1. Penalty for failure to file returns under Section 18, Wealth Tax Act, 1957 — Request for waiver under Section 18-B — Partial reduction of penalty by Commissioner. (Para 1 )
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1997 Supreme(SC) 34
1997(2) Supreme 15
SUPREME COURT OF INDIA
B.P. Jeevan Reddy & K.T. Thomas, JJ.
Smt. Harbans Kaur etc. -Appellants
versus
The Commissioner of Wealth-Tax Jullundur -Respondent
Civil Appeal No. 1334 of 1981
With
CA Nos. 1335-36/81, 1337/81, 1338/81
Decided on 13-1-1997
Counsel for the Parties :
For the Appellants : Dhruv Mehta and S.K. Mehta, Advocates.
For the Respondent : Dr. V. Gaurishankar, Sr. Advocate, Anil Srivastava and B. Krishna Prasad, Advocates.
IMPORTANT POINT
Commissioner has discretion u/s 18B of Wealth Tax Act to either reduce the amount of penalty or to waive entire penalty and discretion must be exercised fairly and not arbitrarily.
Headnote:Wealth Tax Act, 1957-Sections 18 & 18B of Amendment Act, 1975-Power of the Commissioner to reduce or waive penalty in certain contingencies-Power is to be exercised fairly and not arbitrarily-No warrant for proposition that the Commissioner, if satisfied of compliance of conditions, has only to waive the penalty in entirety-Commissioner indicated reasons for reducing penalty to 5% against appellants-Reasons were not in any manner unjust or irrelevant-No reason to interfere with impugned order. (Paras 6 & 11)
Legal Category Hierarchy
Table of Contents
2. Whether the Commissioner, upon satisfaction of conditions under Section 18-B, Wealth Tax Act, 1957, must waive the penalty in full or may reduce it. (Para 2 )
3. The Commissioner possesses discretionary power to either reduce or waive penalties under Section 18-B, provided the decision is fair, non-arbitrary, and based on applied mind. (Para 5 , 6 , 7 , 8 , 10 )
4. Section 18-B of the Wealth Tax Act, 1957, confers discretionary power on the Commissioner to choose between a full waiver or a partial reduction of penalty. (Para 5 , 7 )
5. Appeals dismissed; orders of the Commissioner and High Court upheld. (Para 11 )
6. Does the Commissioner have the power to partially reduce a penalty under Section 18-B of the Wealth Tax Act, 1957?
Yes. The use of the words may in his discretion reduce or waive indicates that the Commissioner has the discretionary power to choose between a full waiver or a reduction in any proportion, provided the conditions of the section are satisfied. (Para 5 , 6 , 7 )
7. What are the requirements for the Commissioner to exercise discretion under Section 18-B of the Wealth Tax Act, 1957?
The Commissioner must be satisfied that the person made full and true disclosure, cooperated in the enquiry, and paid or arranged for payment of tax and interest. The discretion must be exercised fairly, justly, and not arbitrarily. (Para 4 , 6 )
8. Is the Commissioner required to provide reasons when opting for a reduction instead of a full waiver?
Yes. When the Commissioner chooses a reduction over a complete waiver, the order must indicate that the Commissioner has applied his mind to the decision. (Para 8 )
JUDGMENT
Thomas, J.-Appellants 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-B 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-B 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 18B 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.
2. Learned 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.
3. Section 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 the three clauses set out therein.
4. Section 18-B 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 enquiry 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.
5. If the 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.
6. The words "the Commissioner may in his discretion.........reduce or waive the amount of penalty" in Section 18-B of the Act are clear enough to show that the power conferred on the Commissioner is to be exercised by him 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 and not fancifully vide S.G. Jaisinghani v. U.O.I. & others1.
7. Even 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 do
