Income Tax Appellate Tribunal - Chandigarh
Inspecting Assistant Commissioner vs Smt. Raj Kumari Mahajan on 23 October, 1991
Equivalent citations: [1992]40ITD337(CHD)
ORDER
S.P. Kapur, Judicial Member
1. The revenue is in appeal in relation to assessment years 1972-73And 1973-74 and the subject matter is levy of penalty for concealment of assessee's net wealth, under Section 18(1)(c) of the Wealth-tax, Act, 1957. The amounts of penalty are Rs. 3,20,104 and Rs. 2,84,553.
2. On appeal by the assessee the ld. first appellate authority deleted the penalties, hence the revenue is aggrieved and we have heard the parties at length. We have given our very careful consideration to the facts of the case, the reasoning of the ld. lower authorities, contents of assessee's paper-book (13 pages) and that of the revenue (10 pages). At our behest, the assessee has also filed some factual details which relate to filing of the original wealth-tax return, wealth disclosed, wealth assessed, date of original assessment, date of the search on the assessee's premises by FERA people, date of issuance of notices under Section 17 of the Wealth-tax Act, 1957, date of filing of the returns in response to the above notices, wealth disclosed in the returns filed in compliance to notices under Section 17 of the Act, total wealth assessed on re-assessment, dates of completion of reassessments, date of penalty orders and the penalties imposed.
3. One Bhushan Kumar Mahajan died on 14-1-1971. The deceased is said to have married on 25-9-1963And a daughter was born on 22-8-1966. In relation to life insurance policies, one Raj Kumari Mahajan (Mother) was the nominee and on the unfortunate death of the said Bhushan Kumar Mahajan, who died in a car accident in January 1971, a claim in relation to life insurance policy was received in the sum of $ 1 lakh from the insurer M/s. America House Insurance Co. Compensation in the sum of$ 3977.55 was also received from the employer of the said deceased Bhushan Kumar Mahajan, M/s. British Colombia Broadcasting System, New York, U.S.A. Assessments have been framed on the mother (now deceased). Penalties were also imposed upon the mother. The main thrust of the reasoning of the Assessing Officer, who framed the assessments as also the Id. Inspecting Assistant Commissioner of Wealth-tax, who imposed the penalties, being that the mother was the nominee.
4. 'Law is an ass', it was so observed by Lord Denning but he was placed eminently as an author, Jurist, Law Lord and a constitutional authority. He could have, we cannot-being a domestic Tribunal. It was a case of unfortunate death in U.S.A. The nominee, an old lady, was subjected not only to assessment in terms of payment of tax dues but also for concealment though she has had no exclusive domain on the amounts in the face of the fact that the deceased had a living wife and a daughter and succession was governed by the Hindu Succession Act. Smt. Sarbati Devi v. Smt. Usha Devi AIR 1984 SC 346 is an authority for this proposition. The Hon'ble Supreme Court of India in that case has held as under:--
A mere nomination made under Section 39 does not have the effect of conferring on the nominee any beneficial interest in the amount payable under the life insurance policy on the death of the assured. The nomination only indicates the hand which is authorised to receive the amount, on the payment of which the insurer gets a valid discharge of its liability under the policy. The amount, however, can be claimed by the heirs of the assured in accordance with the law of succession governing them.
Under the Hindu Succession Act, which governed the succession in the case of the deceased, who, admittedly, was a Hindu, heirs in Clause-I were the beneficiaries and these find mention in the enabling Section 8 of the Hindu Succession Act. Poor old lady, the unfortunate mother of the unfortunate deceased, was not the sole beneficiary. The assessments have become final but the law declared by the Hon'ble Supreme Court of India under Article 141 of the Constitution of India is binding on all the juridical authorities/courts in India and naturally so on us also. The illegality that emanates from the assessments cannot be allowed to travel to concealment proceedings.
5. Giving due consideration to the facts and circumstances of the case, the reasoning of the learned lower authorities, we do hold that the facts of the case for both the assessment years under appeal did not attract levy of penalty under Section 18(1)(c) of the Act.
We do further hold that the impugned order of learned first appellate authority for both the years suffers from no infirmity. We do adopt his reasoning also as our own in holding that on facts there was justification with the assessee for having not filed the returns/not having disclosed the said asset as her net wealth, since it did not belong to her exclusively. We do yet further hold that on the facts and in the circumstances of the case, the old lady could not have concealed the facts since the facts were not known to her. Concealment presupposes knowledge but here the facts point out to the irresistible conclusion that the old mother, the unfortunate lady, did not have any knowledge of any assets much less the compensation and insurance amount to be received by her on the unfortunate death of the son. In fact, under these circumstances, no prudent man can claim that where the death is such an unfortunate one, which is the case here, and out of India in U.S.A., while the assessee was living in India, there could be any knowledge of facts.
6. Even otherwise, in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. [1979] 118 ITR 326 at pg. 339, their Lordships of the Hon'ble Supreme Court have observed, "There is no presumption in this country that every person knows the law; it would be contrary to common sense and reason if it were so." Their Lordships further observed, "It is impossible to know all the statutory law, and not very possible to know all the common law." Yet further, it is mentioned in the said judgment,... the fact is that there is not and never has been a presumption that everyone knows the law. There is the rule that ignorance of law does not excuse, a maxim of very different scope and application.
7. Read in the context of above observations of the Hon'ble Supreme Court, we have to say that it is not possible to presume, in the absence of any material on record, that the assessee (now deceased) had full knowledge of her rights vis-a-vis nomination in the life insurance policy. Once it is so, then there cannot be any concealment. We hold accordingly. That apart, 'conceal' means and implies something more than mere failure to disclose a thing or a fact. It refers to some advantage to the concealing party or disadvantage to some interested party and secrecy is an essential ingredient of the act of concealment. To constitute concealment, it must appear that the statement or act of the person was calculated and designed to prevent discovery of the act, i.e., that the act was misleading, false and deceptive. There is no material to warrant that inference.
8. Coming to the penalty proceedings, the Hon'ble Supreme Court in the case of CIT v. Khoday Eswarsa & Sons [1972] 83 ITR 369 at page 370, has held that penalty proceedings are penal in character and quasi-judicial in nature. It is the department that has to prove the concealment on the part of the assessee. There is no material on record to hold in favour of the revenue that it has discharged its burden of proof which was cast exclusively on the revenue in terms of the above decision of the Hon'ble Supreme Court.
9. In view of above discussion, the impugned order stands upheld and the revenue fails for both the years.