TMI Blog1978 (4) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... completed on October 31, 1970, the assessments for all the aforesaid assessment years under s. 16(5) of the Act. He made the assessments as follows : Assessment year Net wealth assessed Tax Payable Rs. Rs. 1963-64 4,39,280 2,393 1964-65 4 04,000 1,520 1965-66 4,04,000 1,520 1966-67 4,04,000 1,520 1967-68 4,08,900 1,544 1968-69 4,08,320 1,542 The W.T.O. also initiated penalty proceedings under s. 18(1)(a) of the Act and the assessee was asked to show cause as to why penalty should not be levied. The assessee showed cause but it was not accepted in its entirety by the W.T.O., who, as a result, imposed various penalties for different periods of defaults. The periods of default were found by him to be 88, 76, 64, 52, 40 and 28 months for the assessment years from 1963-64 to 1968-69, respectively. The W.T.O. levied penalty for the years 1963-64 to 750 1968-69, under s. 18 (1)(a)(i) of the Act as amended by the W.T. (Amend.) Act, 1964 (hereinafter called the " 1964 Amendment"), which was effective from April 1, 1965. Thereafter, penalty was levied under s. 18(1)(a)(i) of the Act as amended by s. 24 of the Finance Act of 1969 (hereinafter called the " 1969 Amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spite of service of notice under s. 14(2) of the Act. The assessment was made on October 31, 1970. The W.T.O. found the period of default to be 28 months (from July 1, 1968, to October 31, 1970). The Tribunal, however, found the cause for not filing the return up to April 3, 1970, to be reasonable and found the period of default to be six completed months. The W.T.O. had levied penalty at the rate of 2 per cent. per month for 9 months from July 1, 1968, to March 31, 1969, and levied penalty at the rate of 1 per cent. of the net wealth assessed for 19 months from April 1, 1969, to October 31, 1970. On appeal, the Tribunal, however, upheld the penalty at the rate of 1/2 per cent. per month for six completed months from April 3, 1970, to October 31, 1970. Wealth-tax Reference No. 4/75. This reference relates to two assessment years, namely, 1966-67 and 1967-68. In this case, the assessee filed the returns for both the periods on May 18, 1970. The assessment was made by the W.T.O. on September 26, 1970. For the first period, the W.T.O. found the default for 46 completed months (from July 1, 1966, to May 18, 1970) and for the second period for 34 completed months (from July 1, 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no retrospective effect. He contends that these cases are not concerned with the assessee committing any "offence" in failing to file the return on June 30 as required under s. 14(1) of the Act, and, as such, he submits, the question of commission of a " continuing offence " does not arise. His submission is that the assessee by not furnishing the return on 30th of June, as required under s. 14(1) of the Act, has committed a " default " and the default is continuing from day to day till he submitted the return as in Wealth-tax Reference No. 4/75 or the orders of assessments were made as in the other two references. He concedes that the law prevailing on the day on which the " default " is made would apply. In other words, his submission is that the law prevailing on June 30 of the year in question on which the " default " was committed and on each subsequent day on which it was repeated, would apply to each case. In view of the above concessions of Mr. Talukdar, the point that remains for determination in these cases has been much narrowed down, and is whether the failure to file a return under s. 14(1), for which the penalty has been levied constitutes a " completed offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant portion of s. 18, as amended, ran thus: " 18. Penalty for failure to furnish returns, to comply with notices and concealment of assets, etc.--(1) If the Wealth-tax Officer, Appellate Assistant Commissioner, Commissioner or Appellate 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 which he is required to furnish under sub-section (1) of section 14 or by notice given under sub-section (2) of section 14...... or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 14 or by such notice, as the case may be; or ...... he or it may, by order in writing, direct that such person shall pay by way of penalty-- (i) in the cases referred to in clause (a), in addition to the amount of wealth-tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax ; ....... . (2) No order shall be made under sub-section (1) unless the person concerned has been given a reasonable opportu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cution under s. 36(1) read with s. 35B of the Act. But s. 18(3) bars prosecution if penalty has been imposed under s. 18 in respect of the same facts as constitute an offence. In the cases on hand there has been no prosecution. So we are not concerned with the " offence " aspect of the matter ; we are concerned only with the " penalty " aspect of it. Let us first take the cases of penalties for the assessment years 1963-64 and 1964-65. The due date for furnishing a return under s. 14(1) is June 30 of each year. For the purpose of coming to a decision for liability to penalties for these two years it is not necessary to consider whether the default is committed by the assessee only once, i.e., on June 30 of the year, as contended by the assessee, or the default is a continuing one, as contended by the department. It is agreed by both the parties that penalty would be levied according to the law that operates on the date of default. In other words, for imposition of penalty for failure to furnish a return under s. 14(1) for the year 1963-64, the law that existed on June 30, 1963, would apply. Similarly, the law that existed on June 30, 1964, would apply to the levy of penalty for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation of statutes do not permit reading into a provision of law, or deletion from it, any word or words. The use of the expressions, " two per cent. of the tax ", and " for every month during which the default continued " are material changes brought in by the amendment and not for nothing. The expression, " two per cent. of the tax for every month during which the default continued " clearly indicates that the default is a continuing one (emphasis added.) The default continues from day to day until it is stopped. It is stopped when the order of assessment in pursuance of which the penalty proceedings are drawn, is made, or when a return under s. 15 of the Act is filed. Filing of the return under s. 15 is optional. Although a person has not furnished a return within the time allowed under s. 14, yet he may furnish a return " at any time before the assessment is made " under s. 15. A return under s. 14 or s. 15 of the Act is meant to enable the W.T.O. to conveniently make an assessment of the wealth-tax. Under sub-s. (1) of s. 14 it is obligatory on the part of the assessee to furnish a return and failure to furnish such a return entails penalty or a prosecution. On the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion referred to make it more explicit, but it cannot entertain a new question, even if of law, not arising out of the order of the Tribunal, or referred to it. As a result of the foregoing discussions, the question in Wealth-tax Reference No. 5/75 is answered in the affirmative and in favour of the department. For the same reasons, the question in Wealth-tax Reference No. 3/75 is also answered in the affirmative and in favour of the department. Similarly, for the same reasons, the question in Wealth-tax Reference No. 4/75 is also answered in the affirmative and in favour of the department. Learned counsel cited a number of decisions, but as, in my opinion, they were beside the point and were not helpful, they have not been noticed in the judgment. With regard to para : " Learned counsel for the assessee ...... or referred to it " (supra) of my judgment Mr. Bhattacharjee submits that he referred to the previous approval of the IAC under sub-s. (4) of s. 18 only for the purpose of showing that the provision of s. 18 was substantive and that the maximum penalty as leviable under that substantive section could only be leviable. May be the submission was not clear to me. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T [1977] 108 ITR 86 (Punj), (2) CWT v. Ram Narain Agrawal [1977] 106 ITR 965 (All) and (3) Balakrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan, AIR 1959 SC 798. Mr. Talukdar, learned counsel for the department, on the other hand, contends that what is material in these three references is not whether failure to furnish the return, as required under s. 14(1) of the Act, amounts to an offence or not; but he submits that the assessee, on his failure to do so, commits a " default", within the meaning of s. 18(1)(a)(i) of the Act, which continues de die in diem, until the return is filed or assessment is made. Reliance was placed on the case of CWT v. Smt. V. Pathummabi [1977] 108 ITR 689 (Ker). He has also drawn our attention to the following cases with a view to assisting us in determining the question whether an offence, consisting of breach of statutory duty of the type which we are considering, is a continuing one or not; (1) G. D. Bhattar v. State, AIR 1957 Cal 483 and (2) State v. A. H. Bhiwandiwalla, AIR 1955 Bom 161. The precise question, which I shall consider is, what is the proper construction and operation of the provisions of s. 18(1)(a)(i) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file a return on the date completed " default " on that date and did not render it a continuing default, and as such penalty could be imposed on him only on the basis of the law which was prevalent on that date. In that case the court also expressed agreement with the similar view taken by the Allahabad High Court in CWT v. Ram Narain Agrawal [1977] 106 ITR 965 (All) and, after distinguishing the cases relied on by the learned counsel for the revenue in support of his submission, as to what is meant by continuing offence the court observed at page 90 (of 108 ITR) : " The aforementioned three cases are obviously distinguishable. Only these acts and omission were held to be continuing wrongs which the party concerned was obliged under law to perform or to refrain from performing from day-to-day and at least on the point of failure of the accused to apply for registration and to give a notice of occupation of the factory, the default was not held to be a continued default by the Bombay High Court. To that extent the view of the Bombay High Court goes against the revenue because omission to file a return or the omission to give a notice of occupation are the types of acts or omission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mind, I have read and re-read s. 18(1)(a)(i) of the Act, but I am unable to find words in the section, by any canon of construction, to extract a provision to enable one to say that they mean a continuing offence. As a general rule, the court will not say that a continuing offence is created by a statute unless there are express words which make clear that that was the intention of the legislature when the statute was passed. It is also a settled rule of construction of statute that although in construing an Act of Parliament the court must always give effect to the intention of the Act and must look not only at the remedy provided but also at the mischief aimed at, it cannot add words to a statute or read words into it, which are not there, and if the statute creates a specific offence, it is not for the court to find other offences which do not appear in the statute. It is also the settled canon of construction that even if two views are possible, the view which is favourable to the assessee must be accepted while construing the provisions of a taxing statute. See CIT v. Kulu Valley Transport Company Pvt. Ltd. [1970] 77 ITR 518 (SC). I entertain no shadow of doubt on this poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lal Saraf [1975] 98 ITR 474 (MP). Mr. Talukdar, learned counsel for the revenue, does not controvert the correctness of the proposition of law that an amendment which pertains to a substantive law cannot have a retrospective effect, unless it is so expressly made in the statute or there is necessary implication from the words employed that the legislature intended a particular section to have a retrospective operation. As contended earlier, his case is that " default " contemplated in s. 18(1)(a)(i) of the Act continues or remains unabated, until it ceases by filing of the return or assessment is made, and that the entire period is to be covered pro rata with reference to the original law and the amended law made from time to time. In view of the matter, it is submitted that the penalty imposed by the Tribunal on the assessee in all the three references is justified. Reliance was also placed on the case of (1) Biswanath Ghosh v. ITO [1974] 95 ITR 372 (Orissa) and (2) CWT v. K. Butchaiah [1977] 108 ITR 324 (AP). In my opinion, the contention of the learned counsel for the revenue has no force. I have already held that an offence is complete, on the date when the assessee failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complied with and, therefore, the law as on the date of the non-compliance will have to govern the levy of penalty." Again at page 555, it observed : " Thus, on a due consideration of the matter, we hold that the amendment which took effect from first of April, 1963, would not be applicable to cases where the default has been committed before the amended Act came into force, and that the law applicable to the levy of penalty for such defaults is the law as it stood at the time when the default is committed and not as it stood in the financial year for which the assessment is made as urged by the learned counsel for the assessee, nor as it stood on the date when the penalty proceedings were initiated or when the penalty order was imposed as urged by the revenue." I am in respectful agreement with the view expressed above. In CWT v. K. Butchaiah [1977] 108 ITR 324 (AP), the High Court of Andhra Pradesh was concerned with the levying of penalty on the assessee, who filed voluntary returns of his net wealth on 26th November, 1963, for the assessment years 1958-59 to 1962-63. On 28th July, 1965, notices were issued under s. 18(2) of the Act, as amended by the Act 46 of 1964, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem are similar. It will be relevant at this stage to set out the facts in each of the references, but as the facts and periods of assessment in W.T. Reference No. 5 of 1975 are more comprehensive, it would be convenient first to refer to the facts of this reference. W.T. Ref. No. 5 of 1975.--The assessment years involved in this reference are from 1963-64 to 1968-69. Admittedly, the assessee was liable to pay wealth-tax for all these years. He was required under s. 14(1) of the Act to furnish to the WTO a return in the prescribed form. In this case the assessee did not file any return. The WTO issued notices to the assessee under s. 14(2) of the Act and they were served on him. He did not comply with the notices. Thereafter, the WTO also issued notices on the assessee under s. 16(4) of the Act. They were also not complied with. In the circumstances, the WTO completed the assessment for all the aforesaid assessment years under s. 16(5) of the Act on October 31, 1970. The WTO also initiated penalty proceedings under s. 18(1)(a) and after giving opportunity to the assessee and finding no satisfactory explanation, imposed various penalties for different periods of default as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed for every month during which the default continued, but not exceeding, in the aggregate, an amount equal to the net wealth assessed. The Tribunal further held that the amount leviable for the period from April 1, 1965, to March 31, 1969, was under s. 18(1)(a)(i) of the Act as amended by the 1964 Amendment and for the period, after April 1, 1969, under s. 18(1)(a)(ii) as amended by the 1969 Amendment. On an application by the assessee, the Tribunal referred the following question for our opinion : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the calculation of the penalty upto March 31, 1965, was to be made under s. 18(1)(a)(i) of the W.T. Act, 1957, as it originally stood, from April 1, 1965, to March 31, 1969, under s. 18(1)(a)(i) as substituted with effect from April 1, 1965, by s. 18 of the W.T. (Amend.) Act, 1964, and, thereafter, under s. 18(1)(a)(i) as substituted by s. 24 of the Finance Act, 1969 ? " Wealth-tax Reference No. 3 of 1975 : This reference relates only to the assessment year 1968-69. In this case also no return was filed under s. 14(1) of the Act or a return in spite of service of notice und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment as required under s. 14 of the Act. According to the learned counsel, the offence is complete when the assessee failed to submit the returns on that date. The learned counsel further submits that the assessee is liable to pay penalty according to the law prevailing on that date under s. 18 of the Act as it originally stood for the periods till March 31, 1965. For the same reason he submits that the assessee is liable to pay penalty under s. 18 as amended by the Amending Act of 1964 up to March 31, 1969, for the periods 1965-66, 1966-67, 1967-68 and 1968-69, and thereafter, under s. 18 as amended by the 1969 Amendment. His submission is that the infringement is complete on the 30th June of each year and the assessee could not have committed any offence on any subsequent date of the year for non-submission of the return as enjoined by s. 14(1). The next submission of the learned counsel is that the offence is not a continuing one. He submits that the law creating an offence and providing for penalty is a substantive one and can have no retroactive effect, unless the legislature has made it so, expressly or by necessary implication. The learned counsel submits that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, Appellate Assistant Commissioner, Commissioner or Appellate 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 which he is required to furnish under sub-section (1) of section 14 or by notice given under 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 ...... he or it may, by order in writing, direct that such person shall pay by way of penalty-- (i) in the cases referred to in 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 ........ " By s. 18 of the W.T. (Amend.) Act, 1964 (46 of 1964), this section was substituted with effect from April 1, 1965, by the following s. 18 : " 18. Penalty for failure to furnish returns, to comply with notices and concealment of assets, etc.--(1) If the Wealth-tax Officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person-- (a) has without re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1969 Amendments. From a perusal of the relevant provisions of s. 18 it appears that sub-s. (1)(a) is attracted when the assessee " has without reasonable cause failed to furnish return " as required under s. 14 of the Act. Cl. (i) of that sub-section is the provision, according to me, for the computation of the penalty imposable under this section. In the original section as well as in the subsequent amendments noticed above, sub-s. (1)(a) has used the present tense, namely, "has ... failed to furnish..." Therefore, the provision in this sub-section indicates that it is only prospective and cannot have any retroactive operation. In other words, the assessee will be liable according to the law as it stood at the time of his failure to furnish the return under s. 14 and that liability can be computed or calculated in accordance with the provision of cl. (i) of this section. In the 1964 Amendment sub-s. (1)(a) of the section is to the same effect, that is to say, when the assessee fails to furnish the return as required under s. 14 of the Act. In other words, if the default is committed for the corresponding year of assessment after the amendment, the penalty will be imposable acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing year. Accordingly, I am of the firm opinion that the penalty imposable under s. 18 would be on the basis of the law as it stood on the date of the failure of the assessee to file the return on the crucial date as aforesaid. In other words, if there is default for a particular assessment year, before the 1964 Amendment, the penalty that can be imposed would be according to the provision of the law prior to April 1, 1965. In such a case although the return is filed under s. 15 or the assessment is made after the 1964 Amendment or 1969 Amendment, the amended provisions of cl. (i) of sub-s. (1)(a) of s. 18 would not apply. Similarly, if the failure of the assessee to furnish the return is after the 1964 Amendment, the penalty that can be imposed on him would be on the basis of the law as it stood on the date of his failure to file the return. It would not attract the provision of cl. (i) of s. 18(1)(a) of the 1969 Amendment although the assessment for that year is not complete or no return is filed before that amendment. From the above discussion and also on a perusal of s. 18(1)(a), before and after amendments, it shows that there was no change in the clause levying penalty, but t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Finance Act, 1969, was not retrospective in effect and the penalties under s. 18(1)(a) of the W.T. Act, 1957, were exigible in these cases for the assessment years 1964-65, 1965-66, 1966-67 and 1967-68 on the scale in force prior to the Finance Act, 1969 ? " While answering the question against the department and in favour of the assessee, the Bench observed as under : " The law operative on the date when the infringement takes place is the law applicable unless it is made punishable ex post facto. If the argument of the department is accepted it shall make the operation of the amended law retrospective when there are no such words in the statute itself. There is no scope for culling out an intention of the legislature as the language is explicit and unambiguous. It is well settled both by English and Indian courts that a fiscal statute cannot be regarded as retrospective by implication. We cannot read any intention of retrospective operation by implication. Moreover, we are concerned with a penal provision and the rule against the retrospectivity applies with great ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood on July 1, 1961, and as no minimum was prescribed then, he reduced the penalty to Rs. 1,000. The assessee as well as the department being aggrieved filed appeals before the Tribunal which were dismissed. On a reference, the court adhered to its earlier view in Addl. CIT v. Medisetty Ramarao [1977] 108 ITR 318 (AP) (that was a case under s. 271(1)(iii) of the I.T. Act) wherein it had been observed : It is a cardinal principle of criminal jurisprudence that, unless otherwise provided expressly or by necessary implication, the penalty that was provided for at the time of the commission of the offence would be the proper penalty to be levied, and not the penalty that was provided for at the time of conviction of the offender. In other words, penalty for infraction takes place not when it is detected but when it actually has been committed." The court further held thus ([1977] 108 ITR 787, 798) : "... when cl. (a) to s. 18(1) read with s. 18(1)(i) of the Act does not expressly or by necessary implication treat the default as a continuing default, it would, in our opinion, be stretching the point too far to hold that from the scale of penalty provided in cl. (i) it should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey stood prior to the amendment and not after the amendment, even where the penalty proceedings have been imitiated after the amendment came into force as a result of a reassessment. This will be in accordance with the principle underlying art. 20 of the Constitution under which no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of an offence and also in accord with the settled rule of construction that an amending statute must be given effect to prospectively and not retrospectively unless there is an express provision to that effect." We may now consider whether it is a continuing default or not. In the context, whether the default is a continuing one after the two amendments it is worthwhile to mention some observations made by the Supreme Court of India in Balakrishna Savalram Pujari Waghmere v. Shree Dhyaneshwar Maharaj Sansthan, AIR 1959 SC 798, 807. These observations are : " It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury. If t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, it is not within the competence of the ITO to vary the rate of interest fixed by the Finance Act under sub-s. (2) of s. 220 from time to time. In my opinion, the above two cases, namely, ITO v. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. [1975] 101 ITR 457 (SC) and Biswanath Ghosh v. ITO [1974] 95 ITR 372 (Orissa), have no application in the present case. In CWT v. Smt. Pathummabi [1977] 108 ITR 689, the Kerala High Court no doubt held that after the amendment of s. 18(1) by the W.T. (Amend.) Act, 1964, the non-filing of the return would be considered as a continuing default. But with great respect I am unable to subscribe to that view for the reasons which are already set out in the earlier part of my judgment. Moreover, after going through the report, I find in para 6 of the judgment where their Lordships have observed as follows : "' As we read s. 18(1)(i) of the W.T. Act, 1957, as amended, along with the main s. 18(1) we find that an offence that had become complete had been changed into a continuing offence and visited with consequences every month for continued default even by the amending Act 46 of 1964." I find it difficult to appreciate how an offence which is comple ..... X X X X Extracts X X X X X X X X Extracts X X X X
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