Income Tax Appellate Tribunal - Jabalpur
Subhash Chand Dinesh Chand vs Deputy Commissioner Of Wealth-Tax on 13 December, 1994
Equivalent citations: [1995]52ITD212(JAB)
ORDER
B.S. Saluja, Member
1. The assessee has filed the present appeals against the separate orders of CWT (Appeals), Bareilly dated 31-5-1990 mainly on the ground of levy of penalties under Section 18(1)(a) of the WT Act, 1957.
2. The assessee-company filed the returns of wealth for both the assessment years on 29-8-1985. The valuation dates in this case were 31-7-1983 and 31-7-1984 respectively. The assessee had sought extension of time for furnishing the wealth-tax return in relation to assessment year 1984-85 up to 31-10-1984 vide applications dated 1-6-1984 and 29-9-1984. No further extension for filing the return was sought by the assessee. In reply to the show-cause notice the assessee filed written submissions on 13-2-1989 and stated that the levy of wealth-tax was reintroduced by Section 40 of the Finance Act, 1983 for the first time and the assessee-company came to know of it only through the auditors when they pointed out that the return had to be filed. Therefore, the delay in filing of the return was on account of the said factual position. The assessee also relied on the decision of the Hon'ble Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of UP [1979] 118 ITR 326, wherein the Hon'ble Supreme Court had observed that "there is no presumption that every person knows the law. It is often said that every one is presumed to know the law, but that is not the correct statement : there is no such maxim known to the law". The Assessing Officer observed that the facts were not identical as per arguments advanced by the assessee, as the assessee was fully aware regarding the introduction of Section 40 relating to charging of wealth-tax on closely-held companies which was introduced by the Finance Act, 1983. He further observed that these facts were confirmed with the documents and that the assessee-company had itself sought extension of time for furnishing wealth-tax returns. He, therefore, held the assessee to be in default in not filing the return of wealth under Section 14(1) of the WT Act, 1957 and accordingly levied a penalty of Rs, 4,266 for delay of 9 months in the assessment year 1984-85. On similar grounds, penalty of Rs. 456 was levied for a delay of one month in the assessment year 1985-86.
3. On appeal before the CWT(Appeals) the learned counsel for the assessee contended that the very fact that the assessee had been periodically applying for extension of time be considered as explaining the existence of a reasonable cause and the penalty be dropped. The CWT (Appeals) observed that extensions had been sought up to 31-10-1984 and the Assessing Officer did not impose any penalty up to the period of extension allowed and thereafter no application for extension of time had been made and the assessee continued to be in default up to 29-8-1985. He accordingly dismissed this plea of the learned counsel. Another plea taken by the learned counsel was that the assessee should not be penalised as there was no deliberate or dishonest intention of assessee to file the return late. The assessee had acted bona fide and had reasonable cause for filing the return late. In this connection the CWT (Appeals) analysed the statement of facts filed by the learned counsel and noted that the only reason attributed to the late filing of the return was ignorance of the assessee about the amended provisions relating to wealth-tax in the case of closely-held companies. He also noted that similar plea had been taken by the assessee before the Assessing Officer. After considering the applications filed for extension of time and the submissions made by the learned counsel, the CWT (Appeals) observed that "it is, therefore, proved to be hilt that the plea taken before the Assessing Officer as well as before me of ignorance of the amended provisions of law is thoroughly misleading. In view of what has been discussed above, it is held that the penalty has been imposed by the Assessing Officer on a very sound footing and it is fully established that the appellant had committed default under Section 18(1)(a) without any reasonable cause". Aggrieved, the assessee has filed the present appeals.
4. The learned counsel for the assessee, Shri K.S.V.S. Manian submitted that the Finance Act, 1983, had revived the levy of wealth-tax in the case of closely-held companies and Section 40 of the Finance Act, 1983 was a complete code in so far as levy of wealth-tax in the case of closely-held companies was concerned. He laid emphasis on the provisions of Sub-section (1) of Section 40 and Sub-section (5) of Section 40 for the proposition that the new provisions introduced by the Finance Act, 1983 only related to the levy of wealth-tax and that the penalty provisions of Section 18 are not attracted in this case. The contention of the learned counsel was that the words "the levy of wealth-tax", as used in Sub-section (5), will not cover the penalty provisions under which penalty has been imposed on the assessee, i.e., Section 18(1)(a) of the WT Act. He also referred to Clause (a) of Sub-section (5) which had specifically made certain provisions of the WT Act, 1957 inapplicable in the case of levy of wealth-tax on the closely-held companies. The Bench invited the attention of the learned counsel to the provisions of Sub-section (7) which specify that "this section shall be construed as one with the WT Act". However, the learned counsel reiterated that the expression "levy of wealth-tax" will not cover penalties. He relied on the decision of the Hon'ble Supreme Court in the case of Associated Cement Companies Ltd. v. Director of Inspection C & CE [1985] 153 ITR 322. He also invited our attention to page 4 of the letter dated 21-5-1988 written to CWT(Appeals), Bareilly, where he had mentioned that the words "this Act", as used in Section 18(1)(a) will not cover Section 40 of the Finance Act, 1983 and will only relate to the main WT Act, 1957.
4.1 In addition to the legal issue raised by the learned counsel, he referred to the fact that the provisions of new Section 40 of the Finance Act, 1983 were not known to the assessee as the assessment year 1984-85 was the first assessment year and the assessee had a reasonable cause in late filing of the returns. In this connection he again relied on the decision of the Hon'ble Supreme Court of India in the case of Motilal Padampat Sugar Mills Co. Ltd. (supra) and submitted that a liberal view may be taken.
4.2 He also mentioned that the assessee cannot be penalised for the lacuna in law and penalty cannot be charged unless the Act is suitably amended.
4.3 The learned counsel also stated that the penalty imposed for the assessment year 1985-86 is for a period of one month and the same should not have been levied.
5. The learned departmental representative Mrs. Saroj Deswal heavily relied on the orders of the lower authorities and submitted that the decision of the Hon'ble Supreme Court in Motilal Padampat Sugar Mills Co. Ltd.'s case (supra) is not applicable so as to cover the ignorance of law as pleaded by the assessee. In this connection she also referred to the applications filed by the assessee seeking extension of time for filing the returns. She, therefore, submitted that the penalty has been rightly levied by the lower authorities and the same should be sustained.
6. We have carefully considered the submissions made by both the parties in the light of the case law cited as also in the light of the provisions of Section 40 of the Finance Act, 1983 and the provisions of the W.T. Act, 1957. The relevant provisions of Section 40 are reproduced below for facility of reference :
40. Revival of levy of wealth-tax in the case of closely-held companies.- (1) Notwithstanding anything contained in Section 13 of the Finance Act, 1960 (13 of 1960), relating to exemption of companies from levy of wealth-tax under the Wealth-tax Act, 1957 (27 of 1957) (hereinafter referred to as the Wealth-tax Act), wealth-tax shall be charged under the Wealth-tax Act for every assessment year commencing on and from the 1st day of April, 1984, in respect of the net wealth on the corresponding valuation date of every company, not being a company in which the public are substantially interested, at the rate of two per cent of such net wealth :
** ** ** Explanation : For the purposes of this sub-section, 'company in which the public are substantially interested' shall have the meaning assigned to it in Clause (18) of Section 2 of the Income-tax Act.
** ** ** (5) For the purposes of the levy of wealth-tax under the Wealth-tax Act, in pursuance of the provisions of this section,-
(a) Section 5, Clause (a) of Sub-section (2) of Section 7 and Clause (d) of Section 45 of that Act and Part II of Schedule I to that Act shall not apply and shall have no effect;
(b) the remaining provisions of that Act shall be construed so as to be in conformity with the provisions of this section.
** ** ** (7) Subject to the provisions of Sub-section (5), this section shall be construed as one with the Wealth-tax Act.
[Emphasis supplied] 6.1 Taking up the legal ground raised by the learned counsel first, it is observed that the wealth-tax in respect of the net wealth of the companies was discontinued for the financial year commencing on or after the first day of April, 1960 by Section 13 of the Finance Act, 1960. The wealth-tax on companies was reintroduced by Section 40 of the Finance Act, 1983 in a modified form so as to levy wealth-tax only in the case of closely-held companies. We have carefully considered the arguments of the learned counsel for the proposition that the provisions of Section 40 form a code by themselves for the levy of wealth-tax on closely-held companies and that they will not attract penalty provisions of the main Wealth-tax Act, 1957. We have carefully examined the history of the provisions relating to levy of wealth-tax on companies and it is observed that Clause (a) of Sub-section (5) of Section 40 specifically makes certain provisions of W.T. Act, 1957 inapplicable for the purposes of levy of wealth-tax under the WT Act, e.g., (0 Section 5 relating to exemptions in respect of certain assets, (ii) Clause (d) of Section 45 relating to non-taxability of companies established with the object of carrying on industrial undertakings in India where the companies are not formed by splitting up, or the reconstruction, of business already in existence, etc., and (iii) the provisions of Part II of Schedule I in relating to rates of WT in the case of companies. These provisions have been made inapplicable with a specific purpose as Section 40 of the Finance Act, 1983 prescribed a flat rate of 2 per cent of wealth-tax to be levied on the net wealth of the closely-held companies and Sub-section (3) thereof listed the assets which were to be taken into account for determining the net wealth of closely-held companies. A closer scrutiny of the provisions of Clause (b) of Sub-section (5) will reveal that the remaining provisions of the WT Act will apply and will have to be construed so as to be in conformity with the provisions of Section 40. Moreover, the provisions of Sub-section (7) of Section 40 make it very clear that Section 40 has to be construed as one with the WT Act, 1957 as if Section 40 were incorporated in the main Act. Thus the intention of Parliament is very clear that in place of charging Section 3 of the WT Act, 1957, Section 40 has been enacted so as to make that section self-contained in so far as the rate of levy of wealth-tax and the assets which will form net wealth of a closely-held company are concerned. The provisions of Clause (b) of Sub-section (5) and Sub-section (7) of Section 40 make it clear that in other matters the provisions of WT Act, 1957 will apply. Any other interpretation will nullify the other provisions of WT Act, 1957, which could never have been the intention of the Parliament. If it were so it could have been so stated in Section 40 of the Finance Act, 1983 as has already been done with reference to certain provisions specified in Clause (a) of Sub-section (5) of that section. Further, any such interpretation will lead to absurd results as it could also be argued that if penalty provisions are not applicable then the provisions relating to recovery of wealth-tax and other provisions will not apply.
6.2 With reference to the decision of the Hon'ble Supreme Court in the case of Associated Cement Companies Ltd. (supra) relied upon by the learned counsel, we feel that the said decision is distinguishable as the same relates to levy of special Excise Duty under Section 80 of the Finance Act, 1965. Special Excise Duty which was hitherto levied by the Finance Act every year is not in the nature of basic Excise Duty which is levied by the Central Excises and Salt Act, 1944. It is in fact in addition to the Basic Excise Duty leviable under the Central Excises and Salt Act, 1944. In the present case, Section 40 of the Finance Act, 1983 had provided for a flat rate of wealth-tax of 2 per cent on the net wealth of a closely-held company which is actually in place of rate of wealth-tax, specified by the main W.T. Act, 1957.
6.3 Now taking up the arguments of the learned counsel on merit, it is observed that the learned counsel has relied on the decision of the Hon'ble Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. (supra) for the proposition that the assessee was not aware of the revival of wealth-tax on closely-held companies and that constituted a reasonable cause for late filing of the return. It is observed that for the assessment year 1984-85 the assessee had sought two extensions vide applications dated 1-6-1984 and 29-9-1984 to file the returns by 31-10-1984. Thus by its own conduct, the assessee had made it clear that it was aware of the revival of levy of wealth-tax on closely-held companies by the Finance Act, 1983. No further material has been placed by or on behalf of the assessee before us as to why the assessee could not seek further extension of time for filing the return. In the circumstances the case law relied upon by the assessee is of no help and we see no reason to interfere with the orders levying penalty of Rs. 4,266 in the assessment year 1984-85 for a delay of 9 months and penalty of Rs. 456 in the assessment year 1985-86 for a delay of one month.
7. In the result, the appeals are dismissed.