Smt. Bhuwan Kumar Bhandari vs Commissioner of Wealth-tax and Another

S.K. Kulshrestha, J.—By this petition, the petitioner assails the order dated December 9, 1999 (annexure PIT), passed by the first respondent, Commissioner of Wealth-tax, Indore, by which the said respondent has rejected the revision and declined the claim of the petitioner for deleting the interest charged u/s 17B of the Wealth-tax Act, 1957.

The facts not in dispute before this Court are that the petitioner is an assessee under the Wealth-tax Act and for the assessment year 1992-93, she was required to furnish return by July 31, 1992 for the year ending on March 31, 1992. The petitioner has submitted that on account of the inadvertent lapse of her accountant, the said return could not be filed by the due date but the amount of tax along with interest thereon as required u/s 17B of the Wealth-tax Act, was deposited on March 30, 1994. To substantiate the said contention, the petitioner has submitted exhibit P/3 indicating the calculations and the amount of tax and interest worked out by her.

Learned senior Counsel for the petitioner submits that although a sum of Rs. 62,613 has been deposited along with interest and returns under the said Act for the subsequent periods were duly filed, a notice was received from the Department informing that return for the period ending on March 31,1992, relevant to the assessment year 1992-93 had not been filed. It was on receipt of this notice that realisation dawned that on account of sheer carelessness of the accountant though the tax and interest had been deposited, the return had not been filed. Immediate steps were taken and the return was submitted on March 30, 1998.

Learned Counsel for the petitioner submits that although it was stressed before the assessing authority that the amount of wealth-tax having been deposited along with the interest chargeable thereon for the period of delay till the said amount of tax was deposited, the interest u/s 17B would not be chargeable till the date of the filing of the return. The Assessing Officer charged tax at the rate of 2 per cent, up to the date of filing of the return u/s 17B of the Wealth-tax Act. A revision filed against the said order of the assessing authority has been dismissed by the Commissioner of Wealth-tax vide order dated December 9, 1999 (annexure PIT). Learned Counsel, therefore, submits that on rigid and dogmatic construction of the provision, the decision of the authorities with regard to calculation of interest beyond the period the amount had already been deposited is illegal and against the legislative intent and the order (annexure PIT), therefore, deserves to be quashed.

Learned senior standing counsel has controverted the stand of the counsel for the petitioner. He has submitted that on a plain language of Section 17B of the Wealth-tax Act, it is manifest that interest is to be charged in such cases of lapse/default up to the date of furnishing of the return as is clear from Clause (a) of section 17B(1) and, therefore, the Revenue has, in no way, erred in charging the amount of interest. The Commissioner of Wealth-tax has accordingly, rightly dismissed the revision vide his order (annexure P/7).

A short controversy that arises for determination in this petition is as to whether on payment of the tax and interest on a date anterior to the date of filing of the return under the Wealth-tax Act, the interest at the rate of 2 per cent, prescribed in Section 17B of the Wealth-tax Act is chargeable up to the date of furnishing of the return or the same would get truncated up to the period when the amount of tax and interest has been deposited.

Section 17B(1) (a) and (b) of the Wealth-tax Act, 1957, reads as under:

Interest for defaults in furnishing return of net wealth.-

(1) Where the return of net wealth for any assessment year under Sub-section (1) of Section 14 or Section 15, or in response to a notice under Clause (i) of Sub-section (4) of Section 16, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rate of two per cent., for every month or part of a month comprised in the period commencing on the date immediately following the due date, and,-

(a) where the return is furnished after the due date, ending on the date of furnishing of the return, or

(b) where no return has been furnished, ending on the date of completion of the assessment under Sub-section (5) of Section 16,

on the amount of tax payable on the net wealth as determined (under Sub-section (1) of Section 16) or on regular assessment.

Learned senior Counsel Shri Chaphekar has invited attention to the decision of the Supreme Court reported in Central Provinces Manganese Ore Co. Ltd. Vs. Commissioner of Income Tax, , in which a somewhat similar provision of the Income Tax Act contained in Section 139(8) came up for consideration of their Lordships. At the relevant time Section 139(8) of the Income Tax Act provided as under (page 964):

Where the return under Sub-section (1) or Sub-section (2) or Sub-section (4) for an assessment year is furnished after the 30th day of September of the assessment year, or is not furnished, then whether or not the Income Tax Officer has extended the date for furnishing the return under Sub-section (1) or Sub-section (2), the assessee shall be liable to pay simple interest at nine per cent, per annum, reckoned from the 1st day of October of the assessment year to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment u/s 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid and any tax deducted at source:

Provided that in the case of any person whose total income includes any income from business or profession, the previous year in respect of which expired after the 31st day of December of the year immediately preceding the assessment year, such interest shall be reckoned from the 1st day of January, instead of 1st day of October of the assessment year:

Provided further that the Income Tax Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any person under this Sub-section.

In dealing with a similar contention, their Lordships observed that the provision of levy of interest under Sub-section (8) of Section 139 could not be referred to as penal. Having regard to the reason for levy and the circumstances in which the interest was imposed, it was held that interest was levied by way of compensation and not by way of penalty. On the basis of the said observation of the apex court, learned Counsel submits that when the provisions of Section 17B are read apposite the provision construed by their Lordships in the said case, there is no room for doubt that the charging of interest on the delayed deposit of the wealth-tax is also compensatory and not punitive. It is clear from the provision itself that it is not on account of the delay in not furnishing the return but the amount due from the assessee, that provision has been incorporated to compensate the Revenue for the loss occasioned by the delayed deposit. Under these circumstances, it clearly appears that the intention of the Legislature in providing for charging of interest on account of delay/default is only to make provision to compensate the Department. I am of the view that interpretation of Section 17B by the learned Commissioner of Wealth-tax, Indore does not indicate its true legislative intent.

Consequently, this petition is allowed. The order (annexure P/7) passed by the first respondent is quashed and the matter is remanded to him for decision afresh in the light of the observations made hereinabove. There shall be no orders as to costs.