1987 (3) TMI 137 - AT - Wealth-tax

Summary

Issues Involved:
1. Confirmation of penalty under section 18(1)(c) of the Wealth-tax Act.
2. Whether the mother of the assessee was a genuine partner or a benamidar.
3. Reopening of wealth assessments under section 17 of the Wealth-tax Act.
4. Relationship between findings under the Income-tax Act and the Wealth-tax Act.
5. Applicability of the Supreme Court decision in McDowell & Co. Ltd. v. CIT.
6. Relevance of disclosure in Part IV of the wealth-tax return.
7. Comparison with the case of CIT v. Suleman Abdul Sattar.

Detailed Analysis:

1. Confirmation of Penalty under Section 18(1)(c) of the Wealth-tax Act:
The primary issue in these appeals was whether the Appellate Assistant Commissioner of Wealth-tax (AAC) erred in confirming the penalty under section 18(1)(c). The Wealth-tax Officer had levied penalties on the grounds that the assessee failed to furnish correct particulars of wealth and/or furnished inaccurate particulars, thus committing a default punishable under section 18(1)(c). The AAC upheld these penalties, finding that the assessee deliberately and consciously concealed the wealth.

2. Whether the Mother of the Assessee was a Genuine Partner or a Benamidar:
The assessee had converted his proprietary concern into a partnership firm by taking his mother as a partner with a 30% share. However, the partnership firm was refused registration on the grounds that it was not genuine, and the mother was considered a benamidar of the assessee. This finding was upheld by the Tribunal, leading to the inclusion of the whole income of the firm as the income of the assessee.

3. Reopening of Wealth Assessments under Section 17 of the Wealth-tax Act:
Following the determination that the mother was a benamidar, the original wealth assessments were reopened under section 17. The Wealth-tax Officer included the amounts standing to the credit of the mother in the books of the firm in the assessee's wealth. The assessee's appeal against this inclusion was partially successful, with the AAC of Wealth-tax excluding the amount of Rs. 16,111, which was a gift received by the mother in 1970.

4. Relationship between Findings under the Income-tax Act and the Wealth-tax Act:
The penalties for concealment of income under the Income-tax Act were deleted by the Tribunal, which found that the assessee had not withheld any information but merely claimed a benefit that was denied. The Tribunal held that the issue under consideration in the Wealth-tax Act was merely consequential. The Tribunal emphasized that the findings under the Income-tax Act regarding the device for avoiding tax were relevant for income-tax proceedings but not necessarily for wealth-tax proceedings.

5. Applicability of the Supreme Court Decision in McDowell & Co. Ltd. v. CIT:
The AAC of Wealth-tax applied the ratio of the Supreme Court decision in McDowell & Co. Ltd. v. CIT to uphold the penalties, arguing that the assessee was attempting to evade taxes by creating a bogus firm. However, the Tribunal noted that this ratio was more appropriately applicable to income-tax proceedings and not to wealth-tax proceedings.

6. Relevance of Disclosure in Part IV of the Wealth-tax Return:
The assessee argued that necessary disclosure was made in Part IV of the wealth-tax return, which should protect against penalties. The AAC of Wealth-tax rejected this contention, but the Tribunal found that the disclosure indicated a bona fide belief that the amounts were not includible in the wealth of the assessee, thus negating the intention to conceal wealth.

7. Comparison with the Case of CIT v. Suleman Abdul Sattar:
The AAC of Wealth-tax relied on the case of CIT v. Suleman Abdul Sattar to justify the penalties. However, the Tribunal found that this case, which involved an unscrupulous device to convert unaccounted money, was not applicable to the present facts. The Tribunal emphasized that the assessee's actions did not constitute fraud or gross neglect but were based on a bona fide belief.

Conclusion:
The Tribunal set aside the common order passed by the AAC of Wealth-tax and canceled the penalties, allowing all the appeals. The Tribunal concluded that the penalties under the Wealth-tax Act were not justified, as the assessee had not concealed particulars of wealth or evaded wealth-tax, and the findings under the Income-tax Act did not necessitate penalties under the Wealth-tax Act.