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PETITIONER: VRINDAVAN

       Vs.

RESPONDENT: GOVERDHAN LAL PITTIE

DATE OF JUDGMENT29/04/1986

BENCH: OZA, G.L. (J) BENCH: OZA, G.L. (J) MISRA, R.B. (J)

CITATION:  1986 AIR 1668            1986 SCR  (2) 851  1986 SCC  Supl.  308     1986 SCALE  (1)961

ACT:      Wealth Tax  Act, 1957 s. 18(1)(a) as amended by Finance Act 1969  - Delay in filing return - Minimum penalty 1/2% of the value  of net  wealth for each month of delay - Leavy of penalty - Whether constitutionally valid.

HEADNOTE:      The petitioner  was granted extension of time for three months for  filing his  wealth tax return. However, he filed the return  four months  after the  period of extension. The Wealth Tax  Officer  imposed  a  penalty  on  him  under  s. 18(1)(a) of  the Wealth  Tax Act 1957 at the rate of 1/2% of the total wealth assessed for every month of default and the total penalty  imposed for  four months  was  equal  to  Rs. 6,784. This  order of  the Wealth Tax Officer was maintained by the  Appellate Assistant  Commissioner.  Thereafter,  the petitioner  filed   a  writ   petition  in  the  High  Court challenging the  constitutional validity  of s.  18(1)(a) of the Act  as amended  by the  Finance Act, 1969 on the ground that  it   infringes  Articles   14  and   19(1)(f)  of  the Constitution. The  High Court  dismissed the petition on the ground that the petitioner had not exhausted the alternative remedies available to him under the Act.      The petitioner  then filed  the present  writ  petition before  the   Supreme  Court   challenging  the   provisions contained in  s. 18(1)(a)  on the  grounds :  (i)  that  the section permits  the levy  of minimum penalty of 1/2% of the net wealth  assessed per  month for  each month  of delay in filing the  return and  therefore it  is in contravention of Article 19(1)(f)  of the  Constitution as  in an appropriate case, the  penalty may be equal to the value of total wealth assessed  that   is  the   maximum  limit   of  the  penalty permissible and  is therefore  confiscatory ;  (ii) that the penalty should  be co-related with the duty and not with the net wealth assessed and thus the penalty leviable at 1/2 per cent of the net wealth is unreasonable, and therefore, it is hit by Article 19(1)(f); 852 (iii) that  the provision  gives a  wide discretion  to  the Wealth Tax  Officer without any guidelines to impose minimum penalty which  is 1/2  per cent  of the assessed wealth upto the maximum  which is  equal  to  the  total  value  of  the

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assessed wealth and thus this discretion violates Article 14 of the  Constitution ;  and (iv)  that so  far as  a smaller assessee is  concerned the penalty of 1/2 per cent is harsh, whereas for  a substantial assessee it is rather lenient and thus is  discriminatory  and,  therefore,  contrary  to  the provisions contained in Article 14 of the Constitution.      Dismissing the Writ Petition, ^      HELD :  1. The  petition is  without any substance. The imposition of  penalty at  the rate  of 1/2  per cent of the total assessed  wealth for  each month’s  delay could not be said to  be confiscatory  in nature.  It is not unreasonable for any  reason on  the basis of which it could be said that it will  be in  contravention of Article 19(1)(f). Moreover, the section  has since  been amended  and no such dispute is likely to arise in future. [862 B; 860 H; E-F]      2. In  case of  a smaller  assessee 1/2%  of the  total wealth assessed will be much less as compared to the 1/2 per cent in  the case  of a  substantial assessee  whose  wealth assessed is of much higher value thus although it is 1/2 per cent in both the cases, as it is related to the total wealth assessed, smaller  the assessee  lesser will  be the penalty and richer the assessee the penalty will be higher and by no stretch of  imagination this  could be  said  to  be  either unreasonable or  discriminatory. The  penalty  will  be  for default of  each month  and in  this  view  of  the  matter, therefore, neither  it could  be contended  that  it  is  in contravention of  Article 19(1)(f)  nor in  contravention of Article 14 of the Constitution. [861 C-E]      Janab M.M.  Sultan Ibrahim  Adhum v. Wealth Tax Officer I(I) Karaikudi, 91 I.T.R. 417, approved.      Kunnathat Thathunni  Moopil Nair  v. State  of Kerala & Anr., [1961] 3 S.C.R. 77, in-applicable.

JUDGMENT:      ORIGINAL JURISDICTION : Writ Petition No. 75 of 1972. 853      Under Article 32 of the Constitution of India.      K.L. Rathi and A. Subba Rao, for the Petitioner.      S.C. Manchanda, K.C. Dua and Ms. A. Subhashini, for the Respondent.      The Judgment of the Court was delivered by      OZA, J.  In this petition the petitioner has challenged an order  of penalty  imposed against  the petitioner by the Wealth Tax  Officer at the rate of 1/2 per cent of the total wealth assessed  for every month of default and out of seven months default,  a penalty imposed was for four months equal to Rs.  6,784. The  petitioner had  sought for  extension of time for  three months  which was  granted  and,  thereafter filed the  return four  months after  the period extended by the Wealth Tax Officer. This order of the Wealth Tax Officer was maintained  by the  Appellate Assistant Commissioner. It appears that  during the  pendency of  the appeal before the 4th respondent  the petitioner  filed a writ petition in the High Court  of Andhra Pradesh challenging the constitutional validity of  Section 18(1)(a) of the Wealth Tax Act, 1957 as amended by  the Finance  Act, 1969  on the  ground  that  it infringes Articles 14 and 19(1)(f) of the Constitution. That petition was  dismissed by  the Division Bench of the Andhra Pradesh High Court on the ground that the petitioner has not exhausted the  alternative remedies  available to  him under the Act.  Thereafter the  petitioner has  filed the  present petition challenging  the provisions  contained  in  Section

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18(1)(a)   on   the   ground   that   it   is   invalid   as unconstitutional because  it  infringes  the  right  of  the petitioner  under   Articles  14   and   19(1)(f)   of   the Constitution of India.      It  is   admitted  on  all  hands  that  the  offending provision has  since been  amended and  no such  dispute  is likely to  arise in  future. Even  during the period 1969-70 when the  offending provision was there, the petition giving rise to  the present  appeal appears to be the sole petition wherein the  provision of Section 18(1) has been challenged. The question  involved in  the present  case is,  therefore, only of an academic interest. 854      Section 18  of the  Wealth Tax  Act as  it stood at the relevant time reads :           "Section  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 Section 17,           or has  without reasonable cause failed to furnish           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           (b) has  without reasonable cause failed to comply           with a notice under sub-section (2) or sub-section           (4) of Section 16 ; or           (c) has concealed the particulars of any assets or           furnished inaccurate  particulars of any assets or           debts;           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, for  every  month  during           which the default continued, equal to one-half per           cent of -           (A) the  net wealth  assessed under  Section 16 as           reduced by  the amount  of net wealth on which, in           accordance with  the rates of wealth-tax specified           in Paragraph  A of  Part I of the Schedule or Part           II of  the Schedule,  the wealth-tax chargeable is           nil, or 855           (B) the  net wealth  assessed  under  Section  17,           where assessment has been made under that section,           as reduced by -           (1) the  net wealth,  if any,  assessed previously           under section 16 or section 17. or           (2)  the   amount  of  net  wealth  on  which,  in           accordance with  the rates of wealth-tax specified           in Paragraph  A of  Part I of the Schedule or Part           II of  the Schedule,  the wealth-tax chargeable is           nil,           whichever is greater,           but not  exceeding, in  the aggregate,  an  amount           equal to the net wealth assessed under Section 16,           or as  the case  may be,  the net  wealth assessed           under Section 17, as reduced in either case in the

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         manner aforesaid;           (ii) in  the cases  referred to  in clause (b), in           addition to  the amount  of wealth-tax  payable by           him, a  sum which  shall not  be less than one per           cent of  the assessed  net wealth  but which shall           not exceed the amount of the assessed net wealth.           Explanation -  For the  purposes of  clause  (ii),           "assessed net wealth" shall be taken to be the net           wealth assessed under Section 16 as reduced by the           net  wealth   declared  in   the  return  if  any,           furnished by  such person, or, as the case may be,           the  net  wealth  assessed  under  Section  17  as           reduced by -           (i) the  net wealth,  if any,  assessed previously           under Section 16 or Section 17, or           (ii) the  net wealth  declared in  the return,  if           any, furnished  by such  person under  Section  17           whichever is greater;           (iii) in  the cases  referred to in clause (c), in           addition to any wealth-tax payable by him, a sum 856           which shall  not be less than, but which shall not           exceed twice, the amount representing the value of           any assets  in respect  of which  the  particulars           have been  concealed or  any assets  or  debts  in           respect of  which inaccurate particulars have been           concealed or  any assets  or debts  in respect  of           which inaccurate particulars have been furnished.           Explanation 1, - Where -           (i) the  value of any asset returned by any person           is less than seventy five per cent of the value of           such asset  as determined  in an  assessment under           Section 16  or Section  17 (the  value so assessed           being referred to hereafter in this Explanation as           the correct value of the asset), or           (ii) the  value of any debt returned by any person           exceeds the value of such debt as determined in an           assessment under  Section 16 or Section 17 by more           than twenty-five per cent of the value so assessed           (the value so assessed being referred to hereafter           in this  Explanation as  the correct  value of the           debt), or           (iii) the  net wealth  returned by  any person  is           less than  seventy-five per cent of the net wealth           as assessed  under Section  16 or  Section 17 (the           net wealth so assessed being referred to hereafter           in this Explanation as the correct net wealth),           then, such person shall, unless he proves that the           failure to  return the  correct value of the asset           or, as  the case  may be, the correct value of the           debt or  the correct net wealth did not arise from           any fraud  or any  fraud or  any gross  or  wilful           neglect on  his part,  be deemed to have concealed           the particulars  of assets or furnished inaccurate           particulars of assets or debts for the purposes of           clause (c) of this sub-section.           Explanation 2.  - For the purposes of clause (iii)           - 857           (a) the  amount  representing  the  value  of  any           assets in  respect of  which the  particulars have           been concealed  or any  assets in respect of which           inaccurate particulars  have been furnished, shall           be the  value of  such assets  determined for  the           purposes of  this Act  as  reduced  by  the  value

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         thereof, if any, declared in the return made under           Section 14 or Section 15;           (b) the amount representing the value of any debts           in respect  of which  inaccurate particulars  have           been furnished,  shall be  the amount by which the           value of  such debts  declared in  the return made           under Section  14 or  Section 15 exceeds the value           thereof determined for the purposes of this Act.           (2) No  order shall  be made under sub-section (1)           unless the  person  concerned  has  been  given  a           reasonable opportunity of being heard.           (2A) Notwithstanding  anything contained in clause           (i)  or  clause  (iii)  of  sub-section  (1),  the           Commissioner may, in his discretion,-           (i) reduce  or waive the amount of minimum penalty           imposable on  a person  under clause  (i) of  sub-           section (1) for failure, without reasonable cause,           to furnish  the return  of net  wealth which  such           person was  required to  furnish under sub-section           (1) of Section 14, or           (ii) reduce or waive the amount of minimum penalty           imposable on  a person  under clause (iii) of sub-           section (1),           If he  is satisfied  that such person - (a) in the           case referred to in clause (i) of this sub-section           has, prior  to the  issue of  notice to  him under           sub-section (2)  of Section 14, voluntarily and in           good  faith,  made  full  disclosure  of  his  net           wealth; and in the case referred to in clause (ii)           of this sub-section has, prior to the detection by           the Wealth-tax Officer of the concealment of 858           particulars of  assets or  of  the  inaccuracy  of           particulars furnished  in respect of the assets or           debts  in   respect  of   which  the   penalty  is           imposable, voluntarily  and in  good  faith,  made           full and true disclosure of such particulars;           (b) has co-operated in any enquiry relating to the           assessment  of  the  wealth  represented  by  such           assets; and           (c)  has   either  paid   or   made   satisfactory           arrangements for  payment of  any tax  or interest           payable in  consequence of  an order  passed under           this Act  in respect  of the  relevant  assessment           year.           (2B) An  order under  sub-section  (2A)  shall  be           final and  shall not  be called in question before           any court of law or any other authority.           (3) Notwithstanding  anything contained  in clause           (iii) of  sub-section (1),  if in  a case  falling           under clause  (c) of that sub-section, the minimum           penalty imposable  exceeds a  sum  of  rupees  one           thousand, the  Wealth-tax Officer  shall refer the           case to  the Inspecting Assistant Commissioner who           shall,  for  the  purpose,  have  all  the  powers           conferred under this section for the imposition of           penalty.           (4)  An   Appellate  Assistant   Commissioner,   a           Commissioner or  the Appellate  Tribunal on making           an order  under this  section imposing  a penalty,           shall forthwith  send a  copy of  the same  to the           Wealth-tax Officer.           (5) No order imposing a penalty under this section           shall be  passed after the expiration of two years           from the date of the completion of the proceedings

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         in the  course of  which the  proceedings for  the           imposition of penalty have been commenced.           Explanation  -   In  computing   the   period   of           limitation for  the purposes  of this Section, the           time taken in 859           giving  an  opportunity  to  the  assessee  to  be           reheard under  the proviso  to section  39 and any           period  during   which  a  proceeding  under  this           section for  the levy  of penalty  is stayed by an           order  or   injunction  of   any  court  shall  be           excluded."      The main  contention advanced by the learned counsel is that this  provision permits  the levy of minimum penalty of 1/2 per  cent of  the net wealth assessed per month for each month of delay in filing the return and, therefore, it is in contravention of  Article 19(1)(f) of the Constitution as in an appropriate case the penalty may be equal to the value of total wealth  assessed that  is the  maximum  limit  of  the penalty permissible and is, therefore confiscatory.      The penalty  for late  filing the  return under Section 18(1)(a)(i) is  1/2  per  cent  per  month.  It,  therefore, permits the  imposition of  penalty for  delay of each month whereas the  wealth tax  is assessed  on the  net wealth per year and  according to  the petitioner, therefore, this also is  in   contravention  of  Article  19(1)(f).  It  is  also contended that  the penalty  should be  co-related with  the duty and  not with  the net  wealth assessed  and  thus  the penalty leviable  at 1/2  per cent  of the net wealth, it is unreasonable  and,   therefore,  also   is  hit  by  Article 19(1)(f).      It is  also contended  that as  this provision  confers jurisdiction on  the Wealth  Tax Officer  to impose  minimum penalty which  is 1/2  per cent  of the assessed wealth upto the maximum  which is  equal  to  the  total  value  of  the assessed wealth  and thereby  gives a wide discretion to the Wealth Tax  Officer without  any guidelines  and  thus  this discretion violates Article 14 of the Constitution.      It was  also contended that levy of penalty at the rate of 1/2  per cent  is discriminatory because the assessee who is a  smaller assessee  and whose  wealth tax is assessed at 1/2 per  cent also  will suffer  a penalty  of 1/2  per cent whereas the  other who  may be  a substantital  assessee and pays wealth  tax at  a higher  rate still  the penalty which could be  imposed is only 1/2 per cent and in this manner so far as  a smaller assessee is concerned it is harsh, whereas for a  substantial assessee it is rather lenient and thus is discriminatory and, 860 therefore, contrary  to the  provisions contained in Article 14 of the Constitution.      It is  clear from what has been stated earlier that the question is  not at all of public importance nor it is going to affect  a number  of assessees  as admittedly the law has been amended thereafter and the present petition is the only petition in  respect of  the provisions  of Section 18 as it stood in 1969-70.      So far  as the  question of  confiscatory nature of the provision is  concerned, it  is clear  that the  penalty has been provided  at the  rate of  1/2  per  cent  of  the  net assessed wealth  per month  or each  month’s delay.  It  is, therefore, clear  that for  a month’s  delay in  filing  the return the  only penalty  which could  be imposed is 1/2 per cent of  the total  wealth. It  was contended  that if  this delay goes  on to  the extent that the penalty will be equal

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to the wealth as that is the maximum limit permissible it is confiscatory and, therefore, contravenes Article 19(1)(f) of the Constitution.  This contention  is  purely  based  on  a hypothesis consideration of which is nothing but an academic exercise as admittedly the penalty imposed on the petitioner is only  for four  months delay  which will come to only two per  cent  of  the  total  wealth  assessed  and  it  could, therefore, not be contended that the penalty imposed against the petitioner  is confiscatory  in nature. Such a situation can never  arise as  admittedly the  provision has then been amended and there is no question of such a situation now. In this view  of the  matter this contention cannot be accepted as it  is just  a mere imagination and is not based on facts of this  case. The  imposition of penalty at the rate of 1/2 per cent  (of the  total assessed  wealth) for  each month’s delay could not be said to be consiscatory in nature.      It was  contended that  the penalty  should  have  been related to  tax rather than to the wealth and as it has been co-related with  wealth it is unreasonable. This argument is utilised for  challenging this provision as in contravention of Article  19(1)(f) as  well as  of Article 14. The levy of penalty of  1/2 per  cent of the total wealth assessed could not be  said to  be unreasonable for any reason on the basis of which  it could  be said that it will be in contravention of Article 861 19(1)(f). The  other argument  on  the  basis  of  which  an attempt was  made to  attract Article 14 is that in the case of a  small assessee  where the  rate of tax is 1/2 per cent and still  he can  suffer a  penalty at  the rate of 1/2 per cent whereas  an assessee whose assessed wealth is of higher valuation wherein he is liable to pay wealth tax at a higher rate still  if he commits default as contemplated under this provision the  penalty to  which he  will be  liable to  pay wealth tax  at the  rate of  3 per  cent of the total wealth assessed. This  contention advanced  by the  learned counsel appears to  be fallacious as whatever the rate of tax but if he is  a small  assessee the penalty will be 1/2 per cent of the total wealth assessed and if he is a bigger assessee the penalty will  be 1/2  per cent of the total wealth assessed. Thus in case of a smaller assessee 1/2 per cent of the total wealth assessed will be much less as compared to the 1/2 per cent in  the case  of a  substantial assessee  whose  wealth assessed is of much higher value thus although it is 1/2 per cent in both the cases, as it is related to the total wealth assessed smaller the assessee lesser will be the penalty and richer the  assessee the  penalty will  be higher  and by no stretch of  imagination this  could be  said  to  be  either unreasonable or  discriminatory. This  penalty will  be  for default of each month in this view of the matter, therefore, neither it could be contended that it is in contravention of Article 19(1)(f)  nor in  contravention of Article 14 of the Constitution.      Learned counsel  placed reliance on a decision reported in Kunnathat  Thathunni Moopil  Nair v.  State of  Kerala  & Anr.,  [1961]   3  S.C.R.   77  where  while  examining  the constitutional validity  of the  Land  Tax  imposed  by  the Travancore-Cochin Land  Tax Act,  1955 this  Court struck it down on the ground that it gave a blanket power to the State to exempt  any one  from  operation  of  this  Act  and  for exercise of  power under  Sec. 7 there were no guidelines or principles laid  down in  the  Act  itself.  This  decision, therefore, is  of no  consequence  so  far  as  the  present petition is concerned.      It  appears  that  during  the  period  this  provision

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remained in  force nobody challenged this except the present and one  before the  Madras High Court the decision of which is reported in Janab M.M. Sultan Ibrahim Adhum v. Wealth Tax Officer I  Karaikudi, 91  I.T.R. 417  where exactly  similar contention was  repelled by the Division Bench of the Madras High Court. 862      It is,  therefore, clear  that besides  the contentions advanced in  this case are of purely academic importance and are of  no consequence,  in  future  on  merits  also  there appears to  be no  substance in  the contentions advanced by the learned  counsel for  the petitioner.  In  our  opinion, therefore, the  petition is  without any  substance and  is, therefore, dismissed.  In  the  circumstances  of  the  case parties are  directed to  bear  their  own  costs.  Security amount if deposited will be refunded to the petitioner. M.L.A.                                   Petition dismissed. 863