VEERBHANDAS PURSWANI Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) THIS is a reference under Section 27(1) of the W.T. Act, 1957. In compliance with the direction of this court in M.C.C. No. 92 of 1975 dated July 8, 1980, the following two questions of law have been referred to this court for opinion :

(2.) FOR the assessment year 1968-69, the assessee filed a return of net wealth on November 5, 1969, disclosing a net wealth of Rs. 1,28,024. In declaring the above net wealth, the assessee had shown the amount of money in circulation in a money-lending business carried on by him at Rs. 45,000. It was the contention of the assessee that no books of account were maintained for this business and the amount of Rs. 45,000 was shown in the return by estimate. The WTO found that in the assessment for 1967-68, his capital in the money-lending business was taken at Rs. 92,000. His income for the assessment year 1968-69 was determined at Rs. 24,000. The total of these two thus amounted to Rs. 1,16,000. Against this, the assessee's household expenses, as estimated by the assessee, amounted to Rs. 5,000 and the assessee had incurred expenditure of Rs. 22,000 in the construction of a house. Deducting the above two amounts totalling to Rs. 27,000 from the total of Rs. 1,16,000 as shown above, the balance of capital in the money-lending business was computed by the WTO at Rs. 89,000 as against Rs. 45,000 shown by the assessee. FOR understatement of the capital, he also issued a notice under Section 18(1)(c) of the W.T. Act, calling upon the assessee to show cause why a penalty should not be imposed. As the penalty imposable for the assessment year 1968-69 exceeded a sum of Rs. 1,000, the WTO referred the proceedings to the IAC under Section 18(3) of the W.T. Act, 1957. Thereafter, the IAC again called upon the assessee to show cause why penalty should not be imposed. The assessee contended that money in circulation in the money-lending business, as shown by him and as determined by the WTO, was an estimate in the absence of books of account and there was no basis for treating it to be concealment. The IAC of I.T. did not accept these contentions and imposed a penalty of Rs. 44,000 on the assessee, representing the difference between the money-lending capital shown by the assessee and determined by the WTO. Against the levy of penalty, the assessee filed an appeal before the Appellate Tribunal contending that the order passed by the IAC of I.T. was barred by limitation and there was violation of principles of natural justice, inasmuch as he was not given any opportunity to rebut the facts taken into consideration. Both these contentions were negatived by the Tribunal.

(3.) NOW, the second question referred for our opinion. In this case, the penalty order was passed on March 27, 1972. As per Section 18(5) of the W.T. Act, before its amendment which came into force on April 1, 1971, the penally could be imposed before expiration of two years from the date of completion of the proceedings in the course of which the proceedings for the imposition of penalty have been commenced. The assessment order was passed on February 27, 1970. According to the amended Sub-section (5), which came into force during the penalty proceedings, the penalty could be levied before expiration of two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed which means that penalty could be imposed in the present case within two years from March 31, 1970 The Privy Council in Delhi Cloth & General Mills Co, Ltd. v. CIT [1927] 2 ITC 439, laid down that while provisions of a statute dealing merely with matters of procedure may properly, unless that construction be textually inadmissible, have retrospective effect attributed to them, provisions which touch a right in existence at the passing of the statute are not to be applied retrospectively in the absence of express enactment or necessary intendment. It is settled law that any amendment of the Act, though effected after the close of the assessment year but before the assessment is made, would still be given retrospective effect and would apply to the assessment, if the amendment is purely procedural and affects the machinery for collecting the tax rather than the tax itself [see CIT v. Bagchi & Co. [1951] 20 ITR 33 (Cal) and Kudilal Govindram Seksaria v. CIT [1964] 54 ITR 653 (Bom)]. As such, the order of the IAC of I.T. imposing penalty is well within limitation.