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Section 18 – The Wealth-Tax Act, 1957

The Wealth-Tax Act, 1957

 

 

18. Penalty for failure to furnish returns, to comply with notices and concealment of assets, etc.

 

1[18. Penalty for failure to furnish returns, to comply with notices and concealment of assets, etc. —(1) If the 2[Assessing Officer], 3[Joint Commissioner (Appeals)],— 4[Commissioner (Appeals),] 5[Chief Commissioner or Commissioner] or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person—

6[***]

 

(b) has 7[***] failed to comply with a notice under sub-section (2) or sub-section (4) of section 16; or

 

(c) has concealed the particulars of any assets or furnished inaccurate particulars of any assets or debts; he or it may, by order in writing, direct that such person shall pay by way of penalty—

8[ 9[***]

 

10[(ii) in the cases referred to in clause (b), in addition to the amount of wealth-tax payable by him, a sum which shall not be less than one thousand rupees but which may extend to twenty-five thousand rupees for each such failure;]

 

(iii) in the cases referred to in clause (c), in addition to any wealth-tax payable by him, a sum which shall not be less than, but which shall not exceed five times, the amount of tax sought to be evaded by reason of the concealment of particulars of any assets or the furnishing of inaccurate particulars in respect of any assets or debts:

 

11[Provided that in the cases referred to in clause (b), no penalty shall be imposable if the person proves that there was a reasonable cause for the failure referred to in that clause.]

 

Explanation 1. —For the purposes of clause (iii) of this sub-section, the expression “the amount of tax sought to be evaded”—

 

(a) in a case to which Explanation 3 applies, means the tax on the net wealth assessed;

 

(b) in any other case, means the difference between the tax on the net wealth assessed and the tax that would have been chargeable had the net wealth assessed been reduced by the amount which represents the value of any assets in respect of which particulars have been concealed or inaccuate particulars have been furnished and of any debts in respect of which inaccurate particulars have been furnished.

 

Explanation 2. —Where in respect of any facts material to the computation of the net wealth of any person under this Act,—

 

(A) such person fails to offer an explanation or offers an explanation which is found by the 12[Assessing Officer] or the 13[Deputy Commissioner (Appeals)] 14[or the Commissioner (Appeals)] 15[or the Commissioner] to be false, or

 

(B) such person offers an explanation which he is 16[not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his net wealth have been disclosed by him], then, the amount added or disallowed in computing the net wealth of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the value of the assets in respect of which particulars have been concealed.

17[***]

 

18[ Explanation 3. —Where any person 19[***] fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 17A, a return of his net wealth which he is required to furnish under section 14 in respect of any assessment year commencing on or after the 1st day of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub-section (4) of section 16 or sub-section (1) of section 17 and the Assessing Officer or the Deputy Commissioner] (Appeals) or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has assessable net wealth, the such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his assets or furnished inaccurate particulars of any assets or debts in respect of such assessment year, notwithstanding that such person furnishes a return of his net wealth at any time after the expiry of either of the periods aforesaid applicable to him in pursuance of a notice under section 17.]

 

Explanation 4.—Where the value of any asset returned by any person is less than seventy per cent. of the value of such asset as determined in an assessment under section 16 or section 17, such person shall be deemed to have furnished inaccurate particulars of such asset within the meaning of clause (c) of this sub-section, unless he proves that the value of the asset as returned by him is the correct value.]

 

20[ Explanation 5.—Where in the course of a search under section 37A, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets represent or form part of his net wealth,—

 

(a) on any valuation date falling before the date of the search, but the return in respect of the net wealth on such date has not been furnished before the date of the search or, where such return has been furnished before the said date, such assets have not been declared in such return; or

 

(b) on any valuation date falling on or after the date of the search, then, notwithstanding that such assets are declared by him in any return of net wealth furnished on or after the date of the search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of such assets or furnished inaccurate particulars of such assets, 21[unless—

 

(1) such assets are recorded,—

 

(i) in a case falling under clause (a), before the date of the search; and

 

(ii) in a case falling under clause (b), on or before such date, in the books of account, if any, maintained by him or such assets are otherwise disclosed to the 22[Chief Commissioner or Commissioner] before the said date; or

 

23[(1A) Where any amount is added or disallowed in computing the net wealth of an assessee in any order of assessment or reassessment and the said order contains a direction for initiation of penalty proceedings under clause (c) of sub-section (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause (c).]

 

(2) he, in the course of the search, makes a statement under sub-section (4) of section 37A that any money, bullion, jewellery or other valuable article or thing found in his possession or under his control, forms part of his net wealth which has not been disclosed so far in his return on net wealth to be furnished before the expiry of the time specified in sub-section (1) of section 14, and also specifies in the statement the manner in which such net wealth has been acquired and pays the tax, together with interest, if any, in respect of such net wealth.]

 

24[ Explanation 6. —Where any adjustment is made in the wealth declared
in the return under the proviso to clause (a) of sub-section (1) of section 16 and additional wealth-tax charged under that section, the provisions of this sub-section shall not apply in relation to the adjustments so made.]

25 [***]

 

(2) No order shall be made under sub-section (1) unless the person concerned has been given a reasonable opportunity of being heard.

26[***]

 

27[(3) No order imposing a penalty under sub-section (1) shall be made,—

(i) by the Income-tax Officer, where the penalty exceeds ten thousand rupees;

 

(ii) by the 28[Assistant Commissioner or Deputy Commissioner], where the penalty exceeds twenty thousand rupees. except with the prior approval of the 29 [Joint Commissioner].]

30[***]

 

(4) A 31[Deputy Commissioner (Appeals)], 32[a Commissioner (Appeals),] a 33[Chief Commissioner or Commissioner] or the Appellate Tribunal on making an order under this section imposing a penalty, shall forthwith send a copy of the same to the 34[Assessing Officer].

 

35[(5) No order imposing a penalty under this section shall be passed—

(i) in a case where the assessment to which the proceedings for imposition of penalty relate is the subject-matter of an appeal to the Joint Commissioner (Appeals) or the Commissioner (Appeals) under section 23 or an appeal to the Appellate Tribunal under sub-section (2) of section 24, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated are completed, or six months from the end of the month in which the order of the Joint Commissioner (Appeals) or the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever is later;

 

(ii) in a case where the relevant assessment is the subject-matter of revision under sub-section (2) of section 25, after the expiry of six months from the end of the month in which such order or revision is passed;

 

(iii) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.

 

Explanation. —In computing the period of limitation for the purpose of this section,—

 

(i) any period during which the immunity granted under section 22H remained in force;

 

(ii) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 39; and

 

(iii) any period during which a proceeding under this section for the levy of penalty is stayed by an order or injunction of any court, shall be excluded.

 

(6) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1989, shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.]]

 

COMMENTS

(i) Calculation of penalty for failure to furnish wealth-tax returns cannot be made in accordance with law as it stood on due date of filing of return but must be made as per increased scale of penalty introduced and existed as on date of actual filing of return; Commissioner of Wealth-tax v. Trustees of Sahebzadas of Saraf – E – Khas Trust, Hyderabad, AIR 1997 SC 692.

 

(ii) The officer issuing show cause notices was transferred. The assessee was not informed that previous authority was succeeded by another and succeeding officer wanted to continue proceedings. Held, “penalty imposed by succeeding officer without giving mandatory opportunity of oral hearing” was bad in law and cannot be sustained; Commissioner of Wealth-tax, Bihar-I, Patna v. Jagdish Prasad Choudhary, Sahebganj , AIR 1996 Pat 58.

 

(iii) Penalty provisions in Income-tax Act are similar to that of Wealth-tax Act as far as late filing of return is concerned; Commissioner of Wealth-tax v. Trustees of Sahebzadas of Saraf-E-Khas Trust, Hyderabad , JT 1997 (1) SC 218.

 

(iv) “Reasonable cause” means “sufficient cause” which prevents a man of ordinary prudence acting under normal circumstance without negligence or inaction or want of bona fide from furnishing return in time; Commissioner of Wealth-tax, Bihar-I, Patna v. Jagdish Prasad Choudhary, Sahebganj, AIR 1996 Pat 58.

 

(v) Reasonable opportunity of hearing means reasonable opportunity of ‘oral leaving’; Commissioner of Wealth-tax, Bihar-I, Patna v. Jagdish Prasad Choudhary, Sahebganj , AIR 1996 Patna 58.

 

——————————————–

1. Subs. by Act 46 of 1964, sec. 18, for section 18 (w.e.f. 1-4-1965).

 

2. Subs. by Act 4 of 1988, sec. 127, for “Wealth-tax Officer” (w.e.f. 1-4-1988).

 

3. Subs. by Act 21 of 1998, sec. 66, for “Deputy Commissioner” (w.e.f. 1-10-1998). Earlier the words “Deputy Commissioner” were substituted by Act 4 of 1988, sec. 127, for the words “Inspecting Commissioner or Inspecting Assistant Commissioner of Wealth-tax” (w.e.f. 1-4-1988).

 

4. Ins. by Act 29 of 1977, sec. 39 and Sch. V (w.e.f. 10-7-1978).

 

5. Subs. by Act 4 of 1988, sec. 127, for “Commissioner” (w.e.f. 1-4-1988).

 

6. Clause (a) omitted by Act 3 of 1989, sec. 68(a)(i) (w.e.f. 1-4-1989).

 

7. The words “without reasonable cause” omitted by Act 46 of 1986, sec. 33(a) (w.e.f. 10-9-1986).

 

8. Clauses (i), (ii), (iii) and Explanations 1 to 4 subs. by Act 41 of 1975, sec. 91(i), for clauses (i), (ii), (iii) and Explanations 1 and 2 (w.e.f. 1-4-1976). Earlier clause (iii) and Explanation were amended by Act 19 of 1968, sec. 32(b) (w.r.e.f. 1-4-1968), clause (ii) was substituted by Act 14 of 1969, sec. 24(c) (w.r.e.f. 1-4-1969).

 

9. Clause (i) omitted by Act 3 of 1989, sec. 68(a)(ii) (w.e.f. 1-4-1989). Earlier clause (i) was substituted by Act 14 of 1968, sec. 24(c) (w.r.e.f. 1-4-1969), and was amended by Act 32 of 1971, sec. 33(a) (w.e.f. 1-4-1972).

 

10. Subs. by Act 3 of 1989, sec. 68(a)(iii), for clause (ii) (w.e.f. 1-4-1989).

 

11. Subs. by Act 3 of 1989, sec. 68(a)(iv), for the proviso (w.e.f. 1-4-1989). Earlier the proviso was inserted by Act 46 of 1986, sec. 33(b) (w.e.f. 10-9-1986).

 

12. Subs. by Act 4 of 1988, sec. 127, for “Wealth-tax Officer” (w.e.f. 1-4-1988).

 

13. Subs. by Act 4 of 1988, sec. 127, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

 

14. Ins. by Act 29 of 1977, sec. 39, Sch. V (w.e.f. 10-7-1978)
. 15. Ins. by Act 20 of 2002, sec. 110(a) (w.e.f. 1-6-2002).

 

16. Subs. by Act 46 of 1986, sec. 33(b)(ii)(1), for “not able to substantiate” (w.e.f. 10-9-1986).

 

17. Proviso omitted by Act 46 of 1986, sec. 33(b)(ii)(2) (w.e.f. 10-9-1986).

 

18. Subs. by Act 3 of 1989, sec. 68(a)(v), for Explanation 3 (w.e.f. 1-4-1989).

 

19. The words “who has not previously been assessed under this Act,” omitted by Act 20 of 2002, sec. 110(b) (w.e.f. 1-4-2003).

 

20. Ins. by Act 67 of 1984, sec. 57 (w.e.f. 1-10-1984).

 

21. Subs. by Act 46 of 1986, sec. 33(b)(iii), for certain words (w.e.f. 10-9-1986).

 

22. Subs. by Act 4 of 1988, sec. 127, for “Commissioner” (w.e.f. 1-4-1988).

 

23. Ins. by the Finance Act, 2008 , sec. 62 (w.r.e.f. 1-4-1989).

 

24. Ins. by Act 3 of 1989, sec. 68(a)(vi) (w.e.f. 1-4-1989).

 

25. Sub-sections (1A) omitted by Act 41 of 1975, sec. 91(ii). Earlier sub-section (1A) was inserted by Act 32 of 1971, sec. 33(b) (w.e.f. 1-4-1972).

 

26. Sub-sections (2A) and (2B) omitted by Act 41 of 1975, sec. 91(iii) (w.e.f. 1-4-1976). Earlier sub-sections (2A) and (2B) were inserted by Act 15 of 1965, sec. 20 (w.e.f. 1-4-1965) and sub-section (2A) was amended by Act 42 of 1970, sec. 61(a) (w.e.f. 1-4-1971).

 

27. Subs. by Act 3 of 1989, sec. 68(b), for sub-section (3) (w.e.f. 1-4-1989). Earlier sub-section (3) was amended by Act 42 of 1970, sec. 61(b) (w.e.f. 1-4-1971) and was substituted by Act 41 of 1975, sec. 91(iv) (w.e.f. 1-4-1976).

 

28. Subs. by Act 21 of 1998, sec. 66, for “Assistant Commissioner” (w.e.f. 1-10-1998).

 

29. Subs. by Act 21 of 1998, sec. 66, for “Deputy Commissioner” (w.e.f. 1-10-1998). Earlier the words “Deputy Commissioner” were substituted by Act 4 of 1988, sec. 127, for the words “Inspecting Commissioner or Inspecting Assistant Commissioner of Wealth-tax” (w.e.f. 1-4-1988).

 

30. Sub-section (3A) omitted by Act 3 of 1989, sec. 68(c) (w.e.f. 1-4-1989). Earlier sub-section (3A) was inserted by Act 41 of 1975, sec. 91(iv) (w.e.f. 1-4-1976).

 

31. Subs. by Act 4 of 1988, sec. 127, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

 

32. Ins. by Act 29 of 1977, sec. 39 and Sch. V (w.e.f. 10-7-1978).

 

33. Subs. by Act 4 of 1988, sec. 127, for “Commissioner” (w.e.f. 1-4-1988).

 

34. Subs. by Act 4 of 1988, sec. 127, for “Wealth-tax Officer” (w.e.f. 1-4-1988).

 

35. Subs. by Act 3 of 1989, sec. 68(d), for sub-section (5) (w.e.f. 1-4-1989). Earlier sub-section (5) was substituted by Act 42 of 1970, sec. 61(c) (w.e.f. 1-4-1971).

 

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The Wealth-Tax Act, 1957

 

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