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2005 (8) TMI 733

..... heard together and disposed of by this common order. 2. Facts in Income-tax Referred Case No. 120/1998 (Old TRC Nos. 120 123/1998) are as under -. The assessee is a club registered under the provisions of Karnataka Societies Registration Act, 1960. For the assessment years 1980-81, 1981-82, 1982-83 and 1983-84, the assessee-club had filed the return of wealth in the status of AOP declaring net wealth of Rs. 'nil'. Rejecting the claim made in the returns filed, the Wealth Tax Officer had assessed the wealth of the assessee in the status of individual and charged wealth-tax, under the provisions of the Wealth Tax Act, 1957 ('Act' hereinafter referred to as). 3. In the appeals filed against these assessment orders, it was the stand of the assessee-club that it is an AOP and not liable for payment of wealth-tax. Reliance was placed on the decision of the Tribunal for the earlier assessment years in the assessee's own case, wherein it was held that it was not liable to wealth-tax in view of the language employed in the charging provision, namely, section 3 of the Act. The first appellate authority has allowed the assessee's appeals for the assessment year 1980-81 .....

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..... ill be liable to tax in the like manner and to the same extent as an individual citizen of india resident in India at the rates specified in Part I of Schedule I or at the rate of 3 per cent, whichever course would be more beneficial to the revenue. For this purpose, the shares of the members of the AOP will be regarded as indeterminate or unknown if such shares are not ascertainable at time of the formation of association or at any time thereafter.' 6, The decision of the Tribunal for the assessment year 1979-80 is not applicable for the assessment year 1981- 82 onwards in view of the change in law. The Tribunal's decision as rendered. on, the interpretation of the word 'individual' occurring in section 3. There is, therefore, no doubt regarding the liability of the appellant for wealth-tax for the assessment years 1981-82 to 1983-84. 7. The appeal for assessment year 1980-81 is allowed and the 'appeals' for the assessment year 1981-82, 1982-83 and 1983-84 are accordingly dismissed." 4. On further appeals by the assessee-club against the aforesaid order passed by the first appellate authority, the Tribunal has allowed the appeals, on the ground that th .....

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..... returns, but it was its specific stand that it had sufficient cause for filing the wealth-tax returns belatedly, i.e., only after issuance of a notice by the Wealth Tax Officer, as it was under a bona fide belief that the returns under Wealth Tax Act need not be filed, as it is a club registered under the Karnataka Societies Registration Act, 1960, and the provisions of Wealth Tax Act would not apply to a club. The first appellate authority while allowing the appeals filed by the assessee, in its order has observed that the cause shown by the assessee is not only reasonable but also sufficient and, therefore, the Wealth Tax Officer was not justified in levying penalty, on the ground that the returns under Wealth Tax Act was filed belatedly. The findings and the conclusion reached by the first appellate authority is as under "4. The only question for determination here would be whether the appellant had sufficient or reasonable cause to believe that it was under any obligation to file the returns of wealth. Prior to 1-4-1981, there were several decisions at clubs, which were AOPs, could not be treated as a taxable units; Gujarat High Court in Orient Club v. Wealth Tax Officer ( .....

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..... is not an entity for assessment, it cannot be an entity for levy of penalty, though legally notice have been issued to call for the return and there was delay in filing the return ?" Re-issues in TRC No. 120/1998 (Old TRC Nos. 120-123/1998): 10. Several High Courts and the Tribunals have taken different view on the question whether a club registered under the provisions of Karnataka Societies Registration Act is exigible to tax under the provisions of the Wealth Tax Act, but in our view, for the present, the issue is now settled by the pronouncement of the Supreme Court in the case of CWT v. Ellis Bridge Gymkhana, Etc. Etc (1998) 229 ITR 1 (SC), wherein it is held that 'club is not assessable to wealth-tax in assessment years 1970-71 to 1977-78 as an AOPs, and while saying so, the court has observed that 'the position has been placed beyond doubt by the insertion of section 21AA in the Wealth Tax Act itself'. 11. The facts in the aforesaid decision was that, the assessee was a club and the assessment years involved were 1970-71 to 1977-78. Pursuant to a notice issued by the Wealth Tax Officer, the assessee-club had filed its return of wealth-tax for aforesaid asses .....

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..... ventuality that an assessment can be made on an AOP, otherwise not. Sub-section (2) of section 21AA deals with cases of such associations as mentioned in sub-section (1). That means only AOP in which individual shares of the members were unknown or indeterminate can be subjected to wealth-tax. Sub-section (3) also deals with AOP referred to in sub-section (1). Sub-sections (4) and (5) deal with some consequences which will follow the members of an AOP spoken of in sub-section (1) in the case of discontinuance or dissolution." 13. In reference proceedings, namely, TRC No. 120/1 998 (Old TRC Nos. 120123/1998), we are primarily concerned with assessment years, namely, 1981-82, 1982-83 and 1983-84. In fact, for the assessment year 1980-81, the first appellate authority has given the relief to the assessee by cancelling the assessment order passed by the Wealth Tax Officer under section 16(3) of the Wealth Tax Act, treating the status of the assessee as an 'individual'. However, he has confirmed the orders of assessment passed for the assessment years 1981-82 to 1983- 4, keeping in view the amendment effected to Wealth Tax Act by t ' he Finance Act, 1981, by which amend .....

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..... is not necessary for the purpose of this case, the said provision is extracted and it reads as under "Section 18. Penalty for concealment:-(1) If the Wealth Tax Officer, Appellate Assistant Commissioner, Commissioner of Wealth Tax or Tribunal in the course of any proceedings under this Act, is satisfied that any person (a) has without reasonable cause failed to furnish the return of his net wealth which is required to furnish under sub-section (1) or sub-section (2) of section 14 or section 17 or has without reasonable cause failed to furnish it within the time allowed and in the manner required or (b) xxxxxxxx (c) xxxxxxxx he or it may, by order in writing, direct that such person, shall pay by way of penalty (i) in the case referred to clause (a), in' addition to the amount of wealth-tax payable by him, a sum not exceeding one and a half times the amount of such tax, and (ii) xxxxxxxx (1) No order shall be made under sub-section (1) unless the person concerned has been given a reasonable opportunity of being heard." 15. The Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, apart from others, made the following amendments with effect from 10-9-1986 : .....

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..... should not, be, levied for filing wealth-tax returns belatedly. In the reply filed to the show-cause notice, the assessee had brought to the notice of the Wealth Tax Officer that it was under a bona fide impression that wealth-tax was not payable by a club, which is a society registered under the Karnataka Societies Registration Act, in view of the law declared by several High Courts and also the orders passed by the Tribunal in the assessee's own case for the earlier assessment years. This explanation is rejected by the Wealth Tax Officer while passing the order levying penalty. However, the assessee has succeeded in persuading both the first appellate authority and the Tribunal to accept its explanation for belated filing of the return under the Act. The question now before us is, whether the Tribunal is justified in setting aside the orders passed by the Wealth Tax Officer in levying penalty under section 18(1)(a) of the Act for belated filing of the wealth-tax returns for the assessment year 1981-82 and 1982-83 ? 20. The omission to file returns within the time stipulated in the Act would attract penalty, but the assessee could still prove that because of various factors an .....

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