E. M. Narayanan Unni, A.M.: As above appeals are inter-connected and raise common contentions, they are consolidated and disposed of by common order. For assessee s failure to file his returns of net wealth for above assessment years, within time allowed under s. 14(1) of WT Act, 1957 ( Act ) WTO initiated proceedings under s. 18(1) (a) of Act and called upon assessee to show cause why penalties should not be imposed under that section. For asst. yr. 1958-59 to 1960-61, returns were filed by assessee only after WTO took action under s. 17 of Act and called upon assessee to file returns. For asst. yr. 1961-62, return was filed only after WTO took action under s. 14(2) and called upon assessee to file his return. returns for above years were due on 30th June, 1958, 30th June, 1959, 30th June, 1960, and 30th June, 1961, respectively. Notices calling for returns of net wealth for all those years were served on assessee on 20th Jan., 1962 and returns were actually filed on 26th Oct., 1962. In response to show-cause notices issued under s. 18(1) (a), assessee raised various contentions which were negatived by WTO as he found that they were without any substance. Ultimately, he found that assessee had committed defaults without reasonable cause and imposed penalties of Rs. 4,849, Rs. 8,444, Rs. 9,290 and Rs. 4,891 respectively for each of years. Aggrieved by above orders, assessee filed appeals before AAC n d contended that orders of penalty were illegal and, in any case, penalties levied were excessive and unreasonable. assessee contended that he had reasonable cause for not filing returns within time as he was student at material time; his affairs were being looked after by kamdar whose eye-sight had failed and there were also appeals pending against assessments which were made against assessee. It was further contended that penalties, if at all leviable, should have been levied with reference to t x that remained to be payable after adjusting tax on provisional assessments paid by assessee. AAC held that assessee had not shown reasonable cause for not filing returns within time and that penalties were properly levied. However, he accepted contention of assessee that penalties should be worked out after giving credit for tax paid by assessee on basis of provisional assessments. However, he gave this relief only for asst. yrs. 1958-59 and 1959-60. For asst. yrs. 1960-61 and 1961-62, even this relief was not granted by AAC. assessee has come before us in second appeal against penalties sustained by AAC. Several contentions have been raised before us against levy of impugned penalties. Firstly, it is contended that assessee had reasonable cause for not filing returns within time and that no penalty should have been imposed for such failure. Secondly, it was contended that imposition of penalty in accordance with provisions of s. 18(1) (a), after its amendment by WT (Amendment) Act, 1964, w.e.f. 1st April, 1965, was illegal as default was committed very much prior to that amendment, and if at all penalty was leviable, it should have been levied in accordance with law, as it stood at time of alleged offence. Thirdly, it was contended that returns have been filed under s. 15 of Act and not under s. 14 and, therefore, no penalty should have been levied. Taking first contention of assessee for consideration, it is case of learned counsel that assessee was bona fide under belief that no part of wealth which has been assessed on him belonged to him individually and that jagir compensation, residential house, etc., belonged to HUF. This was also contention taken up by assessee in appeal against quantum assessments. assessee, at no time, considered these assets as belonging to him individually and, therefore, did not consciously omit to file return of these assets in his individual capacity. Secondly, assessee who was very young at material time was not looking after his affairs but was actually studying in Mayo College, Ajmer and his affairs were being looked after by kamdar who, during material time, was unable to attend to his duties owing to failing eye-sight. It is submitted that for these reasons, assessee had reasonable cause for not filing his individual returns of net wealth. It is seen from records, as also from quantum appeals in this case, which we have heard and disposed of separately, that assessee has all along taken up stand that jagir compensation bonds, residential house, etc., did not belong to him as individual but impartible estate represented by these assets bore character of joint family property and he was not assessable in respect of them, as individual. Though we have held against assessee on these contentions, it could not be said that assessee knew all along that these were his individual assets. His failure to return them as his individual assets could not be held to be failure without reasonable cause. question of assessee s status was fraught with considerable doubt and difficulty and even decision given by us is after considering various authorities cited for and against assessee s case. In these circumstances, it would be difficult to hold that assessee did not have reasonable cause for not returning these assets as belonging to him, as individual. Another legal contention raised by assessee also presents considerable difficulty. amendment to s. 18(1) (a) which was made w.e.f. 1st April, 1965 fixed quantum of penalty leviable at two per cent of tax payable, for each month of default, subject to maximum of 50 per cent of tax. Prior to this amendment penalty imposable was maximum of one and half times of tax payable and no minimum limit was specified. Besides, section prior to its amendment, required that WTO should obtain previous approval of IAC before imposing penalty. section, as amended, has done away with that requirement. It is case of assessee s counsel that default was committed long before amendment of WT (Amendment) Act, and returns for all years were also filed long before amendment, having been filed on 26th Oct., 1967. default had caused thereafter. According to him, law applicable, if at all any penalty was leviable, was law as it stood prior to its amendment as amendment was not purely procedural one. requirement that previous approval of IAC should be taken before imposition of penalty was condition precedent and could not have been waived by WTO. Though penalty could have been levied in accordance with amended quantum, according to learned counsel requirement of previous approval of AAC could not have been waived. Though it could be argued with considerable force that requirement of Though it could be argued with considerable force that requirement of previous approval of IAC was part of procedure for imposition of penalty, objection raised by learned counsel for assessee is not entirely free from doubt or difficulty. Taking along with fact that assessee had reasonable cause for his failure to file his individual returns of net wealth, as stated above, circumstances would clearly go to show that imposition of penalty for these years was not justified. Accordingly, we hereby cancel penalties levied for these four years. Appeal Nos. 284, 285, 241 and 242 succeed and are allowed. Coming to two appeals filed by WTO, they are against reduction i n quantum of penalty granted by AAC for asst. yrs. 1958-59 and 1959-60. In view of our finding above, that penalties for these years were not validly levied, these appeals must fail and are dismissed. D. R. Khanna, J.M.: I have perused order of my learned brother. As for contention of assessee that he carried bona fide doubt as to whether he should have filed returns, I am of opinion that there was no such scope for doubt. We have held in quantum assessment proceedings, that throughout this period assessee was bachelor and had no family of his own. There was, therefore, no question of his having any joint family and ascribing property to same. His status, therefore, could only be that of individual. He also could not throw blame on his kamdar as he was 25 years of age. It is also highly doubtful if he was in those days studying in school. However, it is on another ground that I am unable to take exception to conclusion arrived at by my learned brother. law as it then stood, required WTO to obtain previous approval of IAC before imposing penalty. None such was taken, perhaps on ground that in meanwhile, law had been amended and such prior sanction was done away with. position, however, is not free from difficulty, and, therefore, assessee gets benefit: THIRD MEMBER ORDER Ch. G. Krishnamurthy, Senior Vice President.: In all these cases difference of opinion between learned Members of Jaipur Bench of Tribunal was: "Whether, on facts and in circumstances of case, assessee was prevented by reasonable cause in not filing returns of net wealth for asst. yrs. 1958-59 to 1961-62 within time allowed under s. 14(1) of WT Act, 1957 or not?" Originally question framed used words sufficient cause but later on Members of Jaipur Bench substituted word reasonable for word sufficient so as to bring out intention of learned Members more clearly. Before I go to facts of case, it is necessary to give briefly background that led to difference of opinion between Members. For assessee s failure to file his returns of net wealth for asst. yrs. 1958-59 to 1961-62 within time allowed under s. 14(2) WTO initiated proceedings under s. 18(1)(a) and called upon assessee to show cause why penalties should not be imposed under that section. For asst. yrs. 1958-59 to 1960-61 returns were filed only after initiation of action under s. 17 by WTO. For asst. yr. 1961-62 return was filed after WTO issued notices under s. 14(2). returns for above years were due on 30th June, 1958, 30th June, 1959,30 th June, 1960 and 30th June, 1961, respectively. returns were filed on 26th Oct., 1962 for all years. After considering reply given to show-cause notice issued under s. 18(1) (a), WTO levied penalties holding that there was no reasonable cause preventing assessees from filing returns of wealth in time of Rs. 4,849, Rs. 8,444, Rs. 9,290 and Rs. 4,891, respectively. assessee preferred appeals before AAC and contended that levy of penalties was illegal and also pleaded that there was reasonable cause for not filing returns within time. I shall not at stage refer to reasonable cause that was pleaded before authorities, which authorities have not recognised as such. AAC accepted contention of assessee that penalty should be worked out after giving credit for tax paid by assessees on basis of provisional assessments. That was relief given only for two asst. yrs. 1958-59, and 1959-60. For other years even this relief was denied. Thus, penalties were partly reduced for first two years and confirmed for other two years. matter then came before Tribunal by way of further appeals. Before Tribunal again objection was taken on questions of law as well as on facts. On question of law point taken up was that s. 18(1) (a) was amended by WT (Amendment) Act, 1964 w.e.f. 1st April, 1965 and levy of penalties in accordance with earlier provision was invalid. section before amendment provided that WTO should obtain previous approval of IAC before imposing penalty. section as amended has done away with this requirement. Since previous approval of IAC was not obtained levy of penalties without obtaining approval of IAC was illegal. On question of reasonable cause same contentions as were urged before lower authorities were reiterated. learned Accountant Member was of opinion that assessee was entitled to succeed on both counts. He accepted assessee s plea that there was reasonable cause that prevented assessee from filing returns of his wealth within time allowed. He also accepted plea of assessee on question of law. But learned Judicial Member did not agree with learned Accountant Member about existence of reasonable cause. He, thus, differed with learned Accountant Member s view in this question of reasonable cause but agreed with him on legal point. matter was then taken up by way of reference to Rajasthan High Court at instance of Revenue on legal issue. By its judgment dt. 19th Dec., 1983 Rajasthan High Court answered question regarding jurisdiction in favour of Revenue and against assessee. It held that WTO was justified in levying penalties and there was no illegality about it. Then it noted that there was difference of opinion between Members as to existence of reasonable cause. To resolve that difference, High Court directed President to refer difference of opinion to Third Member as provided for in statute. It was pursuant to this direction that Members have framed difference of opinion as above, referred to President, who is pleased to nominate me as Third Member, for my opinion. Now I have heard parties at great length, perused records and I am Now I have heard parties at great length, perused records and I am of opinion that in this case more appropriate view would be to hold that assessee had reasonable cause for belatedly filing returns of wealth. At relevant time assessee was student. He is fourth son of late Maharaja Umed Singh, former ruler of Jodhpur Estate. On death of Maharaja eldest son, late Maharaja Hanumant Singh, assessee s brother, succeeded to Jodhpur Estate. Maharaja Hanumant Singh in accordance with custom obtaining in royal family of Jodhpur gave to each of his four younger brothers including assessee certain villages and residential house for their maintenance. legitimate question that arose for purpose of wealth-tax and also income-tax was whether these villages and residential house received for maintenance from eldest brother constituted individual property or joint family property. view that prevailed till it was decided authoritatively by appropriate authority was that these properties formed impartible estate. In July 1954, jagir lands were resumed by Government of Rajasthan and jagir compensation bonds were issued to assessee in April 1960. What was undecided insofar as assessee was concerned and point under which assessee was labouring was whether compensation bonds and residential house constituted joint family property or individual property. This is one major issue, which remained unsettled for long time till matter reached Tribunal before Jaipur Bench and decided by it by its order dt. 18th Jan., 1972 not without difficulty and not without elaborate discussion of relevant law concerning law of primogeniture, impartible estate and succession to impartible estate with special reference to such lands given for maintenance. third point was assessee being student at relevant time and belonged to royal family allowed his matters to be looked after by kamdar, who developed very bad eyesight almost becoming blind for which reason he allowed these matters to lie not because it paid to delay returns but because question of status was difficult to decide. It is these matters that were projected before WTO as well as AAC and Tribunal in support of view that aggregate effect of these circumstances, had been cause for delay in filing of returns. While WTO and AAC rejected them, learned Accountant Member accepted it. In this context I would like to quote from order of learned Accountant Member: "6. It is seen from records, as also from quantum appeals in this case, which we have heard and disposed of separately, that assessee has all along taken up stand that jagir compensation bonds, residential house, etc., did not belong to him as individual but impartible estate represented by these assets bore character of joint family property and he was not assessable in respect of them, as individual. Though we have held against assessee on these contentions, it could not be said that assessee knew all along that these were his individual assets. His failure to return them as his individual assets could not be held to be failure without reasonable cause. question of assessee s status was fraught with considerable doubt and difficulty and even decision given by us is after considering various authorities cited for and against assessee s case. In these circumstances, it would be difficult to hold that assessee did not have reasonable cause for not returning these assets as belonging to him, as individual. " But learned Judicial Member differed from this view. He held that there was no scope for doubt. According to him, assessee being bachelor, there was no question of his having any joint family to think that property belonged to joint family. He also held that assessee could not throw blame on his kamdar and it was highly doubtful whether in those days he was studying in school. I am of considered opinion that while learned Judicial Member expressed doubts about contentions raised on behalf of assessee did not give categorical finding. It was fact admitted that at relevant time he was student. Merely because he was of 25 years of age, it does not stand to reason that he should entrust his matters to his kamdar. It is also admitted fact that kamdar was losing his eye-sight and was in very precarious condition. It is very easy to come to conclusion that assessee s status was that of individual after decision to that effect was reached after due consideration of law on subject. To ascribe this view to t h e assessee from beginning having due regard to welter of legal complications that were involved in this case which was not denied or could not be denied is rather very unfair. What we have got to see in case of this nature is whether assessee had reasonable cause. reasonable cause must be assessed not from standpoint of Revenue but from standpoint of assessee. reasonable cause must be tangible one existing as such but should not be pretence or hypocritical statement. Another fact that is also relevant to consider at this juncture is assessee paid taxes due even before filing returns of wealth. total sum of Rs. 24,370 was claimed to have been paid before assessment was over on provisional basis as per returns. It is also very significant to note that in case of assessee s brother status claimed as that of HUF was accepted by Tribunal following order of Tribunal in assessee s another brother s case Maharajadhiraj Himmat Singhji vs. CWT (1984) 38 CTR (Raj) 342: (1984) 150 ITR 416 (Raj). It is of much more interest to note that view taken in case of Maharajadhiraj Himmat Singhji (supra) was accepted by High Court. In these circumstances, I find it difficult to agree that conflict of status was not present either to mind of assessee or to kamdar, who was attending to his affairs which acted as reasonable cause for delay in filing of returns. There was no contumacious conduct shown which would benefit assessee by delaying filing of returns. I may also refer to decision of Rajasthan High Court in case of CIT vs. Rawat Singh & Sons 1977 CTR (Raj) 248: (1979) 120 ITR 65 (Raj) in which case High Court held that order imposing penalty for failure to carry out statutory obligation is result of quasi-criminal proceeding and penalty will not ordinarily be imposed unless party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of his obligation. Secs. 270 and 271 of IT Act, 1961 ( 1961 Act ) imposes penalty on contumacious or fraudulent assessees and above principle applies to imposition of penalty under these sections. By this judgment, Rajasthan High Court laid down rule that it is for Revenue to show that assessee had deliberately acted in defiance of law or its conduct was contumacious or dishonest. Following judgment of Supreme Court in Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC), Rajasthan High Court rejected reference filed by CIT of IT under s. 256(2) of 1961 Act to direct Tribunal to make reference where penalty levied under s. 271(1) (a) was cancelled by Tribunal holding that view taken by Tribunal was correct approach and there was no misdirection on question of law. In other words, this decision insofar as Rajasthan High Court is concerned is authority for proposition that it is for Revenue to prove mens rea or by whatever name that may be called. assessee in this case pleaded before authorities below consistently what according to him prevented from filing return of wealth but authorities have not proved that explanation offered was incorrect, false or subterfuge. That onus that was cast on Revenue by this decision does not seem to have been discharged. learned Departmental Representative pointed out that question of status as being reasonable cause on which so much reliance was placed was not taken up at any stage except before Tribunal. That plea having been set up for first time before Tribunal could not have been present to mind of assessee. Therefore, that plea should be held to be afterthought. Though he laid greatest emphasis on this aspect but I have to go by what facts found by learned Members. In order of learned Accountant Member, this plea was mentioned and was accepted by him as existing acting as impediment in way of filing returns of wealth in time. He then referred to decision of Gauhati High Court in Sewbalakram & Co. vs. CIT (1983) 26 CTR (Gau) 28: (1984) 146 ITR 148 (Gau) where Gauhati High Court held that failure to file return when no notice is issued is distinguishable from failure to file return after notice to file return is served. onus will be on assessee to prove reasonability or otherwise of his decision not to file return by introducing evidence. If cause was such as was within special knowledge of assessee then Department may discharge its burden by showing that cause if worked true and reasonable would have been reflected in accounts and records and from common course of human conduct and that it was not reasonable for assessee to have failed to discharge his obligation to file return. In this case assessee was registered firm with its principal place of business in Kohima. notice under s. 139(2) of 1961 Act was issued for asst. yr. 1962-63 in December 1962. No return was filed. Thereafter notice under s. 274, r/w s. 271(1) (a), of 1961 Act was issued on 5th Feb., 1963. assessee filed return on 13th April, 1964 and explained that return could not be filed earlier because of civil disturbances in Kohima. ITO found that there was nothing on record to show that conditions were disturbed and that no request for extension of time on that ground was made. ITO levied penalty and when that order was confirmed by Tribunal, on reference High Court held that levy of penalty was justified because assessee did not prove that it was affected by disturbances during relevant period. point that was sought to be made by referring to this decision was that what was within special knowledge of assessee, he must prove. It is not for Department to prove what was within special knowledge of assessee. If there is failure on part of assessee to prove what was within his special knowledge, he must take consequences. There cannot be any quarrel with this proposition. assessee in this case contended what according to him was reasonable cause. Therefore, Department has to show that it was not correct or that it was wrong or false. That was not done in this case except disbelief. In case before Gauhati High Court, High Court found that ITO found that there was nothing on record to show that conditions around Kohima were disturbed, i.e., Department was able to counter plea put forward by assessee and could show it to be false. That was not case here. This decision, therefore, in my opinion does not hold Revenue s case insofar as I am concerned as Third Member. He also referred to decision of Full Bench of Kerala High Court in case of CIT vs. Gujarat Travancore Agency 1975 CTR (Ker) 1 (FB): (1976) 103 ITR 149 (Ker). Full Bench held in this case that Department must prove mens rea before levying penalty under s. 271(1) (a) was not correct view. Mere use of expression without reasonable cause cannot import mental element or mens rea. Before imposition of penalty under s. 271 what is required is that officer must be satisfied not arbitrarily but judicially that person has without reasonable cause failed to furnish return. But case relied upon by Rajasthan High Court which is jurisdictional High Court and which is binding on me, seemed to me to take different view. I should, therefore, follow what was laid down by Rajasthan High Court. In this context I may also point out that penalties levied for subsequent years on same assessee for more or less similar reasons were cancelled by Tribunal. I am, therefore, of opinion that on taking into account totality of circumstances assessee had reasonable cause for delay in filing of return of wealth and that view expressed by learned Accountant Member is more appropriate and justified and I would express my agreement with that view. Now matter will go back to original Bench which heard appeals for decision according to majority opinion. *** MAHARAJA SHRI DEVI SINGH JI OF JODHPUR v. WEALTH-TAX OFFICER