Smt. M.R. Prabhavathy and Another vs Assistant Commissioner of Income Tax, Now Deputy Commissioner of Income Tax and Another

Bharuka, J.—The Assessee have preferred these appeals u/s 27 of the Wealth Tax Act, 1957 ("the Act" for short). By the impugned order the Tribunal has held that the assesses have rightly been held as liable to pay interest u/s 17B of the Act.

The only substantial question of law involved herein is:

"Whether in terms of Section 17B of the Act the assessee can be held liable to pay interest for delay in filing the return of net income."

The assessment year involved is 1991-92. For this year the due date for filing the return u/s 14 of the Act was 30.6.1991. But the assesses had filed the return much belatedly i.e., on 15.2.1994. On 13.12.1994 a notice u/s 17 of the Act was served on them requiring them to file the return. After receiving the notice the assesses sent a letter dated 26.12.1994 to treat the return filed as one u/s 17(4) of the Act. Thereafter, the assessment was completed u/s 16(3) of the Act. The net wealth was determined at Rs. 59,49,888/- and Rs. 47,92,400/- and thereby demand notices were issued to the assessees for payment of Rs. 92,748/- and Rs. 1,27,272/-, respectively, as wealth tax assessed.

Admittedly, assessee have not paid the admitted tax even according to the return filed by them. Therefore, after passing of the above assessment orders, notices were issued to them purporting to be for rectification u/s 35 of the Act proposing to levy interest u/s 17 of the Act. On receiving the reply from the assesses order dated 2.9.1998 was passed levying interest u/s 17B of the Act amounting to Rs. 59,328/- and Rs. 81,472/- respectively. The assessees assailed the said order by preferring the appeals u/s 23A(1) of the Act before the Commissioner of Wealth Tax (Appeals). Having failed to get any relief they went in second appeal before the Tribunal. But there also they could not succeed. In the memo of appeal the following four questions have been raised:

"1. Whether on the facts and in the circumstances of the appellant''s case, the Tribunal is justified in holding that the interest u/s 17B of the Act is mandatory and not discretionary?

Whether on the facts and in the circumstances of the appellant''s case, the Tribunal was right in law in holding that interest u/s 17B of the Act is required to be levied?

Whether on the facts and in the circumstances of the appellant''s case, the tribunal was right in law in holding that omission to levy interest u/s 17B of the Act is a mistake apparent on the face of the record warranting rectification?

Whether on the facts and in the circumstances of the appellant''s case, the Tribunal was right in law in holding that the appeal of the appellant requires to be dismissed in-liming as non-maintainable?"

The first three questions relate to leviability of statutory interest u/s 17B of the Act. In order to appreciate the contention of the assessees we reproduce hereunder Section 17B(1) of the Act:

"17B(1) Whether the return of net wealth for any assessment years under Sub-section (1) of Section 14 or Section 15, or in response to a notice under Clause (1) 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 regular assessment."

From the above provision it is clear that the Parliament has made it mandatory on the part of the wealth tax officer to levy interest at two per cent if the conditions precedent as envisaged under this section, are found to exists.

In the present case, admittedly, belated returns were filed. Therefore, pursuant to the legislative mandate, they became liable to pay the interest. No discretion had been vested in the wealth tax officer to waive or reduce the same. As of fact, after completion of the assessment the wealth tax officer was required to issue demand notice straightaway asking for payment of interest in terms of Section 17B(1) of the Act. It is not a case of any mistake apparent on the face of the record because even after completion of the assessment the demand notice asking for interest could have been issued.

The learned Counsel for the appellant has submitted that in relation to assessment made u/s 17 of the Act the provisions of levy of interest u/s 17B are not applicable. In our opinion, the argument advanced is ex facie fallacious because Explanation 3 of Section 17B(1) of the Act clearly covers the cases of assessment u/s 17. The issue at hand regarding mandatory nature of the liability u/s 17B is directly supported by the judgment of the Supreme Court in the case of Commissioner of Income Tax, Mumbai Vs. Anjum M.H. Ghaswala and Others, . In this case the question had arisen with regard to levy of interest under Sections 234A, 234B and 234C. The Supreme Court has held at page 13 as follows:

"...... Sections 234A, 234B and 234C in clear terms impose a mandate to collect interest at the rates stipulated therein. The expression "shall" used in the said Section cannot by any stretch of imagination be construed as "may". There are sufficient indications in the scheme of the Act to show that the expression "shall" used in Sections 234A, 234B and 234C is used by the Legislature deliberately and it has not left any scope for interpreting the said expression as "may". This is clear from the fact that prior to the amendment brought about by the Finance Act, 1987, the Legislature in the corresponding section pertaining to imposition of interest used the express "may" thereby giving a discretion to the authorities concerned to either reduce or waive the interest. The change brought about by the Amending Act (Finance Act, 1987) is a clear indication of the fact that the intention of the Legislature was to make the collection of statutory interest mandatory."

Question No. 4 pertains to maintainability of assessee''s appeal before the Commissioner of Wealth Tax (Appeals). Commissioner of Wealth Tax (A) had dismissed the appeal filed by the assessee on the ground that they had not paid even the admitted tax. The Tribunal has held that keeping in view the provisions contained in Section 23(2A) of the Act was justified in dismissing the appeal. Section 23(2A) of the Act reads as under:

"(2A) Where a return has been filed by an assessee, no appeal under this Section shall be admitted unless at the time of filing of the appeal he has paid the tax due on the net wealth returned by him."

The above provision is clearly mandatory in nature. It mandates that an appeal can be admitted only if, at the time of filing of the appeal, the appellant has paid the tax due on the net wealth returned by him. In the present case, admittedly, the assessee has not paid the admitted tax due on the net wealth returned by him. Therefore, the Commissioner of Wealth Tax (Appeals) had no competence to entertain the appeal and was rightly dismissed in limine.

In the above view of the matter we hold that the Tribunal was justified in rejecting the appeals. The appeals are accordingly dismissed.