Kundan Lal Behari Lal v. Commissioner Of Wealth-Tax, U.P, And Another.

1. This is a petition under Article 226 of the Constitution.

2. The petitioner, Behari Lal, runs a business in the name of M/s. Kundan Lal Behari Lal at Chandausi of which he is the sole proprietor. He is being assessed to income-tax in the status of an individual. He, however, was not being assessed to wealth-tax. It has been alleged by the petitioner that on 20th November, 1971, he went to his counsel in connection with his case under the Income-tax Act for the year 1969-70, when he was told by his counsel that he was liable to wealth-tax. On the following day when he appeared before the Income-tax Officer in connection with the income-tax assessment for the year 1969-70, he informed the Income-tax Officer, who was also the Wealth-tax Officer, that he would be submitting his wealth-tax return for the years 1964-65 to 1970-71, according to the legal advice given to him. He goes on to say that the wealth-tax returns for the aforesaid years were prepared on the 28th November, but they could not be finalised on that day and were filed on December 2, 1971. As the returns were not filed within the time allowed under Section 14(1) of the Wealth-tax Act, he applied to the first respondent, the Commissioner of Wealth-tax, Lucknow, on December 3, 1971, for waiver of penalty for filing the returns late, as provided under Section 18(2A) of the Wealth-tax Act. On December 6, 1971, he was served with a set of six notices under Section 17 of the Wealth-tax Act all dated November 29, 1971, issued by the second respondent, the Wealth-tax Officer, Chandausi, for the years 1965-66 to 1970-71. The returns already filed were accepted and he was assessed to tax by the Wealth-tax Officer by his order dated January 24, 1972. Thereafter, the petitioner's application under Section 18(2A) was taken up by the Commissioner and was finally disposed of on September 7, 1972. The Commissioner found that as no notice under Section 17 had been issued by the Wealth-tax Officer for the assessment year 1964-65, the return filed by the petitioner for that year was a voluntary return containing a full and true disclosure of his wealth. He, accordingly, waived the penalty for that year. With regard to the remaining years the application was rejected on the ground that the returns filed by the petitioner had been filed after the notice under Section 17 had been issued to him and as such the petitioner was not entitled to any relief by way of waiver or reduction of penalty. He, accordingly, directed the Wealth-tax Officer to proceed with the penalty proceedings for these years in accordance with law. This order of the Commissioner has been challenged in this petition.

3. Before dealing with the contentions raised on behalf of the petitioner, it is necessary to notice the relevant statutory provisions.

4. Under Section 14(1) every person is required to file a return voluntarily of his net wealth before the 30th day of June each year, if his net wealth is of such an amount as to render him liable to wealth-tax. Section 18(1) then provides for the imposition of penalty, if an assessee fails to file a return under Section 14(1) or fails to furnish it. within the time allowed. Sub-section (2A) of Section 18 empowers the Commissioner to reduce or waive such penalty under certain circumstances. That provision reads :

"(2A) Notwithstanding anything contained in Clause (i) or Clause (iii) of Sub-section (1), the Commissioner may, in his discretion,--

(i) reduce or waive the amount of minimum penalty imposable on a person under clause (i) of sub-section (1) for failure, without reasonable cause, to furnish the return of net wealth which such person was required to furnish under Sub-section (1) of Section 14, or

(ii) reduce or waive the amount of minimum penalty imposable on a person under Clause (iii) of Sub-section (1), if he is satisfied that such person-

(a) in the case referred to in Clause (i) of this sub-section has, prior to the issue of notice to him under Sub-section (2) of Section 14, voluntarily and in good faith, made full disclosure of his net wealth; and in the case referred to in Clause (ii) of this sub-section has, prior to the detection by the Wealth-tax Officer of the concealment of particulars of assets or of the inaccuracy of particulars furnished in respect of the assets or debts in respect of which the penalty is imposable, voluntarily and in good faith, made full and true, disclosure of such particulars;

(b) has co-operated in any enquiry relating to the assessment of the wealth represented by such assets; and

(c) has either paid or made satisfactory arrangements for payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year."

5. The petitioner has challenged the impugned order passed by the Commissioner on the following grounds :

(i) That when the petitioner had informed the Wealth-tax Officer on 29th of November, 1972, that he would be filing his wealth-tax returns, he had made a full disclosure of his wealth before the notices under Section 17 were issued to him and as such he was entitled to that benefit by way of waiver or reduction of penalty.

(ii) That the notices under Section 17 must have been issued by the Wealth-tax. Officer after the petitioner had filed his returns on December 2, 1972, and had been ante-dated.

(iii) That no notices under Section 14(2) were issued to him as contemplated by Clause (2A) of Section 18.

(iv) That the word "issue" occurring in Section 18(2A) means "serve" and as he had filed the returns before the notices were served on him, he was entitled to the benefit contemplated by Section 18(2A).

6. Before dealing with these contentions, it is necessary to dispose of a preliminary objection raised by the learned counsel for the department. He says that the power enjoyed by the Commissioner under Section 18(2A) is a discretionary power and the same cannot be challenged unless it is shown that it has been exercised arbitrarily. He also argued that the order contemplated by this provision is an administrative order and is not amenable to the writ jurisdiction of this court under Article 226 of the Constitution.

7. We find no merit in these contentions. The power conferred Under Section 18(2A) is obviously for the benefit of an assessee and if the circumstances calling (or the exercise of such a power exist, the Commissioner cannot refuse to exercise the same on the ground that it is discretionary. In such circumstances the courts have held that the power is coupled with a duty (See Goverdhan Lal Jagadish Kumar v. Commissioner of Income-tax, [1956] 29 ITR 591 (All)., Vetcha Sreeramamurthy v. Income-tax Officer, [1956] 30 ITR 252 (AP)., Kashiram Agarwalla v. Collector of 24 Parganas, [1958] 33 ITR 800 (Cal). and Amar Nath Khurana & Sons v. Appellate Assistant Commissioner of Income-tax, [1969] 71 ITR 153 (Punj).).

8. Those were all cases under Section 45 of the Indian Income-tax Act, 1922, which provides that an Income-tax Officer may not treat an assessee as in default in respect of the payment of tax, if he has filed act appeal against the assessment order. There also the word "may" has been used, but the courts have uniformly held that the discretion conferred upon the Income-tax Officer not to treat an assessee as in default if he has filed as appeal is coupled with a duty and the Income-tax Officer cannot refuse to exercise that power, if the circumstances calling for the exercise of such a power exist. The same thing has been said by the Supreme Court in I. Hirday Narain v. Income Tax Officer, Bareilly† ., [1970] 78 ITR 26 (SC).. That was a case dealing with the power of the Income-tax Officer to rectify a mistake under Section 35 of the Income-tax Act. There also the power has been couched in enabling words. This is what the Supreme Court observed in paragraph 12 :

"If a statute invests a public officer with authority to do an act in ft specified set of circumstances, it is imperative upon him to exercise his authority in a manner appropriate to the case when a party interested and having a right to apply moves in that behalf and circumstances for exercise of authority are shown to exist. Even if the words used in the statute are prima facie enabling, the courts will readily infer a duty to exercise power which is invested in aid of enforcement of a right--public or private--of a citizen."

9. In support of the second limb of his argument the learned counsel relied upon a decision of the Mysore High Court in Indian Telephone Industries Co-operative Society Ltd. v. Income-tax Officer, [1972] 86 ITR 566 (Mys)., where it has been held that the power conferred upon the Commissioner under Section 271(4A) of the Income-tax Act, 1961 (which corresponds to Section 18(2A) of the Wealth-tax Act), is not in the nature of a quasi-judicial power and, therefore, he is not required to give a hearing. It is not necessary for us to decide as to whether the order contemplated by Section 18(2A) is an administrative order or an order of quasi-judicial nature, because even if it is administrative in nature, the line between an administrative and a quasi-judicial order is now very thin. Even an administrative order is amenable to the writ jurisdiction under Article 226, if it is contrary to law. Moreover, in the instant case, we are not concerned with the question as to whether the Commissioner while exercising power under Section 18(2A) is required to give a hearing to the assessee or not, because the impugned order was passed after oral hearing to the assessee.

10. Now, coming to the merits, we do not find any force in the first three contentions of the learned counsel for the petitioner. Mere declaration of intention by an assessee to file the wealth-tax returns does not amount to full disclosure of his net wealth as contemplated by Clause (2A) of Section 18. The petitioner on his own showing had merely informed the Wealth-tax Officer of his intention to file the returns.

11. As regards the second contention, we find no material to hold that the notices under Section 17 had been ante-dated by the Wealth-tax Officer.

12. With regard to the third contention, we find that there is no material difference between a notice under Section 17 and a notice under Section 14(2). The former notice also requires an assessee to file a return as he is required to do so by a notice under Section 14(2).

13. The last contention, however, is well founded. One of the contentions upon which the Commissioner must be satisfied before he waives or reduces the penalty is that the assessee had made a full disclosure of his net wealth prior to the issue of the notice to him. In our opinion a notice cannot be said to have been issued to a person unless he is served with it.

14. Before 1965 when Section 18(2A) was inserted, the word "issue" had received judicial interpretation a number of times where it was held that the word "issue" means "serve". As early as 1956 this court in Sri Nivas v. Income-tax Officer, [1956] 30 ITR 381 (All),, had interpreted the word "issue" to mean "serve". In 1964 the Supreme Court in the case of Banarsi Debi v. Income-tax Officer, [1964] 53 ITR 100 (SC). observed that the expressions "issued" and "served" are used as interchangeable terms and they are sometimes used to convey the same idea. Recently, the Calcutta High Court in M. M. Ispahani Ltd. v. Commissioner of Income-tax, [1970] 75 ITR 479 (Cal)., has held that the word "issued" used in Section 297(2)(d)(i) of the Income-tax Act, 1961, should be interpreted in its wider meaning as including the "service" of a notice under Section 34. Parliament, therefore, must have been aware of the meaning given to the Word "issue" by the law courts in this country and must have used it in that sense. There is nothing to indicate that the legislature wanted to give the word "issue" a different meaning than had been assigned to it by the courts. According to the Commissioner, the intention of the legislature was that an assessee should make a full disclosure of his wealth before the department becomes aware of it, otherwise he would not be entitled to the reduction or waiver by the Commissioner. We find no justification for such a view. It is not the awareness of the Wealth-tax Officer but the issue of a notice under Section 17 which disentitles an assessee of the benefit by way of waiver or reduction of penalty at the hands of the Commissioner and if the word "issue" means "serve" then we are bound to hold that an assessee, who makes a disclosure of his wealth before a notice under Section 17 is served upon him, is entitled to the benefit and the Commissioner would be fully empowered to exercise the discretion vested in him under Section 18(2A). This conclusion is re-inforced by the fact that under Sub-clause (ii) of Sub-section (2A) of Section 18 which deals with cases of concealment, the Commissioner is empowered to grant relief to an assessee, who makes disclosure of his concealed wealth after the assessment proceedings have commenced against him, but before the concealment is detected by the Wealth-tax Officer. There is no reason to assume that the legislature wanted to meet out a harsher treatment to an assessee who merely delays the filing of a return.

15. Now, in the instant case, the Commissioner has declined to exercise the jurisdiction under Section 18(2A) by placing a narrow interpretation on the word "issue" as meaning "awareness" of the Wealth-tax Officer. As such he can be directed by a writ of mandamus to exercise the jurisdiction which he erroneously has refused to exercise. There are, of course, other conditions also which must be present before the Commissioner exercises jurisdiction in favour of an assessee, namely, that the disclosure must be voluntary and in good faith, it must be a full disclosure and the assessee must be shown to have co-operated in any enquiry relating to the assessment of his wealth-tax. The Commissioner has not stated in his order that any of these conditions were wanting in the case of the petitioner. In fact a reading of the impugned order of the Commissioner shows that he was satisfied that all other requirements were present as is apparent from the following observation in connection with the assessment for the year 1964-65 :

"In this view of the matter, it is clear that the return for 1964-65, filed on December 2, 1971, was before the issue of any notice. Since the return was accepted as full and true the requirements of Section 18(2A) are satisfied."

16. We accordingly allow this writ petition and by a writ of certiorari quash the order of the Commissioner dated September 7, 1972. He is directed to restore the petitioner's application under Section 18(2A) to its original number and to decide it afresh in accordance with law and keeping in view the observations made herein. The petitioner is entitled to the costs.