Income Tax Appellate Tribunal - Delhi
Smt. Malika Parvez Samsayara vs Wealth-Tax Officer on 21 January, 1987
Equivalent citations: [1987]20ITD694(DELHI)
ORDER
S.K. Chander, Accountant Member
1. These cross appeals by the assessee and the revenue are heard together and are being disposed of by a consolidated order for the sake of convenience. The assessment years involved are 1970-71 to 1975-76 both inclusive. For these years, return of net wealth from the assessee was due on or before 30th day of June of the relevant assessment years. However, returns under Section 14(1) of the Wealth-tax Act. 1957 ('the Act') were not filed on due dates. The assessee was not assessed to income-tax. The assessee, who is an individual and a Muslim is a widow, and a pardanashin lady. She is illiterate. She had only one child--a daughter. She earned her livelihood from agricultural land being looked after by her servants.
2. The agricultural land admeasured 23 bighas 5 biswas which was acquired later. Besides this, she had 6 biswas of land which was not acquired. It appears compensation of Rs. 2,93,142.60 was paid as shown at page 32 of the paper book. Besides, this assessee received interest and solatium. There was an award on 21-3-1975 for all this. She received Rs. 2,11,954 on the date of award itself. There were also payments made subsequently. She received final payments in January 1977. On 7-1-1977, she filed returns of her net wealth for all the assessment years under appeal voluntarily. Till then no notice under Section 14(2) or under Section 17 of the Act had been issued to the assessee. The net wealth returned was Rs. 2,29,400, Rs. 2,29,600, Rs. 3,08,496, Rs. 2,98,800, Rs. 2,98,800 and Rs. 3,30,720, respectively for the assessment years 1970-71 to 1975-76.
3. The returns for the assessment years 1970-71 to 1974-75 were revised on 15-2-1977 as recorded in the impugned assessments made for these years on 24-2-1977. The revision of the returns upwards was explained to the WTO as per letter at page 4 of the paper book.
4. After the revision of the above returns, the WTO issued notice under Section 17 for the assessment years 1973-74 and 1974-75 on 17-10-1978. In response to this notice, the assessee filed the returns for these two years on 10-9-1979 simultaneously. The net wealth returned was Rs. 3,47,200 and Rs. 3,47,350 respectively. Assessments under Section 17 were completed on 12-9-1979. Assessment orders made under Section 17 read with Section 16(3) of the Act for these two years appear at pages 21 to 24 of the assessee's paper book. The assessment orders, in fact, as recorded by the WTO himself show that the assessee herself brought to the notice of the WTO that the value of plot at Udaipur Khas had been shown at Rs. 84,000 earlier but should be taken at Rs. 98,000 as awarded by the Housing Board on 21-3-1975. Since the returns filed by the assessee earlier and the letter written to the WTO had indicated this earlier than the reassessment proceedings, assessment orders, therefore, do not include any directions about initiation of penalties for concealment.
5. The net wealth assessed in the regular assessments for the assessment years 1970-71 to 1974-75 was Rs. 2,43,370, Rs. 2,55,370, Rs. 3,38,800, Rs. 3,30,340 and Rs. 3,37,340, respectively. The assessee's net wealth for the assessment year 1975-76 was Rs. 4,40,700. This assessment was completed on 11-3-1980 under Section 16(3). The WTO directed that notice under Section 18(1)(a) of the Act be issued for delay in furnishing the returns. These notices were issued. The WTO issued notices on 14-2-1979 fixing the hearing on 27-9-1979 to show cause why penalty need not be levied for delay in furnishing the returns. Insofar as the assessment years 1970-71 to 1974-75 are concerned, the assessee tendered explanation dated 28-2-1979. It was submitted before the WTO that the assessee was an old widow, illiterate and pardanashin lady having no son, that she owned agricultural lands, which were compulsorily acquired and compensation paid as per award dated 21-3-1975, that the returns for the years under appeal were filed voluntarily on 17-1-1977, that the assessee had also moved an application before the Commissioner of Income-tax, Lucknow for waiver of penalties, that the assessee had not made any delay and there was no intention to withhold the revenue and that in view of her failure to file the returns on a bona fide basis, the proceedings may be dropped. The WTO, however, has rejected this explanation with the mere observation that ignorance of law is no excuse in the eye of law, and the assessee was having wealth exceeding taxable limit. As such, it was obligatory on her part to file the returns within the prescribed time. He, therefore, proceeded to impose the impugned penalties. These penalty orders were made on 28-2-1979 under Section 18(1)(a) read with Section 18(2). The penalty imposed was Rs. 55,653, Rs. 50,754, Rs. 63,421, Rs. 47,670 and Rs. 25,100, respectively for the assessment years 1970-71 to 1974-75 on the basis of regular assessments. Similarly, for the assessment year 1975-76 penalty of Rs. 29,440 was imposed by order dated 26-2-1982.
6. As mentioned supra, the WTO had made reassessments for assessment years 1973-74 and 1974-75 under Section 17 read with Section 16(3). In submissions of the returns in response to notice under Section 17 there was delay. For such delay penalty of Rs. 836 and of Rs. 878 was imposed by the WTO under Section 18(1)(a) by order dated 26-2-1982. The appeals bearing Nos. 1487 of 1986 and 1489 of 1986 relate to these penalties. All these penalties were challenged in appeal.
7. The learned AAC, Bareilly has made order on each appeal separately. For the assessment years 1970-71, 1971-72 and 1972-73 his orders all dated 21-3-1986 are identically worded. He has held that the appellant was an agriculturist till the agricultural land was compulsorily acquired by the said Housing Board and compensation was paid to her on 21-3-1975. Taking into consideration that the appellant was an old widow illiterate and pardanashin Muslim lady, having no son, he held that it is quite understandable that till the time she was having agricultural income, she carried a bona fide belief that she was not liable to wealth-tax. According to the learned AAC, she should have become aware of her responsibility of filing the wealth-tax returns from 21-3-1975. He, therefore, held that up to 31-3-1975, she had reasonable cause for delay in furnishing the returns. However, with effect from 1-4-1975 to 7-1-1977, according to him, this was not a period covered by reasonable cause. He, therefore, directed the WTO to recalculate the penalty by taking period of default from 1-4-1975 to the date of filing the return for each year. In the assessment years 1973-74, 1974-75 and 1975-76, he followed his order for the assessment year 1972-73 and issued identical directions to the WTO for recomputation of the penalty.
8. Insofar as penalty levied under Section 18(1)(a) for delay in furnishing the return in response to notice under Section 17 is concerned, the penalties were confirmed. In the appeals of the assessee, the grievance is retention of the part of the penalties for the assessment years 1970-71 and 1975-76 indicated supra and for confirming the penalties, for delay in furnishing the returns in response to notice under Section 17. On the other hand, the revenue is aggrieved in the directions issued by the learned AAC that delay in furnishing the return in each year should be considered only with effect from 1-4-1975 to the date of filing of the wealth-tax returns for each assessment year.
9. We have heard the parties at length and given careful consideration to the rival submissions. Before we proceed further, we would like to record that before us, it has been stated at the bar by the learned counsel for the assessee, who has also placed on our record in writing that applications filed by the assessee under Section 18(2A)/18B of the Act are yet to be disposed of. Therefore, the matter insofar as those applications are concerned, stands at that. We find that the WTO when he rejected the assessee's explanation proceeded on the assumption that ignorance of law is no excuse in the eye of law itself. This assumption of the WTO was not in accordance with law because the Hon'ble Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh [1979] 118 ITR 326 has held (Per Curiam) 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 a correct statement ; there is no such maxim known to the law. In view of this, the WTO proceeded on wrong premises to evaluate the evidence tendered before him by the assessee. The WTO further observed that the assessee was having wealth exceeding taxable limit and it was obligatory on her part, to file her returns in the prescribed manner under the provisions of the Act. This is merely begging the question because the issue was as to why the assessee delayed the return despite the provisions of law being there for her to file the return of her net wealth. The WTO did not proceed to dispose of the various points made out by the assessee that caused the delay. Therefore, his order was not a speaking order against the point made by the assessee giving reasons for delay in furnishing the returns.
10. The Hon'ble Delhi High Court in the the case of Shakuntla Mehra v. CWT [1976] 102 ITR 301 has held that mere failure to file returns within the time allowed did not make the assessee liable to penalty ; there had to be contumacious or deliberate default ; and the onus was on the department to establish that the assessee had no reasonable cause for not filing it within time. The Hon'ble Court has further held in the case of Sona Electric Co. v. CIT [1985] 152 ITR 507 that the explanation of the assessee can be rejected by the ITO only on cogent grounds and when such grounds are themselves based on no evidence, the question of raising a presumption against the assessee does not arise. We are aware that the observations made by the Hon'ble Court in the case of Sona Electric Co. (supra) are in an income-tax case but we are of the opinion that the observations apply to the facts of the case before us because when the assessee tendered explanation for delay in furnishing the return, the WTO raised a wrong presumption and merely rejected the assessee's explanation without giving cogent reasons why the application was not acceptable. When the matter travelled before the AAC he held that up to the date the assessee's lands were acquired on 21-3-1975 she had reasonable cause for delay in furnishing the returns because she had bona fide plea that she being an agriculturist was not liable to wealth-tax. However, it appears that the learned AAC believed that the entire compensation had been received on 21-3-1975. This is not, however, factually correct. We have indicated above how the assessee received the compensation starting from 21-3-1975 ending in January 1977. The conduct of the assessee is absolutely in accordance with her stand that she became aware of her responsibilities in January 1977 and when she, in fact, became aware of her responsibilities in January 1977 she hastened to file returns simultaneously for all the assessment years under appeal on 7-1-1977. There is no contravention of the fact that till then she was neither assessed to income-tax nor to wealth-tax. No notice, whatsoever, had till then been issued to her which could give her an idea that she was liable to wealth-tax. This conduct of the assessee shows that when she became aware she made conscious efforts to comply with the provisions of law.
11. We also find that her net wealth was mainly constituted of the agricultural land and its value. Therefore, the belief of the assessee that she never thought of filing the return of wealth-tax as she thought she was not liable being an agriculturist is absolutely acceptable as bona fide. The factum of the assessee being a widow, being a pardanashin lady, having no son and not being assessed to income-tax or wealth-tax and deriving her livelihood from agricultural operations carried on by her servants on her behalf clearly lends credence to the claim of the bona fide belief and the explanation for delay in furnishing the return.
12. The revenue relied upon the judgment of the Punjab and Haryana High Court in the case of CIT v. Patram Dass Raja Ram Beri [1981] 132 ITR 671 (FB) to contend that the doctrine of mens rea which in essence pertains to the realm of criminal law would normally not be attracted to the imposition of penalty under the taxing statute which are coersive civil sanctions and remedies for the speedy collection of revenue. However, to our mind this in no way helps the revenue on the facts of this case. We have also pointed out supra, however, that mere failure to file returns within the time allowed did not make the assessee liable to penalty as held by the Delhi High Court in the case of Shakuntla Mehra (supra). The issue of mens rea has not come up in this case. Nevertheless, in the case of Shakuntla Mehra (supra), the Hon'ble Delhi High Court held that there had to be contumacious or deliberate default. Be as it may, insofar as the assessee is concerned, she had tendered a simple explanation that she was not at all aware about her responsibilities as she believed that she being agriculturist was not liable to wealth-tax. There is no contravention of this stand of the assessee by any evidence. Insofar as other case relied upon by the revenue is concerned, it is from Gujarat High Court in the case of CIT v. Ami Dyestuff Corpn. [ 1982] 134 ITR 689 in which the High Court held that in the case of a habitual defaulter assessee-firm the plea that it had applied for extension of time but had no proof of the same, the revenue had discharged the initial burden of proving that the assessee had failed to file returns within time without reasonable cause. The ratio of this case is not at all applicable to the facts of case before us.
13. Thus, it is clear from what is stated above that the assessee had reasonable cause for delay in furnishing the returns on the basis of which regular assessments were raised. When delay is due to reasonable cause no penalties are leviable. The learned AAC, therefore, erred in sustaining the penalties for the period from 1-4-1975 onwards. His conclusions were based upon facts not fully found. The last payment of receipt of compensation was in January 1977 and, therefore, it could not be a plea that the assessee had taxable net wealth on the date of acquisition and on the background of the case was also aware of the filing of wealth-tax returns. These penalties are, therefore, cancelled.
14. Insofar as the delay in furnishing the returns for the assessment years 1973-74 and 1974-75 in reassessment proceedings under Section 17 are concerned, we find that it was the assessee, who brought to the notice of the WTO that something needed assessment and had inadvertently been left out. If notice was issued after that we do not see what purpose the assessee would have achieved by filing to file the returns. Returns were delayed in the process and the assessments were completed without holding the assessee as having concealed anything. On such facts, the penalties under Section 17 for delay in furnishing the returns were not exigible. These are cancelled.
15. In the result, appeals of the assessee are allowed and that of the revenue dismissed.