT(A) was not justified in confirming the penalty under Section 18(1)(c) in this case which deserves to be deleted on legal grounds.
4. The learned Departmental Representative relied on the orders of the authorities below and submitted that the penalty has been rightly levied under Section 18(1)(c) in this case for furnishing inaccurate particulars. He also submitted that satisfaction precedes the issue of notice and, therefore, contended that there is no infirmity in the notice. Regarding the defects pointed out by the learned counsel for the assessee in the notice, he took support from Section 42C and contended that the penalty proceedings initiated in this case are perfectly valid. In support of this contention, he relied on the decisions in CJT v. Rajbir Singh (1998) 233 ITR 126 (P&H) and 232 ITR 450 (sic). He also drew our attention towards the order passed by the assessing authority under the Rajasthan Land and Building Tax Act, assessing the value of the said property and submitted that neither the date of valuation nor the basis thereof has been mentioned in the said order. He further submitted that the assessee having entered into an agreement to sell in 1980 was well aware of the market value of the property and contended that non-disclosure of the said value anywhere shows its fraudulent and mala fide intention. He also submitted that the land was subsequently sold at the price mentioned in the agreement and as such contended that the action of the AO in adopting this value is fully justified. He further submitted that all the cases cited by the learned counsel of the assessee are not applicable in the instant case, as the facts involved in these cases are entirely different from the present case.
5. In the rejoinder, the learned counsel for the assessee submitted that the AO has given the reference of 'IT Act' in the notice instead of 'WT Act' and contended that such fault is not curable under Section 42C which deals with clerical mistakes only.
6. We have considered the rival submissions together with citations and also perused the material on record to which our attention was drawn during the course of hearing by the learned representatives of both the sides. The learned counsel for the assessee has raised various contentions pertaining to legal as well as factual aspects. We shall deal with the legal aspects initially, which mainly involve the issue of validity of notice and AO's valid satisfaction regarding the concealment of income. It is observed that the first notice in this case was issued on 26th March, 1989, initiating the proceedings for levy of penalty under Section 18(1)(c). A perusal of this notice reveals that the same was issued in the printed format meant for issuance of penalty notice under the IT Act, 1961, and although the AO specifically made a reference of Section 18(1)(c) of the WT Act, 1957, in the said notice at the relevant place, he has not struck off the inappropriate/irrelevant portion referring to IT Act, 1961, in some places. It is pertinent to note here that no further action was taken by the AO on the basis of this notice as the quantum appeal in this case was pending before the CWT(A), Ajmer who decided the same against the assessee on 11th Jan., 1993. Thereafter a fresh memo was issued by the AO on 3rd June, 1993, providing one more opportunity to show cause why penalty under Section 18(1)(c) should not be levied, which the assessee availed of on 14th June, 1993, by furnishing written explanation, a copy of which is placed on record. A perusal of this reply reveals that there was no misunderstanding in the mind of the assessee about the offence/default alleged against it and indeed the assessee dealt with the reasons in the said explanation in contending that no penalty could be levied under Section 18(1)(c). It is, therefore, clear that the assessee was not under any misapprehension about the offence alleged against it. On the other hand, the assessee certainly understood the offence alleged against it and tried to show a cause by offering its explanation while urging that no penalty could be levied. Thus, the assessee does not appear to have been prejudiced in any manner in this regard.
7. The penalty notice in such cases is issued in the process of giving an opportunity of being heard to the assessee as envisaged in Section 18(2) with the inherent object of effectively communicating or putting the assessee in the awareness and knowledge of initiation of penalty proceedings under the relevant section and if this object is accomplished, we are of the view that the notice is not rendered invalid just for non-striking off the irrelevant or inappropriate portions of the same. For this view we get support from the decision of the Hon'ble High Court of Andhra Pradesh in the case of CIT v. Chandulal (1985) 152 ITR 238 (AP) relating to notice issued under Section 274 r/w Section 271(l)(c) of the IT Act, 1961, which are analogous to Sections 18(2) and 18(1)(c) of the WT Act, 1957. The relevant portion of the said decision appearing in the headnote is reproduced below :
"It cannot be said that by reason of the ITO not striking out inappropriate portions of the notice issued under Section 274, the notice was rendered invalid. In the first place, it has to be borne in mind that the notice issued under Section 274 is not prescribed under the rules. It is a notice administratively devised for the purpose of putting the assessee in the knowledge of the facts that the ITO initiated proceedings for levy of penalty in order to enable him to show-cause why penalty should not be levied. So long as the object of putting the assessee in the awareness and knowledge of the initiation of the penalty proceedings is accomplished by the issuance of a notice the question of invalidity does not arise on account of either inappropriate language in the notice or on account of any inappropriate portions of the notice not being struck off."
8. The Hon'ble Bombay High Court (Nagpur Bench) also had an occasion to deal with the similar issue in the case of CYT v. Smt. Kaushalya & Ois. (1995) 216 ITR 660 (Bom) wherein it has been held by the Hon'ble High Court that the assessment having been made before the issue of notice and the assessee fully knowing the details about the exact charge of the Department against him, the notice could not be said to have prejudiced the assessee by any ambiguity in its wordings and some mistakes in language would not invalidate the same. The observations of the Hon'ble High Court of Bombay being relevant in this case, are reproduced below in brief :
"The assessment orders were already made and the reasons for issuing the notice under Section 274 r/w Section 271(1)(c) were recorded by the ITO. The assessee fully knew in detail the exact charge of the Department against him. In this background, it could not be said that either there was non-application of mind by the ITO or the so-called ambiguous wording in the notice impaired or prejudiced the right of the assessee to reasonable opportunity of being heard. After all, Section 274 or any other provision in the Act or the Rules, does not either mandate the giving of notice or its issuance in a particular form. Penalty proceedings are quasi criminal in nature. Sec. 274 contains the principle of natural justice of the assessee being heard before levying penalty. Rules of natural justice cannot be imprisoned in any straight-jacket formula for sustaining a complaint of failure of the principles of natural justice on the ground of absence of opportunity it has to be established that prejudice is caused to the concerned person by the procedure followed. The issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice."
9. In the case of CIT v. Zeekoo Shoe Factory (1981) 127 ITR 837 (All), the Hon'ble High Court of Allahabad held that proceedings under Section 271(1)(c) and Explanation of the IT Act, 1961 [which is, analogous to Section 18(1)(c) of the WT Act] are not criminal in nature so as to necessitate framing of a precise charge and it is sufficient compliance of Section 274, if notice informs the assessee that the penalty proceedings are being initiated because of assessee's concealing of particulars of income or furnishing inaccurate particulars. Explaining further the Hon'ble High Court observed that in the cases covered by the Explanation, the Revenue did not have to prove anything other than that the returned income was less than 80 per cent of the assessed income.
9A. The other issue that has been raised by the learned counsel of the assessee is about the satisfaction of the AO regarding concealment before the initiation of penalty proceedings. It is observed that assessment in this case was completed on 20th March, 1989, assessing the value of certain immovable properties substantially higher than the value declared by the assessee in its return of wealth. Consequently, a notice for initiating penalty proceedings under Section 18(1)(c) was issued on 26th March, 1989. However, as the quantum appeal by the assessee against the said assessment was pending before the CWT(A), Ajmer, no further action was taken by the AO on the basis of. notice issued under Section 18(1)fc). Subsequently the quantum appeal was decided by the CWT(A), Ajmer upholding the order of the AO and hence a fresh memo was issued by the AO on 3rd June, 1993 providing an opportunity to the assessee to show cause why penalty under Section 18(1)(c) should not be levied. As the explanation offered by the assessee in response to this notice was not found satisfactory by the AO, penalty under Section 18(1)(c) with reference to Expln. 4 was imposed. From the perusal of Section 48(1)(c), it is revealed that Expln. (4) to the said section deems concealment by an assessee where the value of the assets as disclosed in the return is less than 70 per cent of the value of such assets as determined in an assessment order under Section 16 or Section 17 unless the assessee proves that the value of the asset as returned by him is the correct value. In the instant case, the. assessee has clearly failed to prove the value of assets returned by him as the correct value before the AO as well as before the CIT(A). It is worthwhile to note that the assessee did not prefer the second appeal against the order of GIT(A) and in a way. accepted the valuation adopted by the AO in the assessment. It is thus observed that the deemed concealment envisaged in Expln. 4 to Section 18(1)(c) was established in the assessment proceedings itself and to that extent the satisfaction of the AO was also reached there itself. It is, therefore, very clear that the satisfaction was reached by the AO before initiating the proceedings under Section 18(1)(c). It is also observed that the second notice (memo) was issued on 3rd June, 1993 and the reply received in response thereto from the assessee was also considered by the same AO who finally passed the order on 26th July, 1993 levying the penalty under Section 18(1)(c).
10. We are, therefore, of the view that there was a clear and valid satisfaction reached by the AO in the course of assessment proceedings regarding the default which culminated in the initiation and imposition of penalty under Section 18(1)(c). For this view, we also get support from the decision of Their Lordships of the Supreme Court in DM. Manasvi v. CIT (1972) 86 ITR 557 (SC) wherein it has been held that the satisfaction of the ITO in the course of assessment proceedings regarding the concealment of income constitutes the basis or foundation for initiating the proceedings for levy of penalty.
11. It is observed that the decision of the Madhya Pradesh High Court in CIT v. Ganesh Prasad Badri Prasad's case (supra), cited by the assessee in support of his contentions, deals with Expln. (1) to Section 271(1)(c) of the IT Act, 1961, which is materially different from Expln. 4 to Section 18(1)(c) involved in this case. Therefore, considering all the facts of the case, the material available on record and the legal position enumerated hereinabove, we do not find any legal infirmity or an infirmity of that kind which may render either the penalty notice or the subsequent proceedings to be void or nullity.
12. As far as factual aspects of this case are concerned, it is observed, that the AO arrived at the value of the assets on the basis of sale price, of a portion of the same land agreed upon by the assessee before the valuation date. The said values arrived at by the AO were found to be substantially higher than the values declared by the assessee in his return of wealth based on the valuation made by the Land and Building Taxes Department. It is observed that the order passed by the assessing authority under the Rajasthan Land and Building Taxes Act does not mention any date of. such valuation. It is also observed that the assessee could not establish either during the assessment proceedings or in the appellate proceedings that the value declared by him was the correct Value. In these circumstances, Expln. 4 to Section 18(1)(c) was clearly applicable as the assessee was deemed to have furnished inaccurate particulars about the value of assets. In order to be exonerated from the liability cast upon an assessee under Expln. 4 to Section 18(1)(c), it was necessary on its part to prove that the value returned by him is the correct value. In the instant case, the Department has arrived at the value on the basis of current sale rate agreed by the assessee which can be regarded as the most fair and reasonable market price of the property. The conduct of the assessee in ignoring the sale value of the property which was agreed by assessee itself and instead adopting the valuation which was substantially on the lower side, cannot be considered as bona fide in this case.
13. The Expln. 4 to Section 18(1)(c) is very specific in respect of default and the only way in which the assessee can be exonerated from its levy, is to prove that, the value of the asset as returned by him is the correct value. The decision of Delhi Bench of Tribunal in the case of Dy. CWT v. L.R. Talwar (1996) 55 TTJ (Del) 265 has elaborately dealt with the provisions of Expln. 4 to Section 18(1)(c) wherein it has been held that the said Explanation has to be read along with the provisions of Section 18(1)(c) and in case it is found that the returned value of an asset is less than 70 per cent of the assessed value of that asset, the assessee is deemed to have furnished inaccurate particulars of such assets within the meaning of Section 18(1)(c) and thereafter the assessee is required to prove that the value'of the'asset as returned by him is the correct value and in case he fails to prove this he shall be liable to penalty under Section 18(1)(c) irrespective of the fact that the returned value was on a bona fide basis because no word like "bona*fide"_.has been incorporated in Expln. 4 as they have been incorporated in proviso to Expln. 2 and they could indicate that the legislature did not intend to exonerate a person who falls,within the mischief of Expln. 4 even if his act was bona fide. In the present case, the conduct of the assessee can also not be said to be bona fide inasmuch, as he ignored the sale rate of the portion of the same property agreed by itself before the filing of the return and instead adopted the valuation which was substantially on the lower side.
14. The learned counsel for the assessee has cited the case of CWT v Akshay Kumar Sanghi (supra) and drawn our attention towards the two judgments--Noor Mohd. & Co.'s case (supra) and Addl CIT v. Gem Palace (1975) 98 ITR 640 (Raj) referred by the Hon'ble jurisdictional High Court on page No. 49. However, it is observed that the set of facts involved therein appears to be entirely different from the facts of the instant case, and hence cannot be applied here. In the other case Meghraj Tusnilal's case (supra) referred by the learned counsel of the assessee, the Hon'ble Gauhati High Court's findings are based on the fact that the authorities below as well as the Tribunal did not make any endeavour to find out if the valuation of assets by the assessee was erroneous, whereas in the present case, such efforts have been made right from the AO's level with purpose as discussed herein above.
15. The learned counsel for the assessee has also referred to the decision of Jaipur Bench in WTA No, 264/Jp/84 wherein the issues of assessee's bona fide intention and AO's satisfaction about the concealment are discussed. We feel that our findings on both the issues contained in this order are quite exhaustive and explicit which do not support the assessee's case.
16. The learned counsel for the assessee has also relied upon the decision pf the Tribunal Delhi Bench, WTO v. Smt Sudha Chopra (supra), wherein the Tribunal compared the provisions of Expln. I (i) effective in 1968 with Expln. 4 to Section 18(1)(c) substituted w.e.f. 1st April, 1976 and recorded its observations in para 14 of the order which are reproduced below ;
"The answer would be that though the provisions seem different, the purport is the same i.e. once there is difference in the returned and assessed wealth of over 25 or 30 per cent, then the onus to prove innocence shifts on the assessee and the Revenue is absolved of the responsibility of establishing any guilt."
This decision of Delhi Bench, therefore, also appears to be of no help in assessee's case.
17. As such taking all the facts and circumstances into account and after perusing the relevant material on record, we are of the considered opinion that the assessee clearly fails within the provisions of Expln. 4 to Section 18(1)(c) and penalty has been rightly levied in this case. We, therefore, find no fault in the order of the CWT(A) confirming the penalty under Section 18(1)(c) and, therefore, decline to interfere.
18. In the result, the appeal is dismissed.