1. The applicant revenue by the present reference application, under Section 27(1) of the Wealth-tax Act, 1957 ('the Act'), presented on 23-7-1984, require the Tribunal to refer a question, for the esteemed opinion of the Hon'ble Delhi High Court, said to be a referable question of law and further stated to be arising out of the order dated 2-5-1984 of Bench 'T' of the Tribunal, Delhi in WT Appeal No. 338 (Delhi) of 1983 for the assessment year 1971-72.
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in vacating the order of the WTO who imposed penalty of Rs. 9,039 under Section 18(1)(a) of the Wealth-tax Act, 1957 especially in view of the provision of Section 42C of the Wealth-tax Act, 1957 3. Inasmuch as, in our opinion, no referable question of law, as suggested by the revenue, emanates from our said order, we, therefore, decline to make a reference. However, for doing so, we state our reasons in the succeeding paragraphs.
4. Return of net wealth was due by 30-6-1971. It was filed by the assessee only on 5-3-1975. There was, thus, a delay of 44 months. The WTO issued a show-cause notice in terms of Section 18(2) of the Act. It appears, the WTO asked the assessee to explain similar delays in the filing of wealth-tax returns for various other assessment years as well. The assessee filed a reply on 16-3-1980. This dealt with the assessment years 1970-71 and 1972-73 to 1974-75 ; but there was no explanation given here regarding the delay in filing the return for this assessment year. The WTO considered this reply. However, since the assessee had no explanation to offer for the assessment year 1971-72 (the assessment year in appeal here) he concluded that the assessee had 'no evidence' to explain the delay. In these circumstances, he levied the impugned penalty.
This is an appeal against order under Section 18(1)(c) for failure to file the wealth-tax return late as required by Section 14(1). The return was due on 30-8-1971 but was actually filed on 5-3-1975. But for believing that the return for 1970-71, 1972-73 to 1974-75 were filed in time, the assessee adduced no reason for late filing of the return for this assessment year, i.e., 1971-72. In a question as to whether any extension application was filed no proof could be adduced of having filed the 1970-71 return within time, no reasonable cause was established for late filing of the return. The penalty imposed of Rs. 9,030 is hereby confirmed.
6. The matter was thereafter taken by the assessee before the Tribunal by way of second appeal. The appeal was allowed, inter alia, with the following observation : In the light of the above decisions (no contrary authority was cited before us) we find it difficult to sustain the penalty order. It is common ground that limitation supervened on 31-3-1980 for levy of the impugned penalty in this case. The show-cause notice was issued on 26-3-1980 but explanation thereunder was required to be given by the assessee on 13-3-1980. Notice was, therefore, ab initio void. No doubt, the assessee acted upon the notice to the best of her ability but then as the decisions cited above lay down, there is no estoppel against law. She is entitled to point out that the penalty notice was bad in law, at any stage of the proceedings subsequent to the levy of penalty. We, therefore, cannot uphold the penalty order. The further question is whether to restore it to the WTO for passing a de novo order after giving a fresh opportunity to the assessee of being heard. Here, following with respect, the decision of the Allahabad High Court in Budhar Singh & Sons v. CIT [1983] 13 Taxman 317 we have to hold that the matter cannot be restored to the file of the WTO. The result is, we vacate the order of the Wealth-tax Officer.
7. In the light of the preceding paragraphs, it is seen that the question raised by the revenue was neither examined by the revenue authorities nor by the Tribunal as no such issue was ever raised. In the order, naturally there is no discussion or mention about this issue. In fact, the question raised is riot at all relateable to the order. The Tribunal allowed the appeal after appreciating the material placed on record. Moreover, the section, i.e., 42C of the Act made mention of in the question was introduced from 1-10-1975 and the return was filed earlier to that as we are concerned with the assessment year 1971-72. At the same time, the Board's circular further makes it abundantly clear that this section was not having retrospective effect.
In these circumstances, since no referable question of law, as suggested by the revenue, arises from the said order, we decline to make a reference.
1. Since 1 have not been able to persuade myself to agree with the order of the learned Judicial Member rejecting the captioned Reference Application No. 1092 (Delhi), of 1984 filed by the revenue, I would with respect express a note of dissent as follows.
2. In the assessment" year 1971-72 a penalty of Rs. 9,030 had been imposed upon the assessee under the provisions of Section 18(1)(a). The return of wealth was due to be filed on 30-6-1971. But it had been filed only on 5-3-1975. In order that the assessee could explain the delay of 44 months in the submission of wealth-tax return, a show-cause notice under Section 18(2) dated 17-3-1978 had been issued. Thereafter another opportunity of being heard had been granted to the assessee by the WTO vide letter dated 6-3-1980. On 16-3-1980 the assessee sent a reply explaining the facts regarding the alleged delayed submission of wealth-tax returns for the assessment years 1970-71 and 1972-73 to 1974-75 but in respect of the assessment year 1971-72 no cause had been shown. Since the assessee had failed to show any reasonable cause for the delayed submission of the return for the assessment year 1971-72, the WTO imposed a penalty of Rs. 9,030 by holding as follows : While explaining the reasons for delay in filing the wealth-tax returns for various years the assessee vide his .reply dated 16-3-1980 has offered no excuse for the default pertaining to the assessment year 1971-72. So far as the default relating to other years, the assessee has submitted that he had filed application seeking extension of time and has produced necessary evidence but for the assessment year 1971-72 not only that his reply was absolutely silent so far as this year is concerned but the assessee had also no evidence to cover up the delay. Obviously the default of late filing the return becomes patent and the penalty is leviable.
When the matter went up in appeal before the AAC, the latter upheld the order of the WTO by holding as follows : This is an appeal against order under Section 18(1)(0) for failure to file the wealth-tax return late as required by Section 14(1). The return was due on 30-8-1971 but was actually filed on 5-3-1975. But for believing that the return for 1970-71, 1972-73 to 1974-75 were filed in time, the assessee adduced no reason for late filing of the return for this assessment year, i.e., 1971-72. In a question as to whether any extension application was filed no proof could be adduced of having filed the 1970-71 return within time, no reasonable cause was established for late filing of the return. The penalty imposed of Rs. 9,030 is hereby confirmed.
Dissatisfied with the order passed by the AAC, an appeal was filed before the Tribunal raising the following ground : On the facts and in the circumstances of the case, the action of the learned AAC of Wealth-tax in confirming the penalty of Rs. 9,030 imposed under Section 18(1)0) of the Wealth-tax Act by the learned WTO, is most arbitrary and unjustified and the same must be quashed.
At the time of hearing of the appeal on 20-3-1984 the authorised counsel of the assessee moved an additional ground which was in the following terms : That the notice for levy of penalty is irregular and invalid inasmuch as the notice dated 26-3-1980 calls for appearance on 13-3-1980 and on that ground alone the penalty be quashed.
This prayer is being made since it is a legal issue and does not call for any investigation of the records.
3. The Tribunal heard the representations of the assessee and the department on the admissibility of the additional ground and after so doing it admitted the additional ground as, according to it, the question was a pure question of law and as it went to the root of the matter. After the additional ground was admitted the learned counsel of the assessee argued that the penalty notice dated 26-3-1980 asking for compliance of the assessee on 13-3-1980 was ab initio void and that all proceedings founded upon such an invalid notice were non est in law. On the other hand, the departmental representative submitted that the assessee having already submitted a reply to the show-cause notice, there was no illegality or irregularity attached to the proceedings.
4. After hearing the parties in respect of the submissions made with regard to the additional ground raised by the assessee, the Tribunal held after taking into account the various pronouncements of the Hon'ble High Courts and the Supreme Court in CIT v. Bhudhar Singh & Sons [1983] 143 ITR 322 [wrongly mentioned AS 143 IRE 323 in the order of the Tribunal], CIT v. Ram Baran Ram Nath [1976] 104 ITR 691 (AIL), Director of Inspection v. Pooran Mall & Sons [1974] 96 ITR 390 (SC), C.G. Krishnaswami Naidu v. CIT [1975] 100 ITR 33 (Mad.), Addl. CIT v.P. Nammalvar Naidu & Sons [1979] 116 ITR 863 (Mad.) and Continental Commercial Corporation v. ITO [1975] 100 ITR 170 (Mad.) that it was difficult to sustain the penalty order. In paragraph No. 11 of its order the Tribunal held as follows : In the light of the above decisions (no contrary authority was cited before us) we find it difficult to sustain the penalty order. It is common ground that limitation supervened on 31-3-1980 for levy of the impugned penalty in this case. The show-cause notice was issued on 26-3-1980 but explanation thereunder was required to be given by the assessee on 13-3-1980. Notice was, therefore, ab initio void. No doubt the assessee acted upon the notice to the best of her ability but then as the decisions cited above lay down, there is no estoppel against law. She is entitled to point out that the penalty notice was bad in law, at any stage of the proceedings subsequent to the levy of penalty. We, therefore, cannot uphold the penalty order. The further question is whether to restore it to the WTO for passing a de novo order after giving a fresh opportunity to the assessee of being heard. Here, following with respect, the decision of the Allahabad High Court in Budhar Singh & Sons case (supra) we have to hold that the matter cannot be restored to the file of the WTO. The result is, we vacate the order of the WTO.Even though, normally a question whether there is a reasonable cause in the submission of a return, is a question of fact in the present case the penalty was cancelled by the Tribunal not on the ground that there existed a reasonable cause for the inordinate delay in the submission of return for the assessment year 1971-72 but on the ground that one of the notices issued by the WTO was ab initio void. According to me, the Tribunal having itself held that the additional ground raised by the assessee gave rise to a pure question of law and that pure question of law having been decided by the Tribunal in cancelling the penalty, a question of law does arise from the order of the Tribunal dated 2-5-1984. The question as raised by the revenue in the reference application filed by it is not appropriately worded and, therefore, it certainly needs an amendment. According to me, the following question of law arises out of the order of the Tribunal which is hereby referred to the Hon'ble Delhi High Court for its esteemed opinion : Whether on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty imposed by the WTO under Section 18(1)0) of the Wealth-tax Act, 1957 in the assessment year 1971-72.
1. As we have differed regarding the conclusion in the above case, we refer the point of difference to the President, Tribunal for getting the matter heard by one or more of the other members of the Tribunal.
The point of difference is as follows : Whether, on the facts and in the circumstances of the case, the question raised by the revenue or any other question warrants reference? 1. My learned colleagues of Delhi Bench 'E', who heard this reference application could not come to an agreed conclusion on the following point, which was referred to me for my opinion by the President pursuant to the provisions of Section 255(4) of the Act : Whether, on the facts and in the circumstances of the case, the question raised by the revenue or any other question warrants reference The facts of the case have been discussed by both the learned members and I will refer to the facts from the order of the learned Accountant Member. In the assessment year 1971-72 a penalty of Rs. 9,030 was imposed on the assessee under the provisions of Section 18(1)(a) for the late submission of the return of wealth. The return of wealth was due on 30-6-1971 but it was filed on 5-3-1975 after a delay of nearly 44 months. The WTO required the assessee to show cause for this delay by issuing a notice dated 17-3-1978 under Section 18(2). We do not know what happened on this date but another opportunity was given by the WTO by a letter dated 6-3-1980. On 16-3-1980, i.e., 10 days after the receipt of the letter the assessee sent a reply explaining the facts that were responsible for the delay in the submission of the wealth-tax return. I may state here that there was delay not only for this assessment year but also for the assessment years 1970-71, 1972-73 to 1974-75. While for all these years sufficient cause was shown no cause was said to have been shown for the year under reference, namely, 1971-72. On the ground that the assessee failed to show any reasonable cause for the late submission of the return, the WTO levied a penalty of Rs. 9,030 with the following observations : While explaining the reasons for delay in filing the wealth-tax returns for various years the assessee vide his reply dated 16-3-1980 has offered no excuse for the default pertaining to the assessment year 1971-72. So far as the default relating to other years, the assessee has submitted that he had filed application seeking extension of time and has produced necessary evidence but for the assessment year 1971-72 not only that his reply was absolutely silent so far as this year is concerned but the assessee had also no evidence to cover up the delay. Obviously, the default of late filing the return becomes patent and the penalty is leviable.
Thereafter the assessee preferred an appeal before the AAC, who upheld the levy of penalty. His reason for confirming the penalty was again the failure of the assessee to adduce any reason for the delayed submission of the return. The assessee then filed an appeal before the Tribunal. Before the Tribunal, the assessee raised the following ground in the grounds of appeal: On the facts and in the circumstances of the case, the action of the learned AAC of Wealth-tax in confirming the penalty of Rs. 9,030 imposed under Section 18(1)(a) of the Wealth-tax Act by the learned WTO, is most arbitrary, and unjustified and the same must be quashed.
But at the time of the hearing of the appeal, the assessee moved an additional ground, which was in the following terms .
That the notice for levy of penalty is irregular and invalid inasmuch as the notice dated 26-3-1980 calls for appearance on 13-3-1980 and on that ground alone the penalty be quashed.
This prayer is being made since it is a legal issue and does not call for any investigation of the records.
The Tribunal heard the representatives of the assessee and the department on the admissibility of the additional ground and eventually admitted the additional ground as according to it the question raised was a pure question of law, which went to the root of the assessment.
Then the Tribunal considered the matter in the light of the additional ground and came to the conclusion that since the last penalty notice dated 26-3-1980 asking for compliance of the assessee on 13-3-1980 was issued, it was ab initio void and all proceedings founded upon such an invalid notice were non est in law. In this context, it may be relevant to reproduce the observations of the Tribunal : In the light of the above decisions (no contrary authority was cited before us) we find it difficult to sustain the penalty order. It is common ground that limitation supervened on 31-3-1980 for levy of the impugned penalty in this case. The show-cause notice was issued on 26-3-1980 but explanation thereunder was required to be given by the assessee on 13-3-1980. Notice was, therefore, ab initio void. No doubt the assessee acted upon the notice to the best of her ability but then as the decisions cited above lay down, there is no estoppel against law. She is entitled to point out that the penalty notice was bad in law, at any stage of the proceedings subsequent to the levy of penalty. We, therefore, cannot uphold the penalty order. The further question is whether to restore it to the WTO for passing a de novo order after giving a fresh opportunity to the assessee of being heard. Here, following with respect, the decision of the Allahabad High Court in Budhar Singh & Sons' case (supra) we have to hold that the matter cannot be restored to the file of the WTO. The result is, we vacate the order of the WTO.Then the department filed a reference application before the Tribunal stating that the following question, said to be a question of law, arose out of the order of the Tribunal : Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in vacating the order of the WTO who imposed penalty of Rs. 9,030 under Section 18(1)(a) of the Wealth-tax Act, 1957 especially in view of the provisions of Section 42C of the Wealth-tax Act, 1957 2. The learned Judicial Member after referring to the above facts observed that the question raised by the revenue was neither examined by the authorities below nor by the Tribunal at any stage. In fact it was never raised. A question that was not raised before the Tribunal could not be said to arise out of the order of the Tribunal. Section 42C referred to in the question was introduced with effect from 1-10-1975 and as the return in this case was filed earlier to that date, the question of Section 42C applying does not arise more particularly when a circular issued by the CBDT made it clear that Section 42C is only prospective in operation and not retrospective.
Eventually he held that no question of law arose from the order of the Tribunal. But the learned Accountant Member held to the contrary.
According to him when the Tribunal admitted the additional ground on the ground that it gave rise to a pure question of law, that pure question of law having been decided by the Tribunal by eventually cancelling the penalty, a question of law did arise out of the order of the Tribunal. However, he felt that the question of law that arose was not a question that was raised by the Commissioner. He reframed the question and held that the reframed question arose out of the order of the Tribunal to be referred to the High Court, which is in the following terms : Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in cancelling the penalty imposed by the WTO under Section 18(1)(a) of the Wealth-tax Act, 1957 in the assessment year 1971-72 Now the point for consideration, before me is which is the correct view in the sense whether the order of the Tribunal did or did not give rise to a question of law.
3. After hearing the arguments of both the learned departmental representative and the assessee's counsel, I am of the view that the order passed by the Tribunal does not give rise to any question of law either as framed by the Commissioner or by the learned Accountant Member. I will approach the issue from this angle. It is no doubt true that there are certain rules governing the admission of the additional ground raised before the Tribunal. One of the cardinal rules of justice is that a party before the Tribunal should not suffer by the ignorance of the representative ; nor the course of justice should be permitted to be deflected, if real ground was not taken up before the Tribunal in the grounds of appeal again due to ignorance or any other reason. Since the object of constituting the Tribunal or any Court of law is to render substantial justice, the Courts have held repeatedly that the Tribunal should permit an assessee to raise an additional ground at the time of hearing of the appeal more so if the additional ground is such as to raise a legal issue or an issue which goes to the root of the assessment. The Tribunal can also permit additional grounds to be raised in several other circumstances but the self-discipline sought to be imposed upon it is not to admit grounds which require investigations. Even if investigation is called for, if that investigation is going to render substantial justice, then the Tribunal should not refuse to grant permission. Justice is the legitimate end of law. This is the basic principle which has to be borne in mind in considering the admission of additional grounds or the purpose behind it. Now as I just observed, the rules governing admission of additional grounds are that there should be a legal point in issue not involving any investigation into facts. If such a ground is raised, that ground can be admitted. The reason for the admission of that ground is existence of a legal question. Once the ground was admitted, it becomes part of the several grounds raised. Then the Tribunal passes an order after hearing those grounds. It is that order that was eventually passed by the Tribunal that must give rise to a question of law. If eventually the order passed by the Tribunal does not give rise to a question of law, the mere fact that an additional ground was admitted on the ground that it raised a question of law does not convert the decision given by the Tribunal into a question of law even though the decision ultimately given was on the basis of the appreciation of evidence, e.g., in the case of reopening of an assessment, it is absolutely essential to assume jurisdiction under Section 147 to serve a notice under Section 148 of the Act. Suppose an assessee takes the plea before the Tribunal that no notice was received by him, then that is a legal question and also goes to the root of the assessment. The Tribunal may admit that ground and on examination find that no notice was served. The Tribunal may then annul the assessment. It cannot be said that the order of the Tribunal gives rise to a question of law because the ultimate finding of the Tribunal was that no notice was served on the assessee under Section 148 which is a pure finding of fact. This continues to be a pure finding of fact notwithstanding that at the time when the additional ground was admitted. the consideration was whether that additional ground raises a legal question or not.
Similarly in this case, the legal question raised by way of additional ground was that no opportunity was given to the assessee because by the penalty notice to the assessee it was asked to do the impossible, namely, comply with it on a date much earlier to the date of issue. On this ground, the Tribunal held that there was no proper opportunity given to the assessee and it was void ab initio. Therefore, the principles of natural justice were violated and the levy of penalty was unjust. This was the finding of the Tribunal. To come to this finding of the Tribunal, the fact found by the Tribunal was that no opportunity was given. This finding of the Tribunal cannot give rise to a question of law notwithstanding the admission of the additional ground even though at the time of admission of that ground it was considered that it gave rise to a pure question of law. Since the eventual finding of the Tribunal was a pure finding of fact, as I stated earlier, I am of the view that no question of law arises out of the order of the Tribunal.
4. The learned departmental representative referred to me the decision of the Supreme Court in the case of Nawabganj Sugar Mills Co. Ltd. v.CIT [1972] 86 ITR 44. But in my opinion this does not advance the department's case. The Supreme Court held in this case : The Appellate Tribunal has to act judicially in the sense that it has to consider with due care all material facts and evidence in favour of and against the assessee and record its finding on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevant law. (p. 45) As I said earlier, it was after consideration with due care all material facts and evidence in favour and against the assessee that the Tribunal recorded its finding that there was no proper opportunity given to the assessee. This case does not, therefore, help the department's case. As rightly pointed out by the learned Judicial Member with whom I agree that question of application of Section 42C was never raised before the Tribunal nor was it ever in its contemplation. It is now well settled that the questions of law that can be said to arise out of the order of the Tribunal are : 1. When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order.
2. When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order.
3. When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order.
4. When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it.
This is a case, in my opinion, covered by item 4 as pointed out by the Supreme Court in the case of CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589 and, therefore, it cannot be said that any question of law arises out of the order of the Tribunal.
5. The matter will now go before the original Bench, which heard the reference application for decision according to majority opinion.