Kaur Vs. The Commissioner of Wealth-Tax Jullundur  INSC 29 (13
JEEVAN REDDY, K.T THOMAS
CA Nos. 1335-36/81, 1337/81 1338/81)
in these appeals were liable to penalty under section 18 of the Wealth Tax Act,
1957, (for short the Act'), for failure to file the returns in respect of the
assessment years 1970-71, 1971-72, 1972-73, 1973-74, 1974-75 and 1975-76. When
Parliament amended the Act and incorporated Section 18-8 by Taxation Laws
(Amendment Act 1975) i.e. Act 41 of 1975, appellants in these cases submitted
wealth tax returns and made a request for full waiver of the penalty as
envisaged in the new provision. The Commissioner of Wealth Tax (the
`Commissioner' for short) found that as the appellants have complied with the
conditions stipulated in section 18-8 of the Act they are entitled to the
benefit of the new provision. However, keeping in view the facts and
circumstances of the case, the Commissioner, instead of granting waiver for the
full penalty had only reduced it to 5% for the relevant assessment years.
Appellants submitted that once a person is found to be entitled to the benefits
of the new provision of section 18-B of the Act, the Commissioner should have
waived the entire amount of penalty payable by that person concerned. So saying
they approached the High Court by filing writ petitions but those writ
petitions were dismissed in limine. Hence, these appeals.
counsel contended that once a person is found entitled to the benefit under
section 18B, the Commissioner cannot withdraw part of the benefit by imposing a
penalty of 5 per cent. According to him, once the failure is condoned, power to
waive cannot be exercised in a truncated manner as was done in this case but
only in a full measure.
18(1) empowers the officer under the Act to impose penalty on a person in
certain contingencies. As per the sub-section if the Wealth Tax Officer,
Appellate Assistant Commissioner or Appellate Tribunal in the course of any
proceedings under the Act is satisfied that any person has, without reasonable
cause, failed to furnish the returns which he is required to furnish or has
without reasonable cause failed to furnish within the time allowed or without
reasonable cause failed to comply with a notice under section 16 (2) or (4), or
has concealed the particulars of any assets or furnished inaccurate particulars
of any assets or debts such officer may direct that such person shall pay, by
way of penalty, the amount specified respectively in three clauses set out
18-8 confers power on the Commissioner to reduce or waive such penalty in
certain contingencies, if he is satisfied that such person has made full and
true disclosure of his net wealth and has also cooperated in any equity
relating to the assessment of his net wealth and has either paid or made
satisfactory arrangement for the payment of any tax or interest payable in
consequence of an order passed under the Act.
conditions stipulated in the section are satisfied Commissioner has a
discretion in the matter. In exercise of that discretion, Commissioner can
either reduce the amount of the penalty or he may even waive the entire
penalty. It is for the Commissioner to decide on the facts of a particular case
whether a waiver in entirety or a reduction alone is warranted.
words "the Commissioner may in his discretion......reduce or waive the
amount of penalty" in Section 18-8 of the Act are clear enough to show
that the power conferred on the Commissioner is to be exercised by his in such
manner as he deems just and proper. When a discretion is conferred on an
authority the same must be exercised fairly and not arbitrarily, justly ad not
fancifully vide S.G. Jaisinghani vs. U.O.I. & others: AIR 1967 SC 1427.
if the legislature has not used the words "in his discretion" in
Section 18(B)(1) Commissioner could have exercised only a discretionary power
in view of the employment of the word "may". Now when the Parliament
used both expressions "may" and "in his discretion"
together, the position is placed beyond the pale of any doubt that legislature
wanted an officer of the rank of the Commissioner to be reposed with the
discretionary power to choose between entire waiver or reduction in any proportion.
course when the Commissioner, instead of giving a complete waiver, chooses to
give only a reduction for the penalty amount he must indicate in his order that
he has applied his mind in that regard. In this view, there is no warrant for
the proposition that the Commissioner, if satisfied of the compliance of
conditions, has only one choice i.e. to waive the penalty in entirety.
Otherwise, it may mean that Commissioner can in a case where conditions are not
satisfied, reduce the penalty amount. When conditions are not satisfied,
Commissioner cannot do either.
when the said conditions are satisfied that the occasion arises for the
Commissioner to exercise his discretion - not before.
counsel has cited the following decisions of various High Courts in support of
the contention that waiver in full has to be ordered when all the required
conditions have been complied with: Shakuntla Mehra vs. CWT (1976) 102 ITR 301
of the Delhi High Court; Shankara Apya Swami vs. WTO, Belgaum (1976) 103 ITR
649, of the Karnataka High Court; Anjanappa vs. CWT (1980) 124 ITR 433 of the
Karnataka High Court; Rasiklal Ranchhodbhai Patel vs. CWT (1980) 121 ITR 219 of
the Gujarat High Court Sardar Kartar Singh vs. CWT (1982) 135 ITR 375 of the Gaughati
High Court. In all those decisions learned Judges have pointed out that without
indicating any reason whatsoever the Commissioner cannot dispense with his
discretion in granting waiver of the penalty. Those decisions have not laid
down a proposition that the only course which a Commissioner can adopt on
fulfillment of the conditions is to waive the penalty in entirety.
18-8 is analogous to section 273-A of the Income Tax Act, 1961 where under also
a similar discretion has been conferred on the Commissioner of Income Tax for
either reducing the penalty or granting waiver of the entire penalty. It is
understood in clear terms that the said discretion in Income Tax Act is to be
exercised in a reasonable and fair manner. The decision of the Bombay High
Court [Purshottam Thackersey vs. K.N. Anantrama Ayyar (1985) 154 ITR 438] cited
before us only shows that the order of the Commissioner declining to waive the
penalty without advancing any reason whatsoever cannot be supported and the
matter was remitted to the Commissioner for passing an order afresh.
cases on hand, the Commissioner has indicated his own reasons for resorting to
the power of reduction of the penalty in preference to granting full waiver of
the penalty. We cannot say that the reasons indicated in the orders are in any
manner unjust or irrelevant. We, therefore, find no ground to interfere with
the impugned order and the judgments of the High Court. The appeals are