ORDER
K.A. Thanikkachalam, Judicial Member
1. This appeal is by the assessee and relates to the assessment year 1974-75. In this appeal, the decision of the AAC confirming the penalty of Rs. 1,485 imposed under Section 18(1)(6) of the Wealth-tax Act, 1957 (‘the Act’) is contested.
2. According to the order imposing penalty, a notice under Section 14(2) of the Act was served on the assessee on 20-11-1974. There was no compliance. Thus, for this year no return had been filed either under Section 14(1) or under Section 14(2).
3. The WTO thereafter issued a notice under Section 16(4) of the Act to the assessee and the case was fixed for hearing on various dates such as 23-11-1978, 29-11-1978, 13-12-1978 and 19-12-1978. There was no compliance on any of these dates. Eventually, the assessment was completed on 20-12-1978 under Section 16(5).
4. Penalty proceedings were initiated for non-compliance with the notice under Section 16(4). There was no reply to the show-cause notice. The WTO finally observed :
So it has to be concluded that the assessee has without reasonable cause failed to comply with the provisions of Section 16(4) of the Wealth-tax Act. The penalty leviable for the default as fixed by Section 18(1)(ii) of the Act is a minimum of 1 per cent and maximum of 100 per cent of the assessed net wealth. The assessee’s net wealth being Rs. 1,48,515 the minimum and maximum penalties work out to Rs. 1,485 and Rs. 1,48,515 respectively. I shall, however, levy a penalty of Rs. 1,485 under Section 18(1)(b) of the Act for the assessment year 1974-75.
5. Before the AAC, it was urged that there was sufficient cause for non-filing of the return and for the non-appearance on the dates when the case was fixed for hearing. Even before the AAC, though the appeal was fixed on 3 occasions, there was no response and stating that the reasons adduced were vague, the AAC dismissed the appeal.
6. Before us, the learned counsel submitted that the assessee was suffering from cancer for more than a year. She was hospitalised and, sub sequently, passed away in November 1984. In view of the serious ill ness, it was stated that the assesses could not attend to the statutory obligations. Another point made by the learned counsel was that the assessment made was a protective assessment. He referred to the decision in the case of CIT v. Cochin Co. (P.) Ltd. [1976] 104 ITR 655 of the Kerala High Court and submitted that while a protective assessment was permissible, the decision is authority for the view that protective recovery was not allowed and, therefore, he submitted that when the present assessment is a protective one, the imposition of penalty would be barred. It was finally contended that penalty under Section 18(1)(b) of the Act could not be imposed because the computation was not possible in the circumstances of the case.
7. The learned departmental representative placed emphasis on the continued default not only at the stage of the assessment but even before the first appellant authority. He also submitted that there was no evidence to show that cancer had been detected at the stage when the default took place, which was in 1978.
8. We have considered the rival submissions. If a protective assessment is permissible, it stands, to reason that all stages necessary to reach the stage of making a protective assessment have to be gone through i.e., notice to file the return has to be issued and where a return is filed, a notice for hearing has to bs issued, etc. The assessment as made may be protective but compliance with the notice on the part of the assessee is necessary. Where an assessee defaults in complying with the notice, to hold that the assessee would not be liable to penal action would lead to the position that an assessee could with impunity disregard the statutory requirements. Whether the assessment to be made is eventually a protective one or otherwise, is often a decision which can be arrived at only after a full and complete hearing. We are unable to read into the ratio of the judgment of the Kerala High Court, a proposition canvassed for by the learned counsel. There is, in our view, no bar to the imposition of the penalty where the default is established. We do not express any opinion on the point whether penalty could be recovered or not till the assessment becomes final in the view that we are going to take in the present case.
9. The penalty has been imposed under Section 18(1)(b) for failure to comply with the requirements of the notice under Section 16(4). This notice required compliance on various dates in the months of November and December 1978. The non-compliance, therefore, took place in November and December 1978. This was the time when the default occurred in non-complying with the notice under Section 16(4). Therefore, the penalty to be imposed would be in accordance with law as it stood on the date of default, i.e., 1978. The provisions of Section 18(1)(b) (ii), as it then stood, provided for the computation of the penalty where there was default, which attracted the provisions of Section 18(1)(b)(ii) and they read as under :
(ii) in the case referred to in clause (A), in addition to the amount of wealth-tax payable by him, a sum which shall not be less than ten per cent, but which shall not exceed fifty per cent of the amount of the wealth-tax, if any, which would have been avoided if the net wealth returned by such person had been accepted as the correct net wealth ;
The prerequisite, therefore, is that the difference is to be computed of the tax between the net wealth as returned and the net wealth as assessed. Where no return has been filed, it is clear that the tax on the net wealth as returned cannot be computed. Since this figure cannot be computed, the computation as required under Section 18(1 )(b)(ii) cannot be made. The decision of the Supreme Court in the case of CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294 is an authority for the proposition that the charging section and computation provisions together constitute an integrated code and when there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. In a case like the present one where no return has been filed, the computation provisions of Section 18(1)(b)(ii) as it stood at the material time did not apply. Such a case, therefore, cannot be penalised by invoking the provisions of Section (18)(1)(b). The WTO in the present case imposed the penalty invoking the law as it stood in the assessment year 1974-75. But at that time the default under Section 18(1)(b) had not occurred. The default occurred only in 1978. But that time, the computation provision had changed. The penalty has to be computed according to the computation provision, which is applicable when the default took place. When the default took place, the computation provisions of Section 18(1)(b)(ii) could not be applied on the facts of the present case. Therefore, the penalty, as imposed, has to be cancelled.
10. Before parting with the appeal, we may state that in a case like the present one, since no return has been filed the provisions of Section 18(1)(a) would have been attracted, which, of course, is a separate default, but would cover the period of default for non-compliance of notice under Section 16(4) also.
11. In the light of the conclusion that we have arrived at, it is unneces sary to go into the merits.
12. In the result, the appeal is allowed.