WEALTH-TAX OFFICER v. TIKA MANJENDRA SHAH
[Citation -1985-LL-0302-1]

Citation 1985-LL-0302-1
Appellant Name WEALTH-TAX OFFICER
Respondent Name TIKA MANJENDRA SHAH
Court ITAT
Relevant Act Wealth-tax
Date of Order 02/03/1985
Assessment Year 1973-74, 1974-75, 1975-76
Judgment View Judgment
Keyword Tags principles of natural justice • opportunity of being heard • period of limitation • registered post • legal infirmity
Bot Summary: Alongwith the demand notices and the assessment orders for the three assessment years, the assessee had also been served notices under s. 18 of the WT Act calling upon him to explain why penalties be not imposed under s. 18 for late submission of returns. The assessee appealed against the penalties imposed and it was contended before the AAC that there had been no compliance of the provisions of s. 18 of the WT Act inasmuch as the assessee had not been given an opportunity of being heard before the imposition of penalties in the three assessment years. Shri J. S. Rao, senior Departmental Representative has contended that there was no basic illegality attached to the orders passed by the WTO imposing penalties and that in fact the show cause notices had been actually served upon the assessee which were defied inasmuch as the assessee never appeared to submit any replies, thereto. According to him, the facts which were found by the AAC having not been controverted by the Revenue and no ground having been taken in that direction, there was no justification in blindly contending that the penalties had been wrongly cancelled by the AAC. It is next contended by Shri Monga that when the first set of notices were issued by the WTO, the officer concerned was one Mr. Karkara while when the penalties had been imposed, there had been a change in the inclumbant and one Mr. A. N. Saxena had come to hold the charge of Distt. Shri Monga maintains that it was incumbant upon the second WTO to have granted an opportunity of being heard, before imposing any penalties and since he had failed to do so, no flaw could be found in the combined order of the AAC cancelling the penalties. In any case, it appears to us that when the initial set of notices is admitted to have been received by the assessee for all the three assessment years, we would not be able to agree with the finding of the AAC that the penalty orders suffer from any basic legal infirmity. The jurisdiction to frame the assessment and to initiate the penalty proceedings validly vested in the WTO and therefore, on the grounds of alleged irregularity which supervened, the AAC could not have validly cancelled, the penalties particularly when the notices initially issued by the WTO under s. 18 had been validly served upon the assessee.


These three appeals by revenue are directed against combined order of AAC cancelling penalties imposed upon respondent under s. 18 (1) (a) of WT Act, 1957 in asst. yrs. 1973-74, 1974-75 and 1975-76. Since identical grounds have been raised by Revenue, we would conveniently consolidate them and disposed them of by common order. returns of wealth for asst. yrs. 1973-74, 1974-75 and 1975-76 were filed by assessee on 17th Feb. 1979 resulting in delays of 67,55 and 43 months respectively. Assessments for asst. yrs. 1973-74 and 1974-75 were completed on 12th Feb. 1980 while that of asst. yr. 1975-76 was completed on 11th March 1980. Alongwith demand notices and assessment orders for three assessment years, assessee had also been served notices under s. 18 (2) of WT Act calling upon him to explain why penalties be not imposed under s. 18 (1) (a) for late submission of returns. In response to those show cause notices, no replies had been sent by assessee. Subsequently WTO sent another set of notices on 22nd Feb. 1982. Since no reply had been received by WTO to anyone of notices issued by him, penalties were imposed under s. 18 (1) (a) after holding that assessee had no explanation to offer for late submission of returns. assessee appealed against penalties imposed and it was contended before AAC that there had been no compliance of provisions of s. 18 (2) of WT Act inasmuch as assessee had not been given opportunity of being heard before imposition of penalties in three assessment years. With regard to notices said to have been sent by WTO on 22nd Feb. 1982, it was contended that these had not been served upon assessee. After considering representation made, AAC cancelled penalties as per his finding contained in para 6 of his order which is reproduced below: "I have considered carefully facts of case, submissions made by appellant and also examined impugned letter dt. 22nd Feb. 1982 and A. D. (in token of service of aforesaid letter), I am of opinion that submissions made by appellant s counsels are factually based. A. D. form indicates date of issue as 6/2 whereas letter is stated to have been issued on 22nd Feb. 1982 (i. e, it has been registered by post 16 days before issue which is quite impossible). In totality of facts and circumstances of case, I hold that no adequate opportunity, under s. 18 (2), which is mandatory before imposition of any penalty, was afforded to appellant. As such orders imposing penalties, suffer from basic legal infirmity, and are bad in law. In view of above situation, in law. In view of above situation, I am unable to sustain orders, and same are hereby directed to be cancelled." Shri J. S. Rao, senior Departmental Representative has contended that there was no basic illegality attached to orders passed by WTO imposing penalties and that in fact show cause notices had been actually served upon assessee which were defied inasmuch as assessee never appeared to submit any replies, thereto. On other hand Shri P. N. Monga, ld. authorised counsel of respondent has by his elaborate arguments supported order of AAC and assailed those passed by WTO. Even though Shri Monga has on instruction from his client accepted fact that notices under s. 18 (2) initially issued by WTO alongwith copies of assessment orders, demand notices and Challans had been duly received by assessee in all three assessment years, it is contended by him that penalties had not been imposed on account of default committed with regard to first set of notices and that since penalties were imposed as consequence of alleged default and non compliance of second set of notices which were not served upon assessee at all, penalty proceedings were vitiated and bad in law. Apart from this basic argument Mr. Monga has made several other points. According to him, facts which were found by AAC having not been controverted by Revenue and no ground having been taken in that direction, there was no justification in blindly contending that penalties had been wrongly cancelled by AAC. It is next contended by Shri Monga that when first set of notices were issued by WTO, officer concerned was one Mr. Karkara while when penalties had been imposed, there had been change in inclumbant and one Mr. A. N. Saxena had come to hold charge of Distt. X (15) in place of Mr. Karkara. According to him, second incumbant i. e. Mr. Saxena having failed to grant opportunity of being heard. there was no justification for him to impose penalties which were rendered ab initio void on account of violation of principles of natural justice. Shri Monga maintains that it was incumbant upon second WTO to have granted opportunity of being heard, before imposing any penalties and since he had failed to do so, no flaw could be found in combined order of AAC cancelling penalties. Referring to decision of Hon ble Supreme Court of India in case of Guduthur Bros. vs. ITO reported in (1960) 40 ITR 298 (SC), ld. counsel submits that facts were wholly different in that case. It is also submitted by him that that decision would not be applicable under provisions of 1961 Act where limitation provisions were brought on statute book in contradistinction to provisions of 1922 Act which did not provide any time limitation for imposition of penalties. On being pointed out that law of limitation applies to original orders passed by WTO and not to orders which may be directed to be made by him pursuant to order of higher authority, Shri Monga submits that in accordance with principle of strict interpretation, period of limitation can not be extended in matters of penalty as result of order of higher authority. In support of this contention Shri Monga has referred to Maxwell on Interpretation of Statutes (Twelfth Eddition by Langan pages 238 & 245). In particular he has relied on following view of ld. jurist: "Similarly, statutes dealing with jurisdiction and procedure are, if they relate to infliction of penalties, strictly construed; compliance with procedural provisions will be stringently exacted from those proceeding against person liable to be penalised, and if there is any ambiguity or doubt, it will, as usual be resolved in his favour." In end Shri Monga has referred to decision of Hon ble Allahabad High Court in case of Rajeev Kumar Gupta vs. CIT (1980) 123 ITR 907 (All) i n order to contend that show cause notice having not been issued and served by WTO imposing penalties, orders passed by him were bad in law and rightly cancelled by AAC. We have very carefully considered rival submissions. We have also carefully gone through orders passed by lower authorities. record of WT proceedings for asst. yrs. 1973-74, 1974-75 and 1975-76 had also been perused by us. On going through records of WTO we have firstly satisfied ourselves that notices under s. 18 (2) had been issued and served upon assessee in respect of all three assessment years. These notices under s. 18 (2) had been sent alongwith copies of assessment orders and demand notices for three assessment years. Secondly, we find on examination of postal acknowledgement slip and copies of notices issued on 22nd Feb. 1982 that latter had been served by postal authorities on someone on 3rd March 1982. communication dt. 22nd Feb. 1982 fixing hearing of penalty proceedings on 4th March 1982 had been propertly addressed to Shri T. M. Shah, assessee at 5, Bhagwan Das Road, New Delhi. According to us when notice is sent by registered post and is duly addressed and postal acknowledgement is received after obtaining signature of recipient at given address, presumption is of proper service of notices. In any case, it appears to us that when initial set of notices is admitted to have been received by assessee for all three assessment years, we would not be able to agree with finding of AAC that penalty orders suffer from any "basic legal infirmity". Neither AAC nor learned counsel for respondent would in these circumstances, be justified in saying that principles of natural justice had been violated by WTO before imposing penalties. On other hand, it appears to us that assessee altogether disregarded notices of show cause issued by WTO on both occasions. As far as contention of ld. counsel that WTO who actually imposed penalties upon assessee ought to have given opportunity of being heard, relevant provisions of WT Act are contained in s. 39 thereof. These are in following terms: "Whenever in respect of any proceeding under this Act any WT authority ceased to exercise jurisdiction and is succeeded by another who has and exercises such jurisdiction, authority so succeeding may continue proceeding from stage at which proceeding was left by his predecessor: "Provided that assessee concerned may demand that before proceeding is so continued previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he reheard." In present case, succeeding WTO had in accordance with above provisions, jurisdiction to continue with penalty proceedings from stage at which proceedings had been left by his predecessor-in-office. assessee can demand that before proceedings are continued by successor-in-office he should be re-heard. That situation, however, does not prevail in present case, Here as stated earlier assessee had inspite of fact that notices under s. 18 (2) of WT Act had been initially served upon it by WTO, failed to submit any replies thereto, Even when second set of notices were issued, there had been no compliance on part of assessee and no request had been made by him or on his behalf that succeeding officer must hear him before imposing any penalties. In these circumstances, we would not be able to agree with representation made by Shri Monga that penalties imposed by successor WTO were bad in law. In present case WTO had jurisdiction under law to frame assessment and to call upon assessee to explain why penalties be not imposed upon him for inordinate delays in submission of returns. Subsequently, even if second set of notices were not served well within time or adequate opportunity was not made available to assessee AAC could have at best held that it was case of irregularity which supervened after jurisdiction had been legally assumed. It was not at all case of illegality permeating all through proceedings but case where some irregularity may at best be alleged in so far as adequate opportunity was not available to assessee when notices fixing hearing for 4th March 1982 had been served upon it on 3rd March 1982. According to us law laid down by Hon ble Supreme Court of India in case of Guduthur Bros. (1960) 40 ITR 298 (SC) would squarely apply. facts of that case and present case may not be exactly similar but these were substantially similar. mere fact that no limitation was provided for completion of penalty proceedings under 1922 Act would not, according to us, make any difference to applicability of decision of Hon ble Supreme Court of India under provisions of 1961 Act. We have gone through Maxwell s Commentary on Interpretation of Statutes and in particular through that portion of book on which reliance has been placed by ld. counsel of assessee. We would agree that provisions regarding penalty proceedings must be strictly construed and that compliance of procedural provisions must be stringently exacted. But here in this particular case where in fact notices to show cause had been admittedly received by assessee in all three assessment years, we do not see how views of learned author on which reliance has been placed can be said to operate against view point of Revenue. Similarly decision of Hon ble Allahabad High Court reported in Rajeev Kumar Gupta vs. CIT (1980) 123 ITR 709 (All) also does not help case of assessee at all. There in that case penalty proceedings had been quashed on account of fact that no penalty notice had been issued after assessment order had been rectified even though penalty had been imposed on basis of rectified order. In present case both sets of penalty notices were issued in respect of orders of assessment framed by WTO which were not modified or rectified and therefore, decision relied upon by ld. counsel will not be applicable. In above facts and circumstances, we are of considered view that AAC had no justification in cancelling orders imposing penalties. There was no basic legal infirmity attached to penalty orders. jurisdiction to frame assessment and to initiate penalty proceedings validly vested in WTO and therefore, on grounds of alleged irregularity which supervened, AAC could not have validly cancelled, penalties particularly when notices initially issued by WTO under s. 18 (2) had been validly served upon assessee. Since he acted in contravention of law laid down by Hon ble Supreme Court in above mentioned decision of Guduthur Bros. vs. ITO (1960) 40 ITR 298 (SC) we restore appeals to his file with direction that he shall re-decide appeals on merits after hearing assessee and WTO and after considering as to whether there were or there were not any reasonable grounds for delayed submission of returns on part of assessee in three assessment years. appeal filed by Revenue are allowed for purposes of statistics. *** WEALTH-TAX OFFICER v. TIKA MANJENDRA SHAH
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