TMI Blog2010 (10) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal is allowed - WTA Nos. 01 and 02/Del/2010 - - - Dated:- 22-10-2010 - C.L. Sethi, B.C. Meena, JJ. Sanjay Shivam, Sr. DR, for the Appellant J.J. Mehrotra, CA, for the Respondent ORDER C.L. Sethi: These two appeals by the revenue are directed against the common order, dated 27.11.2009 passed by the Commissioner of Wealth-tax (Appeals) deleting the penalty of Rs.1,00,000/- and Rs.6,00,000/- levied by the Assessing Officer under sec. 18(1)(c) of the Wealth-tax Act, 1957 (the Act) pertaining to the Assessment Years 1991-92 and 1992-93 respectively. 2. The revenue has taken identical ground in both the years contending that the CWT(A) has erred in law and on facts in deleting the penalty levied by the AO under sec. 18(1)(c) of the Act. The assessee is a closely held company. For the years under consideration, no voluntarily return of Wealth-tax was filed by the assessee company. A notice under sec. 17 of the Act was issued on 31.08.1994 for both the assessment years, but no return was filed by the assessee in response thereto. Since no return was filed within time allowed in notice issued under sec. 17 of the Act, the AO issued a letter dated 19.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawal of levy of Wealth Tax on companies w.e.f. 01.04.60, the same was revived only w.e.f. 01.04.93. The assessee was under bona fide belief that it was not liable to Wealth Tax for the previous year. However, on obtaining legal advice in the matter it transpired that u/s 40 of the Finance Act, 1983, the levy of the tax had been revived in a limited way. It was only because of this that there was a delay in filing of the return and there was no concealment of wealth. 3. The assessee's explanation was considered by the Assessing Officer and he then passed the penalty order by observing and holding as under:- "5. Levy of wealth tax on companies was withdrawn by the Finance Act, 1960, w.e.f. 01.04.1960. It was, however, revived in a limited way by section 40 of the Finance Act, 1983, w.e.f. 01.04.1983. It was brought back in a full fledged manner by the Finance Act, 1992, w.e.f. 01.04.1993. Thus, it was in operation since much before the assessee came into existence. The assessee has pleaded ignorance as a reasonable cause. But it is a well settled canon of law that ignorance of law can not be a defence against the consequences of its violation. Admittedly, the assessee had t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year, notwithstanding that such person furnishes a return of his net wealth at any time after the expiry of either of the periods aforesaid applicable to him in pursuance of a notice under section 17." 7. The return of Wealth was not furnished by the due date. It was also not furnished by the last date for furnishing a late return. A notice u/s 17(1) of the Act was issued to the assessee on 31.08.94 requiring it to furnish the return within 35 days of receipt of the notice. There was just no response from the assessee. On 19.09.95, a show cause was issued for making an ex parte assessment on the basis of the information available on the record and time for compliance was fixed on 25.09.95 at 11.30 A.M. Again, there was no compliance. The return was furnished only on 10.10.95. A notice u/s 16(2) of the Act was issued to the assessee on 31.07.96, requiring compliance on 09.08.96. But again, there was no compliance. A reminder was issued on 19.02.97, requiring compliance on 27.02.97. On 31.02.97, a notice u/s 16(4) of the Act was issued to the assessee calling for information about assets of the assessee, by 03.03.97. It was only on 03.03.97 that a representative of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the meaning of section 40 of the Finance Act, 1983 as they were not taxable to wealth on which wealth-tax was leviable within the meaning of section 40 of the Finance Act, 1983 and, therefore, the returns of wealth were not filed. I also find that both the assessment of wealth was completed in the case of the appellant for both the years on much higher figure than the returned wealth but after giving appeal effect the net wealth of the appellant for the Assessment Year 1991-92 remained at the returned wealth and that for Assessment Year 1992-93 the assessed figure was lower than the returned wealth because in the returned wealth value of plant and machinery was also included by the appellant, which was not assessed on which wealth-tax was leviable and, therefore, the claim of the appellant subsequently was accepted by the appellate court and relief was allowed to the appellant on this count. Thus, it will be seen that there is no concealment vis- vis wealth assessed and wealth returned and only the concealment is confined to non-filing of the return of wealth for the first time as mentioned in explanation 3 of section 18(1) of the Wealth Tax Act. The said explanation, speaks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the light of the above facts and circumstances of the case and legal position in the matter, I cancel the penalty levied by the Assessing Officer under section 18(1)(c) of the Wealth Tax Act, 1957 of Rs.1,00,000/- for the Assessment Year 1991-92 and Rs.6,00,000/- for the Assessment Year 1992-93." Hence, the department is in appeal before us. 6. The learned DR submitted that the learned CWT(A) has deleted the penalty merely by accepting the general explanation of the assessee on the face of it without proving and establishing as to how and in what manner the provision of sec. 40 of the Finance Act, 1983 was not within the knowledge of the assessee and as to why the assessee failed to file the return voluntarily before issue of notice under sec. 17 of the Act by the AO. He further pointed out that the assessee has even failed to file the return promptly within the time specified in the notice issued under sec. 17 of the Act, and it is only after the reminder given by the AO that the assessee did file the return showing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year commencing on or after the 1st day of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of subsec. (4) of sec. 16 or sub-sec.(1) of sec. 17 and the Assessing Officer or the authorities mentioned therein, is satisfied that in respect of such assessment year such person has assessable net wealth, then, such person shall, for the purposes of sec. 18(1)(c), be deemed to have concealed the particulars of his assets or furnished inaccurate particulars of any assets or debts in respect of such assessment year, notwithstanding that such person furnishes a return of his net wealth at any time after the expiry of either of the periods aforesaid applicable to him in pursuance of a notice under sec. 17 of the Act. In the present case it is not in dispute that the assessee had assessable net wealth chargeable to tax in both the assessment years as would be clear from the returned wealth disclosed by the assessee in a return filed after notice under sec. 17 was issued. It is not in dispute that the assessee has failed to furnish the return of its net wealth which he was required to furnish under sec. 14 within the period specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax of companies was thus, on the basis of sec. 40 of the Finance Act, 1983 and no change was made in the definition for charge of wealth-tax in sec. 3 of the Wealth-tax Act, 1957. It was further submitted by the assessee that it is only with effect from 1.04.1993 that the word company' was added in sec. 3(1) for bringing charge of levy of the wealth-tax on the companies under the Wealth-tax Act, 1957 itself. It was further contended that the first year of the assessment of the assessee company was 1989-90, and till the year 1990- 91 there were no assets, which were taxable within the meaning of sec. 40 of the Finance Act, 1983. The assessee also contended that the assessee company was in its initial stage of operation and expansion and was not having expertise knowledge of legal provisions and as such, was under bona fide belief that no wealth-tax was leviable as per Wealth-tax Act, 1957 on the companies. It was further contended that the assessee did not enquire into and did not make any efforts to file its return of wealth. From these submissions it is clear to us that the assessee was aware that the wealth-tax Act was in existence. The assessee is also aware that the wealth-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yable on the companies, not being a company in which the public are substantially interested. In this section under sub-sec. (3), the nature of the assets for the purpose of levy of wealth-tax is also specified. It is not in dispute that the assessee is a company in which public are not substantially interested and there exists no confusion or doubt in that regard. Therefore, the assessee's contention that the assessee has misunderstood the provision of sec. 40 of the Finance Act, 1983, cannot be accepted. Thereafter, the levy of wealth-tax which was revived in a limited way being chargeable on a company in which public is not substantially interested by sec. 40 of the Finance Act has been included in the Wealth-tax Act itself by making amendment to sec. 3(1) of the Act by the Finance Act, 1992 with effect from 1.04.1993 whereby sec. 40(3) of the Finance Act was omitted. Section 3(1) of the Wealth-tax Act creates liabilities to pay wealth-tax on all companies on and from A.Y. 1993-94 as so amended by the Finance Act, 1992. Reading sec. 40 of the Finance Act, 1983, along with the Finance act, 1992, this makes it clear that the levy of wealth-tax on closely-held companies was revived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xable wealth from Assessment Year 1993-94 has been regularly filed after amendment made by the Finance Act, 1992 in the Wealth-tax Act itself by including the company for bringing charge of levy of wealth-tax on the companies. In other words, the assessee was well aware that the company has now been included in the Wealth-tax Act, 1957 itself by the Finance act, 1992 and the earlier provision of sec. 40 of the Finance act, 1983 has been omitted. Even if the assessee was not well aware about the provision of sec. 40 of the Finance Act, 1983, till the amendment made by the Finance Act, 1992, it is clear that the assessee was well aware about the abolition of sec. 40 of the Finance Act, 1983 by the Finance Act, 1992 and inclusion of the company in the Act itself for bringing charge of levy of wealth-tax on the companies in the Act itself. Therefore, in the year 1992 when the amendment was brought in the Finance Act, 1992, the assessee could have submitted voluntarily the return of wealth for the Assessment Years 1991-92 and 1992-93 by which the time, the period prescribed under sec. 14 read with sec. 17A to file return was still available with the assessee, but the assessee has failed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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