THE COMMISSIONE OF INCOME TAX vs. N/S. RAJWANTI PROPERTIES PVT

1 In the High Court of Judicature at Madras Dated : 24.7.2019 Coram : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal Nos.492 & 493 of 2019 & CMP.No.15345 of 2019 The Commissioner of Income Tax, Chennai-34 ...Appellant Vs M/s.Rajwanti Properties Pvt. Ltd., Chennai-6. ...Respondent APPEALS under Section 27 of the Wealth Tax Act, 1957 against the common order dated 28.9.2016 made respectively in WTA.Nos.13 and 14/ Mds/2016 on the file of the Income Tax Appellate Tribunal, Chennai 'B' Bench for the assessment years 1997-98 and 1998-99. For Appellant : Mrs.R.Hemalatha, SSC COMMON JUGMENT (Judgment was delivered by

T.S.SIVAGNANAM,J)

We have heard Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for the appellant. 2. These appeals, filed by the Revenue under Section 27 of the Wealth Tax Act, 1957 (for short, the Act), are directed against the common order http://www.judis.nic.in 2 dated 28.9.2016 made respectively in WTA.Nos.13 and 14/Mds/2016 on the file of the Income Tax Appellate Tribunal, Chennai 'B' Bench for the assessment years 1997-98 and 1998-99. 3. The Revenue has filed these appeals by raising the following substantial questions of law : “i. Whether, in the facts and circumstances of the case, the Tribunal was right and correct in deleting the penalty under Section 18(1)(c) of the Wealth Tax Act by overlooking Explanation 3 to Section 18 of the Wealth Tax Act, 1957, which deems non filing of return within the stipulated time to be a concealment of income? ii. Whether, in the facts and circumstances of the case, the Tribunal was right in deleting the penalty levied under Section 18(1)(c) of the Wealth Tax Act on the ground that the CIT(A) had not given any finding with regard to concealment of particulars that have been detected by the Department to levy penalty, when the Statute itself deems non filing of return in time as concealment of income ? And iii. Whether, in the facts and circumstances of the case, the Tribunal was right in deleting the penalty under Section 18(1)(c) of the Wealth Tax Act, when the fact remains that but for the wealth tax assessment proceedings, the assessee would have escaped from payment of wealth tax?” http://www.judis.nic.in 3 4. The short issue, which falls for consideration in these appeals, is as to whether the Tribunal was right in deleting the penalty levied under Section 18(1)(c) of the Act for the assessment years 1997-98 and 1998-99 vide orders dated 06.2.2009 passed by the Assessing Officer, which were confirmed on appeal by the Commissioner of Income Tax (Appeals)-3, Chennai-34 [for short, the CIT(A)] vide orders dated 18.2.2016. 5. Mrs.R.Hemalatha, learned Senior Standing Counsel for the appellant would vehemently contend that the properties in question would fall within the definition of the term 'asset' as defined under Section 2(ea)(i) of the Act, that the assessee failed to furnish the return under the Act, that only after issuance of the notice under Section 16(4) of the Act, the assessee filed their return and that too, a NIL return and only thereafter, the matter was adjudicated and that as the assessee furnished inaccurate particulars, the Assessing Officer was well justified in levying penalty under Section 18(1)(c) of the Act as Explanation 3 to Section 18 of the Act would stand attracted in the assessee's case. In support of her contention, the learned Senior Standing Counsel relies upon the decision of a Division Bench of the Bombay High Court in the case of Shanti Ramanand Sagar Vs. CIT [reported in (2017) 88 Taxmann.com 72]. 6. We have carefully considered the submissions of the learned Senior Standing Counsel for the Revenue and perused the materials on record and the reasons assigned by the Tribunal for allowing the assessee's appeal. http://www.judis.nic.in 4 7. The Tribunal, on going through the income tax assessment orders, the wealth tax assessment orders and the details and statements filed by the assessee, pointed out that it was not the case of the Department that there was a search or survey either under the Income Tax Act or under the Wealth Tax Act nor there was a seizure of any incriminating materials, based on which, the assessments were completed and the penalty proceedings were initiated. The Tribunal further pointed out that in view of the amendment to the Statute with effect from 01.4.1997, the term 'commercial building' was also included in the definition of the term 'asset' as defined under Section 2(ea)(i) of the Act and the assessee was taxed under the Act and that to initiate penalty proceedings against the assessee, the Department should have some material evidence to show that the assessee concealed or did not furnish the particulars before the Assessing Officer. The Tribunal noted that the assessee furnished complete particulars and that the assessee was under the bona fide belief that the house properties, which were stated to have been let out, were not coming under the definition of the term 'asset' as per the provisions of Section 2(ea)(1) of the Act. The Tribunal also noted that the CIT(A), in his orders dated 18.2.2016, did not render any finding with regard to concealment of particulars that were detected by the Department to levy penalty against the assessee. 8. We find that before the CIT(A), the assessee placed reliance on the decision of a Division Bench of the Calcutta High Court in the case of http://www.judis.nic.in 5 Maynak Poddar (HUF) Vs. WTO [reported in (2003) 262 ITR 633]. The factual situation in the said case was almost similar to that of the case on hand and the Court pointed out that even if the assessee included the property in his return, that would not preclude the assessee from claiming the benefit of law and that there cannot be any estoppel against the Statute. It was further pointed out that the property, which was not otherwise taxable, cannot become taxable because of misunderstanding or wrong understanding of law by the assessee or because of his admission or on his misapprehension. With these reasonings, the penalty was vacated. 9. We also find that though the CIT(A) referred to the said decision relied upon by the assessee, he did not deal with the effect of the said decision, which, in our mind, would assist the case of the assessee before us. The CIT(A) proceeded to affirm the orders passed by the Assessing Officer levying penalty by referring to the amendment to the Statute, which came into force with effect from 01.4.1997. To be noted that the assessments under consideration are for the years 1997-98 and 1998-99 and the assessee's specific case was that they were under the bona fide belief that the house property would not fall within the definition of the term 'asset' as defined under Section 2(ea)(i) of the Act. 10. Explanation 3 to Section 18(1) of the Act states that where any person fails, without reasonable cause, to furnish within the period specified in Sub-section (1) of Section 17A, a return of his net wealth, which he is http://www.judis.nic.in 6 required to furnish under Section 14 in respect of any assessment year commencing on or after the 1st day of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under Clause (i) of Sub- Section (4) of Section 16 or Sub-Section (1) of Section 17 and the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has assessable net wealth, then, such person shall, for the purposes of Clause (c) of this Sub-Section, be deemed to have concealed the particulars of his assets or furnished inaccurate particulars of any assets or debts in respect of such assessment year, notwithstanding that such person furnishes a return of his net wealth at any time after the expiry of either of the periods aforesaid applicable to him in pursuance of a notice under Section 17 of the Act. 11. It is not in dispute that in the case on hand, the assessee did not file the return. In the first instance, notice was issued under Section 17(1) of the Act and only thereafter, the return was filed. This, according to the assessee, was because of their bona fide belief that the property would not fall within the definition of the term 'asset' as defined under Section 2(ea)(1) of the Act. If at all the Assessing Officer imposes penalty under Section 18(1)(c) of the Act, by referring to Explanation 3, the Assessing Officer should have rendered a finding that there was no reasonable cause shown by the assessee so as to invoke the deeming provision. http://www.judis.nic.in 7 12. As rightly pointed out by the Tribunal, there was no such finding by the CIT(A). We also find that there was no such specific finding rendered by the Assessing Officer as well. Thus, in the absence of any proof to show that there was an attempt on the part of the assessee to conceal the particulars or to furnish inaccurate particulars, the levy of penalty was not justified. 13. Mrs.R.Hemalatha, learned Senior Standing Counsel for the Revenue has placed reliance on the decision in the case of Shanti Ramanand Sagar to support her stand that the levy of penalty was justified. 14. The decision in the case of Shanti Ramanand Sagar arose out of a case where the penalty was imposed on the assessee under Section 271(1)(c) of the Income Tax Act. After referring to the various decisions, the Court pointed out that when there was no finding that any details supplied by the assessee in the returns were found to be inaccurate or erroneous or false, there was no question of inviting the penalty under Section 271(1)(c) of the Income Tax Act. On facts in the said case, it was found that the assessee had deliberately suppressed an agreement and this, according to the Assessing Officer in the said case, amounted to furnishing of inaccurate particulars. 15. In the case before us, the Tribunal has clearly pointed out that there was no finding rendered by the CIT(A) with regard to the concealment or furnishing of inaccurate particulars. Therefore, we are of the view that the http://www.judis.nic.in 8 T.S.SIVAGNANAM,J AND V.BHAVANI SUBBAROYAN,J RS decision in the case of Shanti Ramanand Sagar would not assist the case of the Revenue. Thus, we find that there is no error in the reasons assigned by the Tribunal in the common order impugned. 16. For the above reasons, the above tax case appeals fail and are accordingly dismissed. The substantial questions of law are answered against the Revenue. Consequently, the connected CMP is also dismissed. 24.7.2019 Internet: Yes To The Income Tax Appellate Tribunal, Chennai 'B' Bench. TCA.Nos.492 & 493 of 2019 and CMP.No.15345 of 2019 http://www.judis.nic.in