1. These seven appeals for the A.Ys. 1969-70 to 1975-76 by the revenue are directed against common consolidated order of the AAC. The objection of revenue is that the AAC has mis-interpreted and mis-applied the decision of the Supreme Court in the case of Maya Rani Punj v. CIT [1986] 157 ITR 330 while reducing the penalties levied under Section 18(1)(a) of the Wealth-tax Act in the above seven years.
The returns of wealth which the assessee was to submit by 30th June, 1969 for the A.Y. 1969-70 and by 30th June of each of the succeeding six years were all submitted on 27-3-1984. The assessments were completed on the same date i.e. 27-3-1984 and penalty proceedings under Section 18(1)(a) of the WT Act were initiated. The learned WTO after considering the reply of the assessee to the show cause notices, levied penalties of various amounts on 20th March, 1986. The provisions relating to the computation of penalty under Section 18(1)(a) of the WT Act were amended by Taxation Laws (Amendment) Act, 1975 with effect from 1-4-1976. Prior to the amendment and since 1-4-1969 the penalty leviable was to be computed @ % of net wealth (as reduced by the sum specified in the schedule) for every month during which the default continued, but not exceeding in aggregate to the net wealth assessed.
Since the amendment with effect from 1-4-1976, on the date of assessment order as also on the date of submission of return i.e. on 27-3-1984, the penalty for default under Section 18(1)(a) of the WT Act is now leviable at a sum equal to 2% of the assessed tax for every month during which the default continued. The WTO in this case computed the penalties @ % of the wealth assessed as reduced by Rs. 2 lacs from 30th June of each year to the date of filing of the returns. He thus levied penalties of Rs. 16,000, Rs. 26,000, Rs. 31,000, Rs. 60,000, Rs. 85,000, Rs. 85,000 and Rs. 1,85,000, respectively, for the seven assessment years under appeals. The AAC, on further appeals, after applying ratio of the decision of the Supreme Court in the case of Maya Rani Punj (supra) and that of the Delhi High Court in the case of CWT v. Amolak Singh Jain [1987] 163 ITR 825, reduced the penalties to Rs. 264, Rs. 262, Rs. 180, Rs. 7,207, Rs. 7,296, Rs. 6,570 and Rs. 7,929, respectively. The AAC held that amended law was to be applied for computing the penalties leviable. The revenue has challenged the above decision of the AAC.2. Shri H.P. Verma, appearing for the revenue, contended that in the case of Maya Rani Punj (supra) their Lordships of the Supreme Court held that default under Section 271(1)(a) of the IT Act or under Section 18(1)(a) of the WT Act in not submitting the return in time is a 'continuing default' and, therefore, penalty for the default is to be computed for each month with reference to the law as it existed in the month in which the default occurred. In other words, it was claimed that for the continuing default up to 31-3-1976 in each of the assessment year, penalty was to be computed @ % of the net wealth and not at 2% of the assessed tax. Shri Verma placed reliance on the decision of the Patna High Court in the case of CIT v. CWT v. Jagjit Kaur [1986] 162 ITR 844 in which their Lordships after considering the decision of Maya Rani Punj's case (supra) held that "it was, therefore, rightly submitted that penalty would be computed at different rates applicable during the period of each month in accordance with the rules existing during the said period". The learned counsel for the assessee once again reiterated that the decision of Maya Rani Punj's case (supra) has been rightly interpreted by their Lordships of the Delhi High Court in Amolak Singh Jain's case (supra) and, therefore, penalties leviable were to be computed on the basis of the amended provisions which came into force after 1-4-1976 for the whole period of defaults.
3. We have heard the parties and have also carefully perused the various decisions cited before us. The decision of the Delhi High Court in Amolak Singh Jain's case (supra) supports the stand of the assessee whereas the view taken by their Lordships of the Patna High Court in Jagjit Kaur's case (supra) supports the stand taken by the revenue. The two High Courts have differently applied the decision of Supreme Court.
In such a situation, when two views of a matter are possible, the view which favours the assessee, more particularly in matters relating to levy and computation of penalty, is to be preferred as per the decision of their Lordships of the Supreme Court in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192. In the above circumstances, we are inclined to uphold the order of the AAC that the penalty was to be recomputed on the basis of the amended provisions.
4. Shri Verma, during the course of hearing of appeals, also submitted that the view that even in respect of the default prior to 31-3-1976 the penalty is to be levied with reference to amended law would lead to absurd and discriminatory results and, therefore, such a view should not be followed. Elaborating this argument, he pointed out that for the assessment years prior to the A.Y. 1976-77 for identical defaults of same period under Section 18(1)(a) of the WT Act levy of different amounts of penalties would be justified depending upon the dates of submission of return and assessment orders. When computations are based on amended provision in one case and on unamended provision in the other. For similar default running in same period of time, same penalty should be levied. Shri Verma further submitted that the courts while interpreting statutes and law must avoid absurd and discriminatory results. To meet the above argument we will independently consider the ratio of the decision in Maya Rani Punj's case (supra).
5. Before quoting from the decision in the case of Maya Rani Punj (supra), in our opinion, it is necessary to reproduce relevant provisions of the Wealth-tax Act which are in force since 1-4-1976 : Penalty for failure to furnish returns, to comply with notices and concealment of assets, etc.-- 18. (1) If the Wealth-tax Officer, Appellate Asstt. Commissioner, Commissioner (A), 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 subsection (1) of Section 14 or by such notice, as the case may be ; or 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 equal to two per cent of the assessed tax for every month during which the default continued ; The Explanation defining assessed tax is not relevant for the purpose of these appeals. Prior to its amendment, as per Clause (i) for default under Section 18(1)(a) of the W.T. Act levy was provided as under:-- (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 specified in Sub-Section (1A), or 6. The facts of Maya Rani Punj's case (supra) are that for the A.Y.1961-62 income-tax return was to be filed by September 28, 1961. The return, however, was filed on May 3, 1962 i.e. after Income-tax Act, 1961 had come into force w.e.f. 1-4-1962. The ITO initiated proceedings under Section 271(1)(a) of the Income-tax Act 1961, for the default in submission of the return in time and levied a penalty of Rs. 4,060. The Appellate Tribunal held that penalty was to be quantified according to the provisions of Section 28 of 1922 Act and reduced the amount of penalty to Rs. 400. On a reference, the High Court held that the Tribunal was not competent to reduce the penalty levied under Section 271(1)(a) of 1961 Act to a figure lower than the sum equal to 2 % of the tax for every month during which the default continued. On further appeal, it was argued before the Supreme Court that penalty should have been computed as per the provisions of Section 28 of 1922 Act which were applicable when the default occurred on 28th September, 1961 and that the assessee could not be subjected to higher punishment under Section 271(1)(a) of the 1961 Act in breach of article 20(1) of the Constitution. Their Lordships of the Supreme Court extensively quoted from their earlier decision in Jain Bros. v. Union of India [1970] 77 ITR 107 and at page 335 observed as under:-- It was well settled that in fiscal enactments, the Legislature has a larger discretion in the matter of classification, so long as there was no departure from the rule that persons included in a class are not singled out for special treatment. It was not possible to say that while applying the penalty provisions contained in the Act of 1961 to cases of persons whose assessments were not completed after April 1, 1962, any class has been singled out for special treatment.
It was obvious that for the imposition of penalty, it was not the assessment year or the date of the filing of the return that was important but it was the satisfaction of the Income-tax authorities that a default had been committed by the assessee which attracted the provisions relating to penalty. Whatever be the stage at which the satisfaction was reached, the scheme of Sections 274(1) and 275 of the Act of 1961 was that the order imposing penalty must be made after the completion of the assessment. The crucial date, therefore, for the purpose of penalty is the date of such completion and the satisfaction of the authority that proceedings for levy of penalty be initiated.
Their Lordships further held that the default under Section 271(1)(a) of the Income-tax Act or for that matter under Section 18(1)(a) of the Wealth-tax Act is a continuing default. In the last para their Lordships made the following observations : In the instant case, assessment was made on June 30, 1964, and proceedings for imposition of penalty were directed to be initiated that day. Provisions of Section 271(1)(a) of the 1961 Act were fully applicable and the demand of penalty was thus justified being within the limits of law.
The above decision provides a complete answer as to why different treatment is given to the assessees depending upon the dates of the assessment orders. If the legislature in its wisdom provides different quantum of penalty for similar defaults from time to time, it is not for the courts to question the wisdom of the legislature. The courts more especially the authorities under the Income-tax Act which are creatures of statute have to execute and apply law as it is handed to them by the Legislature from time to time. The above decision also lays down that penalty proceedings are initiated when authorities record in course of assessment proceedings satisfaction that a default has been committed. Similarly, in D.M. Manasvi v. CIT [1972] 86 ITR 557, their Lordships of Supreme Court held that satisfaction of the ITO constitutes the very basis and foundation of penalty proceedings. In the present case, returns were filed on 27-3-1984 and the assessments were made on the same date. So, the satisfaction was recorded and penalty proceedings were initiated on 27-3-1984. On the above crucial date the amended provisions with effect from 1-4-1976 were applicable.
The penalty proceedings were thus required to be quantified as per the law existing on the above crucial date. The revenue's case that only amended procedural provisions are applicable and for quantification the substantial law as it existed from month to month corresponding to month of default is to be applied, cannot be accepted. The computing provisions of the Wealth-tax Act together with provisions laying the procedure, constitute an integrated code and we see no justification for splitting the one from the other. It is not permissible to take the statute at the time of levy of penalty, apply procedural provisions and substitute different provisions relating to computation of penalty from month to month. Such patch work or re-writing of statute is not permissible. This is amply illustrated by the decision in Maya Rani Punjs case (supra). In that case delay of six months in submitting the return up to 31st day of March, 1962 had occurred when provisions of 1922 Act were in force and default under the 1961 Act was only for the month of April, 1962. But their Lordships upheld the levy of penalty under the new Act for the whole period. The repealed provisions of 1922 Act in respect of default up to March 1962 were not substituted for computing the penalty imposed under the 1961 Act.
7. In Maya Rani Punjs case (supra) Supreme Court also reviewed and overruled their earlier decision in the case of CWT v. Suresh Seth [1981] 129 ITR 328. In Suresh Seth's case (supra) it was held that the default for non-filing of the return is complete when on the last due date return is not filed under the Wealth-tax Act. In Maya Rani Punj's case (supra) their Lordships held that the above default in non-filing a return was a 'continuing default'. It is 'continuing' in the sense that it commences when on the last due date, the return is not filed and continues from day to day till it is brought to an end. It is deemed to be repeated from day to day as the provisions relating to filing of the return remain uncomplied with. The default after having been commenced can be brought to an end either by filing a return under Section 15 of the WT Act or when assessment is made. The above said Section 15 provides that return can be filed 'before the assessment is made'. Thus, after the assessment is made, no return can be filed. At page 341 of the report their Lordships also observed as under : The imposition of penalty not confined to the first default but with reference to the continued default is obviously on the footing that non-compliance with the obligation of making a return is an infraction as long as the default continued. Without sanction of law, no penalty is imposable with reference to the defaulting conduct.
In earlier part of the judgment, their Lordships have observed that 'accrual of penalty depends upon the terms of the statute imposing it'.
Under Section 18(1)(a) of the WT Act both before and after the amendment, the period for which the default 'continued' has first to be determined and then penalty computed on monthly basis at the rates prescribed. In the case in hand, the default commenced when on 30th June the returns were not submitted. The above default continued right till 27-3-1984 when it was brought to an end. Thus, for the whole period the default 'continued'. As on 1-4-1976 it was a 'continuing' default and had not become 'continued'. The fallacy in the approach of the revenue lies in their assuming that default started on 1st of July in each year and ended with the end of the month. Second default started with the beginning of the second month and thus up to 31-3-1976, there were several defaults of each month which were distinct in quality from the defaults after 1-4-1976 when provisions of Section 18(1)(a) were amended. Though each day of default gave rise to fresh cause of action and the default is 'deemed to be repeated on each day' as provisions relating to filing of the return remains uncomplied with, there is no warrant for holding that with the end of every month default came to an end. The default did commence after 30th June, remained a continuing default and came to an end only on March 27, 1984. As on 1-4-1976 when it was a continuing default and before it was complete, the amended provision brought about a qualitative change and added different colour to it. Before the default became 'continued', the new provisions had already come into force. In a way, the 'occurrence' continued right up to 27-3-1984. Thus, the penalty for the whole period during which the default continued is to be levied under the amended provision at 2 per cent of the assessed tax for each month.
The provisions of Section 18(1)(a) both before and after its amendment do not provide for levy of penalty in respect of 'half-baked' defaults.
It is not permissible to cut and split the default on. monthly basis.
Anyway, the approach that default starting on 1st July came to an end with the end of the month and a new default started in the next month will make the default a 'non-continuing one'. For the above reasons, we hold that the AAC was right in holding that the penalties for defaults under Section 18(1)(a) were required to be computed in accordance with the provisions of amended law.
8. For the above reasons, we find no force in these appeals of the revenue. The appeals are, accordingly, dismissed.