Citation Codes

Equivalent Citations

citation codes

Case Number

Income-Tax Reference No. 29 of 1975.

Advocates

D. N. Awasthy, Advocate and B. K. Jhingan, Advocate,
Balraj Kohli, Advocate and Ram Rang, Advocate, for the Applicant—Petitioner.

Judges

M.R Sharma
S. S. Sidhu, JJ.

Acts

Sections 30 and 31(4) of the Mines Act, 1923, Coal Mines Pithead Bath Rules, 1946, and Mines Creche Rules, 1946.
Section 14(1) of the Wealth-tax Act, 1957 (hereinafter called "the Act").
Section 17(1)(a) of the Gift-tax (Amendment) Act, 1962,
Rules 4 and 5 of the Bombay Factories Rules.
Section 18(1)(a) of the Wealth-tax Act, 1957,
SECTION 6 A GENERAL CLAUSES ACT
Finance Act, 1969 7,596 7,759
Finance Act, 1969 5,267 5,382
Finance Act, 1969 115 (ii)
Finance Act, 1969 163 (ii)
FINANCE ACT 1969
section 18(l)(a)

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The Income-tax Appellate Tribunal, Amritsar Bench, referred two questions of law to the Court concerning penalties levied under Section 18(1)(a) of the Wealth-tax Act, 1957. The assessee's wealth-tax returns for the assessment years 1964-65 and 1965-66 were due on June 30, 1964 and June 30, 1965 respectively, but were filed only on March 18, 1971 (a delay of about six years). The Wealth-tax Officer completed assessments on March 22, 1971 showing higher total wealth than declared, and initiated penalty proceedings for late submission. Penalties of Rs. 5,382 (for 1964-65) and Rs. 7,759 (for 1965-66) were levied under Section 18(1)(a), calculated by applying: (a) the pre-amendment scale (2% per month, subject to a maximum of 50% of the wealth-tax payable) for the period up to March 31, 1969, and (b) the amended scale (½% of net wealth per month) for the period from April 1, 1969 to March 18, 1971. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal upheld the penalties on appeal, the two appeals having been consolidated, and referred the stated questions to the Court.

Legal Issues Presented

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the offence relating to the omission to file the wealth-tax returns was a continuing offence?
Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the penalties of Rs. 5,382 and Rs. 7,759 levied by the department on the assessee under Section 18(1)(a) of the Wealth-tax Act, 1957, for the assessment years 1964-65 and 1965-66, respectively?
The opinion also identifies the precise related question: whether penalties should be imposed on the basis of Section 18(1)(a) as it stood prior to its amendment on April 1, 1969, or whether the increased penalty provisions (as amended by the Finance Act, 1969) should apply from April 1, 1969 onwards.

Arguments of the Parties

Revenue's Arguments

The learned counsel for the revenue contended that the non-submission of the return on the due date constitutes a recurring or continuing default. Accordingly, the imposition of penalty should follow the provisions as amended from time to time and, therefore, the increased scale of penalty (as amended from April 1, 1969) could be applied to the period after that date.
In support of this contention, the revenue relied on authorities holding certain omissions or failures which recur day-to-day are continuing offences, citing State v. Kunja Behari Chandra (AIR 1954 Pat 371 [FB]), State v. A.H. Bhiwandiwalla (AIR 1955 Bom 161) and State v. Umashankar Laxminarayan Jaiswal (AIR 1962 MP 311).

Assessee's Position (as reflected in the record and prior decisions)

The record and prior tribunal/high court decisions taken up in the opinion reflect the view that the default in not filing a wealth-tax return is completed on the due date and is not a continuing offence that attracts successive penal consequences under subsequently amended provisions.
Earlier decisions highlighted in the opinion (e.g., Tribunal in Commissioner of Wealth-tax v. Ram Narain Agrawal and Madras High Court in Commissioner of Gift-tax v. C. Muthukumaraswamy Mudaliar) supported the proposition that the law operative on the date of the infringement (i.e., the due date) applies and that an amended penal provision should not be given retrospective effect.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Commissioner of Wealth-tax v. Ram Narain Agrawal [1977] 106 ITR 965 (All)	The law operative on the date when the infringement takes place governs the offence; penal statutes are not to be given retrospective effect by implication; stronger rule against retrospectivity applies to penal provisions.	The Court expressly agreed with the Bench's reasoning and followed its conclusion that the amended penalty provisions of the Finance Act, 1969 could not be applied retrospectively to defaults that had occurred before April 1, 1969.
Commissioner of Gift-tax v. C. Muthukumaraswamy Mudaliar [1975] 98 ITR 540 (Mad)	Non-submission of a return on the due date is an infringement for which the penalty provisions in force on that date must be applied (section in pari materia with Wealth-tax Act provision).	The Court endorsed this view as supportive authority for applying the penalty scale in force on the date of default rather than a later-amending penal provision.
State v. Kunja Behari Chandra (AIR 1954 Pat 371 [FB])	Where a statute imposes a day-to-day duty (e.g., providing creche/bathing facilities), omission on each day constitutes a continuing offence because the obligation is continuous.	The Court distinguished this authority from the present case, noting that filing a return is not a day-to-day statutory duty of the same character and therefore the analogy did not support treating non-filing as a continuing offence here.
State v. A.H. Bhiwandiwalla (AIR 1955 Bom 161)	Failure to apply for statutory registration/notice was not a continuing offence, but using premises as a factory without a licence was a continuing offence — distinguishing between discrete omissions and ongoing wrongful conduct.	The Court relied on the distinction the Bombay High Court drew, observing that omission to file a return is akin to the discrete omission (not continuing) rather than the continuous use without licence.
State v. Umashankar Laxminarayan Jaiswal (AIR 1962 MP 311)	Omission to securely fence fermenting vats was treated as a continuing offence (day-to-day obligation).	The Court treated this authority as distinguishable because the statutory duty there was continuous in nature, unlike the duty to file a return on a specific date.
Balakrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan (AIR 1959 SC 798)	A continuing wrong is one that creates a continuing source of injury; if the wrongful act causes an injury that is complete, there is no continuing wrong even though resulting damage may continue.	The Court applied this principle to conclude that the omission to file a return is a completed wrongful act on the due date and not a continuing wrong; hence later-amending penal provisions could not be applied retroactively to increase penalty for that completed default.

Court's Reasoning and Analysis

The Court considered whether the omission to file a wealth-tax return on the due date is a continuing offence or a completed default, and whether penalties should be determined by the law in force on the date of default or by subsequently amended penal provisions.

Key elements of the Court's reasoning:

Precedent and statutory interpretation principle: The Court relied on authority (including the Tribunal decision in Ram Narain Agrawal and the Madras High Court in the gift-tax case) that the law operative on the date of the infringement governs liability — a penal provision should not be made retrospective by implication. The Court quoted the principle that fiscal statutes cannot be regarded as retrospective unless the language is explicit.
Distinction from genuine continuing duties: The Court examined cases where omissions were held to be continuing offences (e.g., obligations incumbent day-to-day such as providing creches or maintaining safety fencing) and observed that those duties were inherently continuous. By contrast, filing a return by a fixed date is a one-time statutory obligation (with a specific due date) and is not comparable to a day-to-day statutory duty.
Application of the continuing-wrong doctrine: The Court invoked the Supreme Court's statement of the continuing wrong principle (Balakrishna Savalram Pujari Waghmare) — that a continuing wrong creates a continuing source of injury; but if the wrongful act causes a complete injury at the time it is done, then it is not a continuing wrong. Applying that test, the Court concluded that the wrongful act of not filing a return is complete when the return is omitted on the due date.
Statutory non-affectation principle: The Court referred to Section 6(d) and (e) of the General Clauses Act to support the view that repeal or amendment of statutory penalty provisions does not affect penalties incurred for offences committed under the earlier law; the repeal or modification does not prevent the earlier penalty regime from being applied to offences committed before amendment.
Rebuttal of revenue's contention: The Court addressed the revenue's reliance on cases treating some omissions as continuing offences, distinguishing those authorities on the ground that they involved duties to be performed day-to-day or ongoing conduct. The Court noted that one of the cited authorities (Bombay High Court in Bhiwandiwalla) in fact held that failure to apply for registration was not a continuing offence — which undermined the revenue's position.

Conclusion of analysis: Considering the authorities, the nature of the statutory duty to file a return and the General Clauses Act, the Court found that the omission to file a return on the due date completes the default on that date and does not become a continuing default to which subsequently amended penalty provisions can be applied.

Holding and Implications

Holding: The Court answered both referred questions in favour of the assessee and against the revenue. In particular, the Court held that the omission to file the wealth-tax return is a completed default on the due date and not a continuing offence; therefore, the penalty applicable is that which was in force on the date of default (i.e., prior to the amendment of April 1, 1969), and the amended penal provisions could not be applied retrospectively to increase the penalty.

Implications:

Direct effect on the parties: The assessee is entitled to have penalties assessed according to the law and penalty scale in force on the respective due dates (June 30, 1964 and June 30, 1965), rather than being subject to the increased penalty provisions introduced by the Finance Act, 1969 for periods of default that predated that amendment.
Broader legal consequence: The decision affirms the established rule that penal fiscal provisions are not to be given retrospective effect and distinguishes between discrete statutory defaults tied to a specific date and obligations that are continuous in nature. The Court's conclusion aligns with prior tribunal and high court decisions referenced in the opinion.
No suggestion in the opinion that a novel rule of law was being created; the Court expressly agreed with previously expressed views and applied them to resolve the referred questions in this case.

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Suresh Seth v. Commissioner Of Wealth-Tax

1. The Income-tax Appellate Tribunal, Amritsar Bench, Amritsar, has referred to us the following two questions of law for our opinion:

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the offence relating to the omission to file the wealth-tax returns was a continuing offence?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the penalties of Rs. 5,382 and Rs. 7,759 levied by the department on the assessee under Section 18(1)(a) of the Wealth-tax Act, 1957, for the assessment years 1964-65 and 1965-66, respectively?"

2. The wealth-tax returns of the assessee for the assessment years 1964-65 and 1965-66 were due on June 30, 1964, and June 30, 1965, as laid down in Section 14(1) of the Wealth-tax Act, 1957 (hereinafter called "the Act"). The same were, however, filed on March 18, 1971, after a delay of about six years. The Wealth-tax Officer completed the assessments for the aforementioned years on March 22, 1971, on a total wealth of Rs. 1,45,800 and Rs. 1,65,200, respectively, as against the declared wealth of Rs. 1,38,550 and Rs. 1,59,127, respectively. For the late submission of the returns of wealth, penalty proceedings were initiated against the assessee. Since the assessee failed to advance any reason which prevented him from filing his wealth-tax returns within the time allowed by law, the Wealth-tax Officer levied penalties of Rs. 5,382 and Rs. 7,759 on him under Section 18(1)(a) of the Act for the aforementioned assessment years. The amounts of penalty were worked out as follows :

" Assessment year 1964-65 :

(i) For the period July 1, 1964, to March 31, 1969 :

Penalty at 2% p.m. subject to a maximum of 50% of the wealth-tax payable under section 18(l)(a) before its amendment on April 1, 1969, by the Finance Act, 1969 115

(ii) For the period from April 1, 1969, to March 18, 1971 :

Penalty at ½% of the net wealth for each month of default under section 18(l)(a) as amended by the Finance Act, 1969 5,267 5,382 Assessment year 1965-66 :

(i) For the period from June 1, 1965, to March 31, 1969 :

Penalty at 2% p.m. subject to a maximum of 50% of the wealth- tax payable under section 18(l)(a) before its amendment on April 1, 1969, by the Finance Act, 1969 163

(ii) For the period from April 1, 1969, to March 18, 1971 :

Penalty at ½% of the net wealth for each month of default under section 18(l)(a) as amended on April 1, 1969, by the Finance Act, 1969 7,596 7,759

3. The orders imposing the aforementioned penalties were upheld in appeal by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar. Since the two appeals had been consolidated by the last mentioned Tribunal, a consolidated reference has been made to us.

4. The precise question involved in the case is whether penalties should be imposed on the assessee on the basis of Section 18(1)(a) of the Act as it stood prior to its amendment on April 1, 1969, by the Finance Act, 1969, or the same should be increased from April 1, 1969, onwards by which date this section had been amended by the Finance Act, 1969.

5. The point whether the non-filing of a return under Section 14(1) of the Act constitutes a continuing default or not is not bare of authority and has received the attention of at least two High Courts. In Commissioner of Wealth-tax v. Ram Narain Agrawal [1977] 106 ITR 965 (All), the question arose under these circumstances. The assessee was assessed to wealth-tax as an individual for the assessment years 1964-65, 1965-66, 1966-67 and 1967-68. No voluntary return of wealth was filed as required of him under Section 14(1) of the Act. The Wealth-tax Officer issued notices under Section 17 of the Act calling for a return of net wealth for the assessment years which were served upon the assessee on October 26, 1969. The returns were filed by him on September 18, 1970, and the assessments were completed on January 30, 1971. The Wealth-tax Officer initiated proceedings under Section 18(1)(a) of the Act for delay in filing the returns and levied penalties against the assessee. The appeal filed by the assessee was dismissed by the Appellate Assistant Commissioner of Income-tax, but the second appeal filed by him before the Income-tax Appellate Tribunal was partly allowed and it was held that the increased scale of penalty was applicable only in a case where the default in furnishing the return of net wealth occurred on or after April 1, 1969. After allowing the appeal, the Tribunal directed the Wealth-Officer to impose the penalty on the scale in force prior to the Finance Act, 1969. Aggrieved by this order, the Commissioner of Wealth-tax had the following question referred for the opinion of the High Court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Finance Act, 1969, was not retrospective in effect and the penalties under Section 18(1)(a) of the Wealth-tax Act, 1957, were exigible in these cases for the assessment years 1964-65 1965-66, 1966-67 and 1967-68 on the scale in force prior to the Finance Act, 1969?"

6. While answering the question against the department and in favour of the assessee, the Bench observed as under--See [1977] 106 ITR 965, 968 (All):

"The law operative on the date when the infringement takes place is the law applicable unless it is made punishable ex post facto. If the argument of the department is accepted it shall make the operation of the amended law retrospective when there are no such words in the statute itself. There is no scope for culling out an intention of the legislature as the language is explicit and unambiguous. It is well-settled both by English and Indian courts that a fiscal statute cannot be regarded as retrospective by implication. We cannot read any intention of retrospective operation by implication. Moreover, we are concerned with a penal provision and the rule against the retrospectivity applies with greater rigour in such cases."

7. In Commissioner of Gift-tax v. C. Muthukumaraswamy Mudaliar [1975] 98 ITR 540 (Mad), a Division Bench of the Madras High Court was concerned with the interpretation of Section 17(1)(a) of the Gift-tax (Amendment) Act, 1962, which is in pari materia with Section 18(1)(a) of the Act. It was held that the non-submission of the return on June 30, 1962, was an infringement of the law for which penalty was sought to be levied and as such the provisions relating to penalty that were in force on that date would have to be applied in the assessee's case.

8. We are in respectful agreement with the view taken in the aforementioned two cases.

9. The learned counsel for the revenue has, however, contended that the non-submission of the return on the due date constitutes a recurring default which attracts the imposition of penalty under the provisions as amended from time to time. In support of his contention, he has placed reliance upon State v. Kunja Behari Chandra AIR 1954 Pat 371 [FB], State v. A.H. Bhiwandiwalla AIR 1955 Bom 161 and State v. Umashankar Laxminarayan Jaiswal AIR 1962 MP 311. We shall now briefly deal with these three authorities.

10. In Kunja Behari Chandra's case AIR 1954 Pat 371 [FB], the Patna High Court was concerned with the interpretation of Sections 30 and 31(4) of the Mines Act, 1923, Coal Mines Pithead Bath Rules, 1946, and Mines Creche Rules, 1946. The relevant rules provided that creche should be provided for the children of the workers and workers should be allowed the facility of having a bath at the pithead of the mines. Apparently, the rules conferred important privileges on the coal miners which they were entitled to enjoy from day-to-day. It was also the legal duty of the owners of the coal mines to provide these facilities from day-to-day. In that background, it was held that omission on the part of the owners of the coal mines to provide these facilities from day-to-day constituted a continuous offence inasmuch as the same was committed on every day on which the act or omission continued.

11. In A.H. Bhiwandiwalla's case AIR 1955 Bom 161, decided by the Bombay High Court (D.B.), the court was concerned with the interpretation of Rules 4 and 5 of the Bombay Factories Rules. It was held that the failure of the accused to apply for the registration and to give a notice of occupation was not a continuing offence but the conduct of the accused in using the premises as a factory without obtaining a licence constituted a continuing offence.

12. Similarly, in Umashankar Laxminarayan Jaiswal's case AIR 1962 MP 311 decided by the Madhya Pradesh High Court (D.B.), omission to securely fence the fermenting vats was regarded as a continuing offence.

13. The aforementioned three cases are obviously distinguishable. Only those acts and omission were held to be continuing wrongs which the party concerned was obliged under law to perform or to refrain from performing from day-to-day and at least on the point of failure of the accused to apply for registration and to give a notice of occupation of the factory, the default was not held to be a continued default by the Bombay High Court. To that extent the view of the Bombay High Court goes against the revenue because omission to file a return or the omission to give a notice of occupation are the types of acts or omission which can properly be regarded as of the same type. Had the statute provided that the possession of wealth, without filing a return in respect of it before the Wealth-tax Officer, would constitute a wrongful act, the default would certainly be regarded as a continuing one. There is, however, no such provision in the Act.

14. The aforementioned considerations apart, the matter stands concluded against the revenue by some of the observations made by the Supreme Court of India in Balakrishna Savalram Pujari Waghmare v. Shree Dhyanesh-war Maharaj Sansthan AIR 1959 SC 798, 807. These observations are:

"It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury. If the wrongful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from the act may continue."

15. If Section 18 of the Act is tested on the touchstone of the aforementioned principle, it becomes obvious that the wrongful act on the part of an assessee becomes complete as soon as he does not file the return of his wealth on the stipulated date. His omission to do so does not make the wrongful act a continuing one, merely because the penalty imposable on him may either continue or get enhanced.

16. The same conclusion follows from a consideration of Section 6 of the General Clauses Act, the relevant portion of which reads as under :

"6. Effect of repeal.--Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not--.........

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed ; or

(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid;

and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment, may be imposed as if the repealing Act or Regulation had not been passed."

17. If the assessee by not filing the returns on June 30, 1964, and June 30, 1965, had committed a default, the repeal or the modification of the provisions relating to penalty could not affect his right to be dealt with in accordance with the repealed or modified statutory provisions.

18. After careful consideration of the whole matter, we are of the considered view that the omission of an assessee to file a return on the due date completes his default as on that date and does not render it a continuing default. Consequently, the penalty can be imposed on him only on the basis of the law which was prevalent on that date.

19. We accordingly answer both the questions in favour of the assessee and against the revenue.

Suresh Seth v. Commissioner Of Wealth-Tax

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Revenue's Arguments

Assessee's Position (as reflected in the record and prior decisions)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Suresh Seth v. Commissioner Of Wealth-Tax

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