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TMI Blog1972 (12) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... reply dated July 7, 1970, the petitioner represented that the firms in which he was a partner took their own time to complete and finalise their accounts and hence he was not able to compute his share of wealth from these firms in time. He also stated that he was under the mistaken impression that wealth-tax is leviable only on assets situated within the taxable territory and the net value of the assets within the taxable territory was below the taxable limit. After hearing the petitioner, the Wealth-tax Officer held that it was the duty of the assessee under the Act to see that the accounts of the firms are closed in time to enable him to file his return of wealth within the due date. The Wealth-tax Officer was also not willing to accept the explanation of the petitioner that he was under a mistaken impression that wealth-tax is leviable only on the assets situated within the taxable territory. In that view be levied a penalty of Rs. 6,344 for 1,968-69 and Rs. 5,470 for 1969-70. It is against these orders that the petitioner has filed the above writ petitions on the ground that section 18(1)(a) of the Act is ultra vires, illegal and invalid. The learned counsel for the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educed in either case in the manner aforesaid ......." It is seen from the a bove provision that the penalty will be calculated on the basis of the assessed wealth as reduced by the amount of initial exemption. The penalty will be one-half per cent. of the aforesaid amount for every month during which there was a failure without reasonable cause to furnish the return subject to a maximum in the aggregate of an amount equal to the assessed net wealth. For the purpose of levy of tax, section 3, read with the Schedule to the Act as in force on April 1, 1969, classified assessees into those possessing net wealth up to Rs. 5 lakhs, those possessing net wealth exceeding Rs. 5 lakhs but not exceeding Rs. 10 lakhs, exceeding Rs. 10 lakhs but not exceeding Rs. 20 lakhs and net wealth exceeding Rs. 20 lakhs. A similar classification has also been made on the basis of net wealth possessed by a Hindu undivided family. There is a graded rate of tax on the net wealth according to the classification made in the Schedule. The learned counsel for the petitioner submitted that the same classification of assessees shoul have been adopted for the purpose of levy of penalty also and a graded rate sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first category is given thus : " A statute may itself indicate the persons or things to whom its provisions are intended to apply and the basis of the classification of such persons or things may appear on the face of the statute or may be gathered from the surrounding circumstances known to or brought to the notice of the court. In determining the validity or otherwise of such a statute the court has to examine whether such classification is or can be reasonably regarded as based upon some differentia which distinguishes such persons or things grouped together from those left out of the group and whether such differentia has a reasonable relation to the object sought to be achieved by the statute, no matter whether the provisions of the statute are intended to apply only to a particular person or thing or only to a certain class of persons or things. Where the court finds that the classification satisfies the tests, the court will uphold the validity of the law ........" It has also been noted in a number of decisions that, so far as tax laws are concerned, the legislature is given a larger play in the matter of classification. Thus, in V. Venugopala Ravi Varma Rajah v. Union o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , was substituted for the original section 18(1)(a) by Finance Act of 1969 which came into force on April 1, 1969. The Finance Act has increased the scale of penalty imposable on persons who failed without reasonable cause to furnish the return of net wealth within the time allowed and for noncompliance with the notice to produce evidence, etc. It is intended to provide an effective deterrent against faults without reasonable cause in the matter of furnishing the return of wealth or the production of accounts and documents called for by notice. Failure to furnish a return and failure to furnish a return within the time specified without reasonable cause amounts to concealment or temporary concealment of wealth. The object of the provision is thus intended to prevent concealment of wealth. So far as these persons are concerned they form a class by themselves. The, gravamen of the offence is failure to submit the return without reasonable cause. Whether a person is richer comparatively than the other has no relevance to this classification. Having regard to the object of this provision, in our judgment, the classification of all these defaulters, so to say, into one category is an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gopala Ravi Rajah v. (Union, of lndia the laws being the expression of legislative will intended to solve specific problems or to achieve definite objectives by a specific remedy, absolute equality or uniformity of treatment is impossible of achievement. If the classification is rationale the legislature is free to impose different rates in different ways and adopt different modes of assessment. It is also not correct to state that the burden is discriminatively cast by adopting the penalty at one-half per cent. uniformly on the net wealth assessed. Definitely, a person who is having larger net wealth pays higher penalty than the person with a smaller net Wealth. The penalty also is dependent on the period of the delay is it has to be calculated at half per cent. for every month during which the default continued. It is not a uniform imposition of penalty in the sense that every defaulter, irrespective of his net wealth and the duration of the delay, is made to pay a fixed sum of money. The penalty is linked with the quantum of net wealth and the period of the delay. We do not find anything irrational in this method of levying penalty. It is not for the court, as observed by the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Wealth-tax Act shall be furnished before the thirtieth day of June of the corresponding assessment year. But the Wealth-tax Officer, if he is satisfied that it is necessary so to do, can extend the date of submission of the return. Section 18 itself requires that, in order to attract the liability for penalty, the Wealth-tax Officer must be sastified person has failed to furnish the return "without reasonable cause" Thus only fraudulent concealment attracts liability for penalty. In dealing with the provisions of section 28 of the Indian Income-tax Act l922, which also provided for the levy of penalty for non-submission of income-tax return within the time specified "without reasonable cause", this in Sivagaminatha Moopanar & Sons v. Income-tax Officer held that a provision intended to prevent evasion and make it unremunerative to the evader is an incidental and ancillary power necessary to render effective the substantive power conferred to legislate on taxes on income, and observed : " The argument that the penalty which could lawfully be levied under section 28, viz., one and a half times the tax evaded, might, in certain cases, where the average rate of tax exceeds te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of tax and concealment of wealth, it is saved under article 19(5) as a reasonable restriction on the fundamental right of the petitioner under article 19(1)(f) of the Constitution, in the interest of the general public. Therefore, the contention of the petitioner that section 18(1)(a) offends article 19 (1)(f) is utenable. Equally untenable is the contention that Parliament lacks legislative competence to enact section 18(1)(a) of the Act. The contention is based on a wrong assumption that a power to levy penalty is not incidental or ancillary to the power to legislate on taxes on the capital value of assets under entry 86, List 1, of the Seventh Schedule to the Constitution. This court in Sivagaminatha Moopanar & Sons v. Income-tax Officer, dealing with the power of Parliament to levy penalty as provided in section 28 of the Indian Income-tax Act, 1922, for non-submission of the income-tax return without reasonable cause, has observed as follows : " The expression taxes on income is of the widest import and would obviously include laws in relation to the taxation of evaded income. Such a law may take the form of an appropriation not merely of the income evaded but even more ..... X X X X Extracts X X X X X X X X Extracts X X X X
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