TMI Blog2005 (8) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance 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 and insofar as assessment years 1981-82, 1982-83 and 1983-84 are concerned, keeping in view the provisions of section 21AA of the Act, which has been inserted in Wealth Tax Act by Finance Act, 1981, with effect from 1-4-1981, has noticed in his order that : 4. Assessment years. 1981-82 to 1983-84 : A new section 21AA was inserted in the Wealth Tax Act by the Finance Act, 1981, with effect from 1--1981. Sub-section (1) of section 21AA provides that where assets chargeable to wealth-tax are held by an AOP (other than a company or co-operative society) and the individual shares of the members of the association in the income or assets or both are indeterminate or unknown, wealth-tax shall be levied and recovered from such association in the same manner and to the same extent as an individual, citizen and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessee is an entity not susceptible to be assessed for its relying on the decision of the Karnataka High Court in the case of CWT v. Bowning Institute Wealth (1992) 194 1TR 287 (Kar). 5. The Tribunal, pursuant to the directions issued by this court in C.P. Nos. 406 to 409/1993, dated 14-2-1994 has referred the following question of law arising out of the orders passed in WTA Nos. 498 to 500/1998 and WTA No. 553/1988, dated 29-11-1991 pertaining to assessment years 1980-81, 1981-82, 1982-83 and 1983-84 for our consideration and opinion. The question of law is as under Whether in the facts and circumstances, of the case. the Tribunal is right in law in confirming the order of the CWT(A) who held that the assessee cannot be treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax 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 (1980) 123 ITR 395 Guj), Bombay High Court in Orient Club v. CWT (1982) 136 ITR 697 (Bom) and Willingdon Sports Club v. C.B. Patil, Addl, WTO Anr. (1982) 137 ITR 83 (Bom). The Bangalore Bench of the Tribunal had also held similarly in the appellant's own case as well as in the case of other clubs, etc. Which effect from 1-4-1981, section 21AA was introduced, but there is some doubt as to whether the provisions of section 21AA would apply to a members club where the members have a right to enjoy and use the club assets, but little else. For example, there would be no right to alienation. This view is also supported by the Tribunal, Hyderabad Bench, in Rajendra Prasad Memorial Club v. Wealth Tax Officer (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessment years, but had contended that it was not liable to be assessed under the Wealth Tax Act, 1957. The Wealth Tax Officer had rejected the claim of the assessee. The assessee was successful before an the forums, including before the High Court, where the court has confirmed the orders passed by the Tribunal in holding that the assessee is not liable to wealth-tax under the Wealth Tax Act, 1957, for the assessment years in question. The Apex Court while affirming the view expressed by the Gujarat High Court has observed : All these provisions go to show that the Wealth Tax Act has been drafted on thd same lines as the Indian Income Tax Act, 1922. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 amendment section 21AA is inserted with effect from Ist April, 1981, which is applicable for and from the assessment year 1981-82. Now that the scope of section 21AA of the Act has been explained by the Apex Court in Ellis Bridge Gymkhana Club's case (supra), we need not dilate much on the scope and interpretation of the said section. It would be suffice to notice that assessment as an AOP can be made only when the individual shares of the members of the association in the income or assets or both of the association on the date of its formation or any time thereafter are indeterminate or unknown can be subjected to wealth-tax. In the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 : (1) The words 'without reasonable clause' wherever they occurred, were omitted. 16. The Direct Tax Laws (Amendment) Act, 1987, apart from making changes in the designations with effect from 1-4-1988, substituted this section by a new section with effect from 1-4-1989, but that substitution was deleted and instead, certain amendments were made by the Direct Tax Laws (Amendment) Act, 1989, with effect from 1-4-1989 and thereby clauses (a) and (i) of the original section were omitted. 17. A brief analysis of the section as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation 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 and reasons, there was failure on his/its part for non-filing of the returns within the time prescribed under the Act. A cause could be said a reasonable cause, if it is not actuated by bad faith, or false grounds. 21. In the present case, the assessee's explanation in the reply filed to the show-cause notice issued under section 18(1)(a) of the Act by the Wealth Tax Officer is that, a club. registered under the provision of the Karnataka Societies Registration Act is an AOP ..... X X X X Extracts X X X X X X X X Extracts X X X X
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