Penalty cannot be levied on suo-motto additional wealth declared in revised belated return

Aggrieved by the order dated 30/06/2011, passed in Appeal No. 489/10-11 by the Ld. Commissioner of Wealth Tax (Appeals-1), New Delhi (for short hereinafter called as “the CWT”) where under the Ld. CWT confirmed the penalty levied by the Assessing Officer, assessee preferred this appeal with a prayer to delete the penalty.

2. Briefly stated relevant facts are that the assessee filed the return of wealth on 23/11/2009 showing a net wealth of Rs. 15,59,03,165/-and subsequently having realized that inadvertently they have omitted to add the taxable assets of the partnership firms in which the assessee company was a partner, filed a revised computation of wealth on 20/12/20 10 showing the net wealth at Rs. 36,90,03,980/-. Assessment was complete on the total net wealth of Rs. Rs. 36,90,03,980/-. However the AO proceeded to levy penalty under section 18 (1) (c) of the Act for concealment of income, and according to the assessee Ld. AO failed to appreciate the fact that the filing of revised computation by the assessee by adding the earlier inadvertently omitted portion of wealth was without any detection from the side of the Department, as such, there was no concealment within the meaning of section 18 (1) (c) of the wealth tax Act. Appeal preferred to the Commissioner of Wealth Tax was dismissed by way of impugned order. The assessee is, therefore before us in this appeal challenging the lavy of penalty of Rs. 21,31,100/-.

3. At the outset, it is the contention of the Ld. AR that the notice issued under section 18 (1) (c) of the Wealth Tax was not specific and it does not specify the charge for levy of the penalty, as such, in view of the decision reported in CIT vs Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar), CIT vs SSA’s Emerald Meadows ITA No 380/2015 of Karnataka High Court as confirmed by the Hon’ble Apex Court in CIT vs SSA’s Emerald Meadows CC No 11485/2016 (SC), the penalty cannot be sustained. Per contra, it is allotment of the Ld. DR that inasmuch as the Assessing Officer recorded in the order of assessment that the penalty proceedings under section 18 (1) © of the wealth tax were initiated for furnishing inaccurate particulars of wealth, the same reason pervades all through the penalty proceedings. In the penalty order the WTO concluded that the assessee had furnished inaccurate particulars of its wealth which amounts to concealment thereof and penalty under section 18 (1) (c) of wealth tax was levied for such infringement. It is not, therefore, open for the assessee to contend that the notice is defective for not specifying the charge. According to the Ld. DR the contents of the notice have to be read in the context of the assessment order and the penalty order, in which case no discrepancy could be found.

4. We have gone through the record in the light of the augments on either side. No doubt the assessment order reads that the penalty proceedings were initiated for furnishing inaccurate particulars of wealth and also the penalty order states that the penalty was imposed for furnishing inaccurate particulars. However, the notice issued under section 18 (1) (c) of the Act on 29/12/2010 shows that the said notice was issued for concealment of the particulars as well as furnishing inaccurate particulars of income.

5. In the case of CIT vs Manjunatha Cotton & Ginning Factory, 359 1TR 565 (Kar). Vide paragraph 60, the Hon’ble Karnataka High Court has held as follows : –

“60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. ~t is needless to point out satisfaction of the existence of the grounds mentioned in Section 271 (1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable.”

6. In ITA 380/2015 the Hon’ble Karnataka High Court Considered the question of law as to,-

“Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case?”

And the Honble High Court ruled answered the same in favour of the assessee observing that:

“The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short ‘the Act’) to be bad in law as it did not specify which limb of Section 271 (1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX – VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed.”

7. The Special Leave Petition filed by the Revenue challenging the aforesaid judgement of the High Court was dismissed by the Hon’ble Supreme Court holding:

“We do not find any merit in this petition. The special leave petition is, accordingly, dismissed.”

8. Ld. ARs submits that the notice issued in this matter creates jurisdiction in the WTO to invoke the provisions under section 18 (1) (c) of the Act as such any defect in such notice is incurable in nature and vitiates the proceedings. In view of the above decisions, we’re of the considered opinion that the defect in the notice that creates jurisdiction is an incurable defect and vitiates the proceedings. On this ground, the assessee succeeds.

9. Ld. AR submits that even merits also, the penalty is not sustainable. He submitted that assessee filed the return of wealth on 23.11.2009 and on 14.03.2011, the assessee revised the return of wealth, and subsequently the assessment was completed on the revised net wealth only. However, in the assessment order, the Assessing Officer i.e. Deputy Commissioner of Wealth Tax (in short “DCWT”) observed that the original return of wealth in this matter was filed belatedly on 23-11- 2009 and revised on 20.12.2010, since the original return itself was filed belatedly the same could not be revised by way of fresh return u/s 15 of the Act and in these circumstances, the revision of wealth tax return subsequent to the issuance of notice u/s 16(4) of the Act, amount to furnishing all inaccurate particulars of wealth. On this ground, the DCWT initiated penalty proceedings u/s 18(1)(c) of the Wealth Tax Act and concluded them by levying of penalty. Appeals preferred by the assessee challenging the finding of the DCWT and the levy of penalty was dismissed by the CWT by way of impugned order.

10. It is the arguments of the Ld.AR that since there are no provisions in the Wealth Tax Act equivalent to Section 234A, 234B and 234C for penal interests on delayed return, there is no concept of delayed return and the return filed u/s 15 of the Act cannot be held as belated or non-est. He further submitted that inasmuch as the assessee filed the return of wealth in accordance with the provisions of section 15 of the Act which was well within the prescribed time, there was no justification for the AO in initiating the proceedings u/s 18(1)(c) of the Act. According to the Ld.AR that section 15 of the Act contemplates three situations for revising the return, and those are :-

(i) If any person has not furnished the return within time of sub-section (1) of section 14;

(ii) If any person has not filed a return in response to a notice issued u/s 16(4)(i) of the Act; and

(iii) If any person having furnished a return discovered any omission or strong statement in the returned furnished.

11. He submits that in all the above three contingencies law permits the furnishing of the revised return before the expiry of one year from the end of the relevant assessment year or before completion of assessment whichever is earlier. While placing reliance on this provision u/s 15 of the Act, Ld. AR submits that there is no difference between filing of return within the time stipulated u/s 14(1) of the Act or filing the same with any delay. In this view of the matter, he submitted that the order of the CWT is perfectly justified and does not warrant any inference. Per contra, Ld.AR placed reliance on the assessment order.

12. Having heard the arguments, we have carefully perused the record and the assessment order shows that it is only basing on the revised assessment, the assessment was completed. Only reason stated by the AO for initiation of penalty was that no revision could be made in case of belated filing of the original return of wealth. Though it is argued by the DR that the belated return as well as the revised return both are non-est in the eye of the law. We find it difficult to agree with him inasmuch as it is only on the basis of the revised return of wealth, the assessment took place. We also do not find any support of law to the observations of the AO that the belated return is non-est in the eye of law as such it cannot be revised thereby rendering the revised return of wealth void ab initio. The case of the assessee squarely falls within the ambit of Section 15 of the Act, as such it does not give rise to any penalty proceedings. With this view of the matter, we find it difficult to sustain the penalty levied by the AO. We, therefore, direct the AO to delete the penalty. In view of the above, both on facts and on law the assessee succeeds.

13. In the result, the appeal of the assessee is allowed.

The order is pronounced in the open court on 16^th of November, 2017.