B.S. Ahuja, Judicial Member
1. These three appeals by the assessee pertain to the assessment years 1974-75, 1975-76 and 1976-77 and challenge the levy of penalty for concealment of wealth in all these years. The facts being similar, the appeals are being disposed of by this common order.
2. The assessee was a minor and was represented by his guardian. He had inherited jewellery on the death of his mother sometime in the year 1965. This jewellery was then valued at Rs. 50,000. In the returns for the assessment years 1976-77 and 1977-78, the assessee declared the value of the jewellery coming to his share at nil. In the assessment years 1968-69 and 1969-70 it was declared at Rs. 50,000 and exemption was claimed under Section 5(1)(viii) of the Wealth-tax Act, 1957 ('the Act').
3. In the subsequent years, 1970-71 onwards, including the three years under appeal, the value of this jewellery was declared at Rs. 50,000. In the assessment year 1974-75, the WTO vide his letter dated 28-12-1974 asked the appellant to file a valuation certificate from a registered valuer in respect of his jewellery. In spite of various opportunities being given to the assessee, he did not comply with the directions of the WTO. Instead, he persisted that the value of jewellery should be taken at Rs. 50,000 only in view of the likely depreciation in the value of the jewellery over the years. The WTO vide his letter dated 12-6-1975 asked the appellant to show cause why the value of jewellery should not be taken at Rs. 2 lakhs. The assessee, in reply, reiterated that the value should be taken only at Rs. 50,000. The WTO, however, adopted the value at Rs. 2 lakhs in each of these three years under appeal.
4. The WTO started penalty proceedings under Section 18(1)(c) of the Act and issued notice to show cause why penalty should not be levied. The assessee submitted that there was no concealment. The WTO specifically asked the assessee to show cause why penalty may not be imposed under Section 18(1)(c) for suppressing the value of jewellery. The assessee contended that the value adopted by the WTO was abnormal. The WTO held that the Explanation to Section 18(1)(c) applied and the assessee had not been able to show that the difference between the returned value and the assessed value of the jewellery did not arise from gross or wilful neglect on his part. He, therefore, imposed the penalties which were maximum imposable under the law. In the assessment years 1974-75 and 1975-76, the penalty was based on the wealth concealed while in the assessment year 1976-77 it was based on the tax evaded.
5. The assessee came in appeal before the Commissioner (Appeals) and contended that the levy of penalty was not justified for the alleged default committed by his father and natural guardian who was since expired on 3-1-1980. The Commissioner (Appeals) found no force in this contention. He noticed that by the time the penalty orders were passed, the assessee had become major and penalty orders were made on him and he had also filed appeals. So, according to law penalty is imposable even on a minor who is an assessee and is assessed through his guardian. The death of the assessee's father and natural guardian was immaterial to the issue. Some other technical objections regarding jurisdiction of the WTO were taken but were rejected. It was then contended that the value of the jewellery being sub judice, the WTO should have kept the matter in abeyance pending disposal of the appeal and pending report of the approved Valuation Officer. The Commissioner (Appeals) noted that he had confirmed the valuation of the jewellery at Rs. 2 lakhs and it was not necessary to refer the matter to the Valuation Officer under Section 16A of the Act.
6. On merits, the Commissioner (Appeals) held that the levy of penalty was fully justified. While valuing the jewellery consistently at Rs. 50,000, the assessee did not take into account the patent fact that the value of the jewellery was increasing from year to year on account of appreciation in the value of gold as well as the precious stones contained in the jewellery. This was a fact of common knowledge and the assessee could not be ignorant of this fact. Having had the knowledge that the value of jewellery had increased, the assessee could, in no circumstances, justify his action in showing the same value of jewellery in these three years as he had shown in the assessment years 1968-69 or before. Besides, in the assessment year 1974-75, the WTO had specifically asked the assessee to file a valuation report in respect of jewellery but the assessee did not comply with the WTO's direction. It was inconceivable in the opinion of the Commissioner (Appeals) that the value of jewellery, which was valued at Rs. 50,000 in the assessment year 1968-69, should also be the same in the assessment years under appeal when the market price of gold and precious stones had increased by several times.
7. As regards the assessee's contention that the natural guardian had filed a valuation certificate from a valuer Vaikunth Somaiya dated 25-1-1978 giving the value of jewellery at Rs. 70,000 and another certificate for the value of one ring at Rs. 5,000 before the Commissioner of Income-tax (Appeals), the Commissioner of Wealth-tax (Appeals) noted that the valuation certificates suffered from serious defects and did not establish that the values of jewellery on the valuation dates was Rs. 50,000. The valuer had omitted to value four diamond bangles, one mang tika and one brooch on the plea that they were missing. He had also not given either the weight of the jewellery in gold or in diamonds. He, therefore, held that the value of jewellery could not be Rs. 50,000 in the assessment years under appeal. It was not, in fact, less than Rs. 2 lakhs as held in the quantum appeal. The difference between the value shown and the value assessed is very substantial and could not be ignored for the purpose of imposition of penalty under Explanation 1(i) and 1(iii) of Section 18(1)(c) for the assessment years 1974-75 and 1975-76 and Explanation 4 of Section 18(1)(c) for the assessment year 1976-77. The assessee had failed to rebut the presumption raised against him under Explanations to Section 18(1)(c). Instead, the entire evidence showed that there was gross and wilful neglect on the part of the assessee in persisting in showing the value of the jewellery at Rs. 50,000. This was not an ordinary negligence on his part. Nor was it an innocent action. He, therefore, held that the assessee was guilty of concealment of wealth for which penalty was leviable. As regards the quantum of penalty, the Commissioner (Appeals) reduced it to the minimum in all the three years.
8. The assessee is in appeal against the said order of the Commissioner (Appeals). We have heard the learned counsel for the assessee and the departmental representative at length. The learned counsel for the assessee stated that the jewellery was inherited by the assessee on 15-10-1967 on the death of his mother and in the estate duty proceedings this jewellery was valued at Rs. 50,000. The assessee was a minor till 1980. He stated that on 25-1-1978, the assessee filed a report of an approved valuer according to which the value of the jewellery was Rs. 70,000. Three items of jewellery which were inherited were missing. He could not state since when these three pieces were missing and when it was claimed before the WTO that they were so missing, because from the record pertaining to these three years it does not seem to have been stated at any stage till the valuation report dated 25-1-1978 was filed that three items of jewellery were missing. In fact, according to the assessee, the value of jewellery had remained static and if three items of jewellery had been misplaced or lost then the valuation of the remaining pieces of jewellery should not have been Rs. 50,000 but should have been less. Since that was not done, it is clear that even, according to the assessee, when he valued the jewellery at Rs. 50,000 in the returns of wealth, he conceded that there had been some increase in the value of jewellery. That the value of the remaining pieces of jewellery, except the three which were missing, was Rs. 70,000 as per the valuation report dated 25-1-1978 would further show that the value of jewellery had, in fact, increased.
9. The learned counsel for the assessee pointed out that the entire jewellery was sold in 1978 for Rs. 70,000. From this he wants us to infer that the value shown in the years under appeal was not arbitrary nor was it understated and levy of penalty was not justified, in the light of an order of the Tribunal, Bombay Bench 'B' in the case of Ajaypat Singhania in WT Appeal No. 78 (All.) of 1981, for the assessment year 1972-73, where the penalty had been cancelled. In that case, the jewellery had been valued at Rs. 25,000 and the approved valuer valued it at Rs. 29,170. Since the assessee was returning wealth of over Rs. 10 lakhs, the Tribunal held that the difference in valuation was nominal. Besides, in that case, on being asked to get the jewellery valued, the assessee had complied with the request of the WTO. The learned counsel of the assessee also relied on the Circular of the Board which is reproduced at page 12 of the paper book. The Board stated in para No. 556 in its Circular Letter : F. No. 27/57/68-WT, dated 10-5-1968-see Taxmann's Direct Taxes Circulars, Vol. 1, Fourth edn., p. 925 -as follows.
3. As regards points contained in paragraphs 7 to 12 of your letter, the Board agree that the absence of valuation report by an approved valuer will not by itself establish concealment or understatement so as to attract penal provisions. Whether or not penalty provisions are attracted in such cases will have to be decided on the merits of each case.
10. It was contended by the learned counsel of the assessee that what Section 18(1)(c) required was to give details of the property and if he gives such details, it was open to him to put on it an ad hoc valuation i.e. even Re. 1 and still the assessee would not be liable for penalty since he had disclosed the details of the jewellery. He also claimed that the jewellery was old and outmoded. He also relies on the decision of the Delhi Bench 'D' of the Tribunal in IT Appeal No. 124 (Delhi) of 1977-78 for the assessment year 1973-74, a copy of which has been placed at pages 17 to 29 of the paper book. He further relied on the order of the Tribunal in quantum appeals pertaining to these three years in WT Appeal Nos. 544 to 546 (All.) of 1979 passed by Bombay Bench 'B' on 4-2-1984, a copy of which has been placed at pages 30 to 33 of the paper book. In the quantum appeals, the Tribunal held that the valuation of the jewellery should be Rs. 1 lakh for the assessment years 1974-75 and 1975-76 and Rs. 1,25,000 for the assessment year 1976-77.
11. So far as the Explanation to Section 18(1)(c) is concerned, the learned counsel contended that the assessee's father may have been negligent or even obstinate in persisting to value the jewellery at Rs. 50,000 but that would not justify the levy of penalty. The valuation of jewellery being purely on an estimate, the case of the assessee was analogous to the estimate of gross profit in income-tax cases and purely on the basis of that estimate penalty would not lie. When it was pointed out to the learned counsel that it is common knowledge that there was appreciation in the value of gold and precious stones like diamond, the value of which is quoted on the Bullion Market every day and, therefore, this being a notorious fact the assessee would naturally know that there was such an appreciation of valuation, the learned counsel contended that the appreciation in the value depended on the type of jewellery and this jewellery was old and, therefore, did not appreciate in value. It was, however, conceded that for the assessment year 1971-72, the Tribunal bad held that the valuation of this jewellery had increased from Rs. 50,000 to Rs. 55,000 and the assessse had accepted that order. He still contended that for the assessment year 1974-75, the declaration of the value of the jewellery at Rs. 50,000 was bona fide. He invoked the jurisdiction in equity and contended that the levy of penalty equal to the wealth concealed was a savage penalty and we should not levy the same. He, further, contended, that the levy of penalty equal to the net wealth concealed in the first year would reduce its net wealth by that amount and, therefore, there could be no recurring penalty.
12. As against this, the learned departmental representative relies on the orders of the authorities below and on the specific wording of the Explanation to Section 18(1)(c) for contending that the levy of penalty was amply justified. When Parliament had laid down a certain basis for computing penalty, the Tribunal must give effect to the same.
13. We have considered the rival contentions. We have very carefully gone through the record and we find that the conduct of the assessee and his guardian has been very contumacious and right from the beginning the assessee has been totally non-co-operative in his attitude towards the WTO. It is not as if the WTO did not give the assessee an opportunity for filing a valuation report. The assessee was given various opportunities but he persisted in not complying with the WTO's direction. The question arises, what could be the reason for the assessee's non-co-operation? In the background of the facts of the case, the only reason that we can find is that he knew that the valuation report of the approved valuer would expose the hollowness of his claim, that while the value of jewellery had generally increased over the years in an inflationary economy, it had only remained static in his case. If that was not so, we fail to understand why he should persist in not complying with the WTO's direction. That this was the only reason is made clear by the fact that when finally a report of the valuer was filed on 25-1-1978, the valuer valued the jewellery by excluding 3 items therefrom at Rs. 70,000. Therefore, it is clear that the valuation of jewellery was minimum Rs. 1 lakh in the first two years because while including the value of those 3 items of jewellery, the value would go above Rs. 1 lakh. We may state that even the valuation of jewellery at Rs. 70,000 by the assessee's valuer is very defective insofar as the valuation is merely his ipse dixit because he neither gave the weight of gold nor of the diamonds or other precious stones. Even going by the assessee's own valuation report, it is clear that the jewellery owned by the assessee had considerably been undervalued by the assessee in the return.
14. We find from the record in the paper book filed by the assessee the order of the Allahabad Bench 'A' of the Tribunal dated 10-4-1975 in WT Appeal No. 277 (All.) of 1973-74 for the assessment year 1972-73. The question involved therein was the valuation of this very jewellery. The WTO had valued it at Rs. 1,57,000 and the AAC had reduced it at Rs. 1,00,000 while the assessee had, as usual, declared it at Rs. 50,000. The Tribunal held the valuation as arbitrary and since the Tribunal was not expert in the matter of valuation of jewellery and the exact particulars of the jewellery were also not made available to them, the valuation was set aside to get the jewellery valued by an expert on scientific basis. This would show that at least from April 1975, the assessee was alive to the fact that the jewellery had to be got valued from an expert but, as the order of the WTO for the assessment year 1974-75 shows, from 29-9-1976 till 21-3-1977, he gave various opportunities to the assessee's representative to file a valuation report but on 21-3-1977, the assessee's representative expressed his inability to do so.
15. The question arises whether on these facts levy of penalty would be justified or not. The learned counsel for the assessee contends that Section 18(1)(c) justifies levy of penalty if any person 'has concealed the particulars of any assets or furnished inaccurate particulars of any assets or debts'. The contention is that the assessee has not concealed the particulars of the jewellery nor has he furnished inaccurate particulars of any assets or debts. We are of the opinion that this is without any merit altogether in view of the fact that Explanation to Section 18(1)(c) is applicable to the case in hand. Explanation I(i) reads as follows :
Explanation 1 : Where,-
(i) the value of any asset returned by any person is less than seventy-five per cent of the value of such asset as determined in an assessment under Section 16 or Section 17 (the value so assessed being referred to hereafter in this Explanation as the correct value of the asset).
Explanation 1(iii) reads as follows :
(iii) the net wealth returned by any person is less than seventy-five per cent of the net wealth as assessed under Section 16 or Section 17 (the net wealth so assessed being referred to hereafter in this Explanation as the correct net wealth).
Both these Explanations which were applicable for the assessment years 1974-75 and 1975-76 clearly apply to the case of the assessee and justify the levy of penalty because the value of the jewellery returned by the assessee is less than 75 per cent of the value of the jewellery as determined in the assessment and at the same time, the net wealth returned by him is less than 75 per cent of the net wealth as assessed. When such is the case, the onus shifts on the assessee to prove that the failure to return the correct value of the assets or the correct net wealth did not arise from any fraud or any gross or wilful neglect on his part. The assessee cannot really claim that he has discharged the onus because all that he has done is that he persisted with an assertion that the value of his jewellery had not increased from 1967 onwards when he inherited it though actually it had increased and his valuation report dated 25-1-1978 establishes that fact. The conduct of the assessee in persisting to value it at Rs. 50,000 despite the fact that in the assessment year 1971-72 it had been valued at Rs. 55,000 and the assessee had accepted that valuation and in the assessment year 1972-73 the Tribunal sent the case back for obtaining the valuer's report shows his defiant attitude towards the revenue. The assessee seems to say that 'do what you like, I won't care and I won't comply with it'. Such an attitude would bring the case of the assessee tinder the head 'wilful neglect and gross neglect' within the Explanation to Section 18(1)(c). The assessee cannot say that he made a mistake because he was warned right from the beginning by the WTO that this valuation could not be accepted and still he persisted to press his claim.
16. It is contended that the assessee was a minor and his father may have been stubborn or obstinate but that would not justify the levy of penalty. In our opinion, when law permits a minor to own wealth at Rs. 20 lakhs or so and he can earn income through his guardian, so must he be answerable for the lapses of his guardian when he contravenes the law obviously for the benefit of the minor. The guardian had nothing personal to gain. His interest was not adverse to that of the minor since he was the father. Therefore, if the case of the assessee falls directly within the ratio of Section 18(1)(c) read with the Explanation, penalty must lie even though he was then a minor.
17. We may point out that the circular of the Board on which reliance has been placed does not help the assessee in any way because we have not upheld the penalty merely for want of valuation report by an approved valuer but on the merits of the case after considering all the facts. The Tribunal's order in the case of Ajaypat Singhania (supra) is inapplicable because there the assessee had been co-operative with the department by filing the valuation report and the difference in the valuation was Rs. 4,000 when the Tribunal held it to be very nominal difference. The facts here are entirely different and the difference is more than double the valuation. Similarly, the case on which reliance is placed and copy of which is at pages 17 to 29 of the paper book has no bearing on the facts of the case. The jewellery was valued in that case as in the last year and during the course of hearing, the assessee had filed valuer's report. These facts take the case of the assessee out of the ratio of that order. The Tribunal held in that case that the Explanation to Section 18(1)(c) was attracted but the onus on the assessee was discharged. The facts in the case before us clearly show that the onus has not been discharged by the assessee. Therefore, on considering all the facts and circumstances of the case, we are of the opinion that penalty for concealment of wealth under Section 18(1)(c) read with the Explanation is leviable for the assessment years 1974-75 and 1975-76 at a minimum of Rs. 50,000 in each year, since in the quantum appeal the Tribunal has held that the valuation of jewellery should be fixed at Rs. 1 lakh in each of these years. We order accordingly. We may point out that once Parliament in its wisdom has laid down the quantum of penalty, we would not be justified in describing it as savage and on that ground to ignore it or stultify it.
18. In the assessment year 1976-77 the Tribunal held that the valuation of jewellery should be taken at Rs. 1,25,000. In this year, the basis of levy of penalty was the wealth-tax evaded and the WTO shall determine the minimum penalty on that basis for this year.
19. The appeals are, accordingly, partly allowed.