judgement:
N: Criminal Appeal No. 183 of 1981.
Appeal by special leave from the Judgment and Order dated 30.1.1981 of the High Court of Allahabad in Civil Misc.
Habeas Corpus Writ No. 6343/80.
R.K. Garg, Naresh K. Sharma and Mukul Mudgal for the Appellant.
R.K. Bhatt for Respondent No. 1 Hardayal Hardy and Miss A. Subhashini for the Respondents.
The Judgment of the Court was delivered by KOSHAL, J.
This is an appeal by one Harish Pahwa against the judgment dated 30th January, 1981 of the High Court of Allahabad dismissing a petition presented by the appellant to it under Article 226 of the Constitution of India with a prayer that a writ of habeas corpus be issued against the State of Uttar Pradesh and Union of India in as much as the detention of the appellant by them was not in accordance with law.
The only point that has been raised before us by Mr. Garg appearing on behalf of the appellant is that the representation made by him against his detention to the State Government was not decided within a reasonable time and that the delay is fatal to the detention.
This point was no doubt not taken before the High Court, but in view of its importance and the fact that all the material necessary for its determination is available on the record, we have allowed it to be raised before us and have overruled a preliminary objection taken by the State to the effect that it should not be entertained.
In order to decide the point we may refer to certain admitted facts.
The order of detention is dated 16th May, 1980 and the representation made by the appellant against it from Varanasi Jail bears date the 3rd of June, 1980.
The State Government received 278 the representation on the 4th June, 1980 but for two days no action was taken in connection with it.
On the 6th of June, 1980 comments were called for from the Customs authorities with regard to the allegations made in the representation and such comments were received by the State Government on the 13th June, 1980.
On the 17th of June, 1980, the State Government referred the representation to its Law Department for its opinion which was furnished on the 19th of June, 1980 The rejection of the representation was ordered on the 24th of June, 1980 and it was communicated to the jail authorities two days later.
The case of the State is that the representation was with the Customs authorities who were formulating their comments from 7th June, 1980 to the 12th of June, 1980 and that the representation was under the consideration of the Government for four days from 13th June, 1980 to 16th June, 1980, of its Law Department from 17th June, 1980 to 19th June, 1980 and then again under its own consideration for six days from 19th June, 1980 to 24th June, 1980.
In our opinion, the manner in which the representation made by the appellant has been dealt with reveals a sorry state of affairs in the matter of consideration of representations made by persons detained without trial.
There is no explanation at all as to why no action was taken in reference to the representation on 4th, 5th and 25th of June, 1980.
It is also not clear what consideration was given by the Government to the representation from 13th June, 1980 to 16th June, 1980 when we find that it culminated only in a reference to the Law Department, nor it is apparent why the Law Department had to be consulted at all.
Again, we fail to understand why the representation had to travel from table to table for six days before reaching the Chief Minister who was the only authority to decide the representation.
We may make it clear, as we have done on numerous earlier occasions, that this Court does not look with equanimity upon such delays when the liberty of a person is concerned.
Calling comments from other departments, seeking the opinion of Secretary after Secretary and allowing the representation to lie without being attended to is not the type of action which the State is expected to take in a matter of such vital import.
We would emphasise that it is the duty of the State to proceed to determine representations of the character above mentioned with the utmost expedition, which means that the matter must be taken up for consideration as soon as such a representation is received and dealt with continuously (unless it is absolutely necessary to wait for 279 some assistance in connection with it) until a final decision is taken and communicated to the detenu.
This not having been done in the present case we have no option but to declare the detention unconstitutional.
We order accordingly, allow the appeal and direct that the appellant be set at liberty forthwith.
N.V.K. Appeal allowed.

summary:
The appellant who was detained by an order dated 16th May, 1980, made a representation dated 3rd June, 1980 from jail, which was received by the State Government on 4th June, 1980.
Comments were called for from the Customs Authorities on the 6th of June, 1980 and were received on 13th June, 1980.
On the 17th June, 1980, the State Government referred the representation to its Law Department for opinion which was furnished on the 19th June, 1980.
The representation was rejected by an order dated 24th June, 1980, which was communicated to the jail authorities two days later.
The appellant 's writ petition having been dismissed by the High Court, he came in appeal to this Court raising a new plea that the representation made by him against the detention to the State Government was not decided within a reasonable time and that the delay was fatal to the detention.
Allowing the appeal, ^ HELD: 1.
In matters of this kind where all the material necessary for the determination of a new point is available on the record, and having regard to the importance of the matter, this Court can entertain the point even if it had not been raised before the High Court.
[277 F G] 2.
The order of detention declared unconstitutional and appellant directed to be set at liberty.
[279 F] 3.
On numerous earlier occasions this Court has made it clear that it does not look with equanimity upon delays in considering the representations of detenus.
Where the liberty of a person is involved it is the duty of the State to determine his representations with the utmost expedition and deal with it continuously until a final decision is taken and communicated to the detenu.
[278 G H] In the instant case no explanation had been given by the Government, as to why no action was taken on the representation of the detenu on 4th, 5th and 277 25th of June 1980 and what consideration was given from 13th June, 1980 to 16th June, 1980 and why the file had to travel from table to table before reaching the Chief Minister, who was the only authority to decide the representation.
[278 E F]


judgement:
ivil Appeal Nos.
768 769 of 1978.
Appeals by Special Leave from the Judgment and order dated 28.1.1977 of the Punjab and Haryana High Court in Income Tax Reference No. 29 of 1975.
B.B. Ahuja and Miss A. Subhashini for the Appellant.
G.C. Sharma, E.D. Helms, R.S. Sharma and K.B. Rohtagi for the Respondent.
The Judgment of the Court was delivered by VENKATARAMIAH, J.
The Commissioner of Wealth Tax, Amritsar has filed the above appeals by special leave against the judgment of the High Court of Punjab and Haryana in a reference made under section 27(1) of the (hereinafter 422 referred to as 'the Act ') answering in favour of the assessee the following two questions: "1.
Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the offence relating to the omission to file the Wealth tax returns was a continuing offence ? 2.
Whether, on the facts and in the circumstances of the case, the Tribunal was right in law upholding the penalties of Rs. 5382/ and Rs. 7759/ levied by the department on the assessee under section 18(1)(a) of the , for the assessment years 1964 65 and 1965 66 respectively ?" The assessee, the respondent in these appeals filed his wealth tax returns for the assessment years 1964 65 and 1965 66 on March 18, 1971 while he was required by section 14(1) of the Act to file the return for the assessment year 1964 65 on or before June 30, 1964 and the return for the assessment year 1965 66 on or before June 30, 1965.
The Wealth tax Officer completed the assessments for the aforementioned years on March 22, 1971 determining the total wealth at Rs. 1,45,800/ for the assessment year 1964 65 as against the declared wealth of Rs. 1,38,550/ and at Rs. 1,65,200/ for the assessment year 1965 66 as against the declared wealth of Rs. 1,59,127/ and also commenced proceedings for the levying penalty under section 18(1)(a) of the Act for late submission of returns.
Ultimately the penalties were levied as follows: "Assessment year 1964 65: (i) For the period from 1.7.64 to 31.3.69: Penalty at 2% p.m. subject to maximum of 50% of the wealth tax payable under section 18(1)(a) before its amendments on 1.4.69 by the Finance Act, 1969: Rs. 115/ (ii) For the period from 1.4.69 to 18.3.71: Penalty at 1/2% of the net wealth for each month of the default under section 18(1)(a) as amended by the Finance Act, 1969: Rs. 5,267/ Rs. 5,382/ 423 Assessment year 1965 66: (i) For the period from 1.7.65 to 30.3.69: Penalty at 2% p.m. subject to maximum of 50% of the wealth tax payable under section 18(1)(a) before its amendment on 1.4.69 by the Finance Act, 1969: Rs.163/ (ii) For the period from 1.4.69 to 18.3.71: Penalty at 1/2% of the net wealth for each month of default under section 8(1)(a) as amended on 1.4.69 by the Finance Act, 1969: Rs. 7,596/ Rs. 7,759/ The above orders levying penalties were upheld in appeal by the Appellate Assistant Commissioner and the Income tax Appellate Tribunal, Amritsar Bench, Amritsar.
At the instance of the assessee a consolidated reference was made by the Income tax Appellate 'Tribunal to the High Court referring the above two questions for its opinion.
The High Court answered the said questions in favour of the assessee after rejecting the contention of the department that the default or failure to file the return in time was a continuing default and that the penalty had to be computed for the period prior to April 1, 1965 in accordance with section 18 as it stood prior to its amendment by the Wealth tax (Amendment) Act, 1964, for the period between April 1, 1965 to March 3], 1969 in accordance with section 18 of the Act as amended by the Wealth tax (Amendment) Act, 1964 and for the period between April 1, ]969 to March 18, 1971 (on which date the returns were filed) in accordance with sec.
18 of the Act as amended by the Finance Act, 1966.
Aggrieved by the decision of the High Court, the Department has filed these appeals under Article 136 of the Constitution .
Before dealing with the contentions of the parties, it is appropriate to set out the provisions of the Act which have a bearing on the question involved in the present appeals as they stood during the relevant periods: Prior to April 1, 1965, sub sections (1) and (3) of section 14 of the Act stood as follows: 424 "14.
Return of wealth (1) Every person whose net wealth on the valuation date was of such amount as to render him liable to wealth tax under this Act shall, before the thirtieth day of June of the corresponding assessment year, furnish to the Wealth tax officer a return in the prescribed form and verified in the prescribed manner setting forth his net wealth as on the valuation date; (2). . . (3) The Wealth tax officer may, if he is satisfied that it is necessary so to do, extend the date for the delivery of return under this section.
" After April 1, 1965: "14. (1) Every person, if his net wealth or the net wealth of any other person in respect of which he is assessable under this Act on the valuation date was of such an amount as to render him liable to wealth tax under this Act, shall, before the thirtieth day of June of the corresponding assessment year, furnish to the Wealth tax officer a return in the prescribed form and verified in the prescribed manner setting forth the net wealth as on the valuation date.
(2). . . (3) The Wealth tax officer may, if he is satisfied that it is necessary so to do, extend the date for the delivery of the return under this section.
" Section 15 of the Act which has not undergone any change since the commencement of the Act reads: "15.
Return after due date and amendment of return If any person has not furnished a return within the time allowed under section 14 or having furnished a return under that section discovers any omission or a wrong statement therein, he may furnish a return or a revised return, as the case may be, at any time before the assessment is made.
" The relevant parts of section 18 of the Act as they stood during the three periods referred to above read as follows: 425 Prior to April 1, 1965 "18.
(1) If the Wealth tax officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person (a) has without reasonable cause failed to furnish the return of his net wealth which he is required to furnish under sub section (1) or sub section (2) of section 14 or section 17 or has without reasonable cause failed to furnish it within the time allowed and in the manner required; or (b) . (c) . . he or it may, by order in writing, direct that such person shall pay by way of penalty (i) in the case referred to in clause (a), in addition to the amount of wealth tax payable by him, a sum not exceeding one and a half times the amount of such tax, and . " Between April 1, 1965 and March 31, 1969 "18.
(1) If the Wealth tax officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person (a) has without reasonable cause failed to furnish the return of his net wealth which he is required to furnish under sub section (a) of section 14 or by notice given under sub section (2) of section 14 or section 17 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub section (1) of section 14 or by such notice, as the case may be; or (b) . . (c) . . 426 he or it may, by order in writing, direct that such person shall pay by way of penalty (i) in the cases referred to in clause (a), in addition to the amount of wealth tax, if any, payable by him, a sum equal to two per cent of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent of the tax; After April 1, 1969 and as on March 18, 1971 on which date the returns were filed "18.
(1) If the Wealth tax officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person (a) has without reasonable cause failed to furnish the return which he is required to furnish under sub section (1) of section 14 or by notice given under sub section (2) of section 14 or section 17, or has without reason able cause failed to furnish within the time allowed and in the manner required by sub section (1) of section 14 or by such notice, as the case may be; or (b) . . (c) . . he or it may, by order in writing, direct that such person shall pay by way of penalty (i) in the cases referred to in clause (a), in addition to the amount of wealth tax, if any, payable by him, a sum, for every month during which the default continued, equal to one half per cent of (A) the net wealth assessed under section 16, as reduced by the amount of net wealth on which in accordance with the rates of wealth tax specified in Paragraph A of Part I of the Schedule or Part II of the Schedule, the wealth tax chargeable is nil; or (B) the net wealth assessed under section 17, where assessment has been made under that section, as reduced by 427 (1) the net wealth, if any, assessed previously under section 16 or section 17 or (2) the amount of net wealth on which in accordance with the rates of wealth tax specified in Paragraph A of Part I of the Schedule or Part II of the Schedule, the wealth tax chargeable is nil, whichever is greater, but not exceeding, in the aggregate, an amount equal to the net wealth assessed under section 16, or, as the case may be, the net wealth assessed under section 17, as reduced in either case in the manner aforesaid;. . " Now let us analyse the above provisions of law.
Section 14 of the Act which has not undergone any material change from the commencement of the Act in so far as the question involved in these appeals is concerned requires a person the value of whose wealth is such as would attract the liability to pay tax to file a return of his wealth as on the valuation date in the prescribed manner before the Wealth tax Officer on or before the thirtieth of June of the assessment year or on or before any date upto which the Wealth tax officer has extended the time to file the return.
Section 15 of the Act, however, enables such a person to file a return at any time before the assessment is made.
The distinction between section 14 and section 15 of the Act lies in the fact that whereas under section 14 a duty is imposed on the assessee to file a return within the prescribed date, section 15 enables him to file a return before the assessment is made even though the last date prescribed by section 14(1) is over.
Section 18 of the Act deals with three types of penalties for certain specified acts or omissions on the part of the assessee referred to in clauses (a), (b) and (c) of sub section (1) thereof.
We are concerned in this case with the question of levy of penalty in respect of omissions referred to in clause (a) of section 18(1) of the Act.
There are four kinds of omissions referred to in that clause (i) failure to furnish the return which the assessee is required to furnish under sub section (i) of section 14; (ii) failure to furnish the return as required by a notice issued under section 14(2) or section 17, (iii) failure to furnish the return as required by section 14(1) within the time allowed and in the prescribed manner and (iv) failure to furnish the return as required by a notice issued under section 14(2) or section 17 within the time allowed and in the prescribed manner.
Each one of these omissions expose the assessee to the levy of penalty unless reasonable cause is shown for not performing 428 the duty.
In clause (i) of section 18(1) of the Act, the penalty leviable for any of the omissions referred to in section 18(1)(a) is set out but the measure of penalty imposable has varied from time to time.
Prior to April 1, 1965 the penalty imposable was a sum not exceeding one and a half times the amount of wealth tax payable by the assessee during the assessment year in question.
Within the outer limit referred to above, The officer concerned or the Tribunal as the case may be could impose any amount as penalty having regard to all the relevant circumstances of the case including perhaps the time that had elapsed from the last day allowed to file the return.
Between April 1, 1965 and March 31, 1969 the measure of penalty was regulated by section 18 of the Act as amended in 1964.
During that period the penalty imposable was a sum equivalent to two per cent of the tax for every month during which the default continued but not exceeding in the aggregate fifty per cent of the tax.
The penalty leviable during this period was less onerous than it was before April 1, 1965.
Then came the amendment made by the Finance Act of 1969.
After April 1, 1969 by reason of the amendment introduced by the Finance Act of 1969 the penalty imposable was altered to a sum for every month during which the default continued equal to one half per cent of the net wealth calculated in accordance with the amended provisions in section 18.
The penalty leviable during this period was more drastic than what it was before.
One significant difference between the law as it existed prior to April 1, 1965 and the law as it existed during the subsequent two periods is that whereas during the period prior to April I, 1965 there was no specific reference in clause (i) of section 18 (a) to the time lag between the last date on which the return had to be filed and the date on which it was actually filed, the said factor was expressly required to be taken into consideration after April 1, 1965 while determining the penalty payable by the assessee.
Another significant factor which requires to be borne in mind is that neither the Wealth tax (Amendment) Act, 1964 nor the Finance Act, 1969 by which section 18 of the Act was amended expressly stated that the amended provisions of section 18 would be applicable to an assessee who had failed to file the return in respect of any preceding assessment year and the said default had continued after the amendment came into force except using the phrase "for every month during which the default continued", in that part of section 18 which prescribed the measure of penalty.
The contention of the Department is that whatever may have been the position of law before April 1, 1965, on and after that date 429 the default committed by an assessee in not filing a return as required by section 14(1) of the Act amounted to a continuing wrong which attracted the penalty as provided by the law in force at the time when such default continued.
In other words it is contended that in this case since the assessee who had to file a return after April 1, 1965 for assessment year 1965 66 had not f led the same till March 13, 1971 penalty had to be computed for the period upto April 1, 1969 under the provisions of section 18 of the Act as it stood during that period and for the subsequent period additional penalty should be levied in accordance with section 18 as amended by the Finance Act, 1969.
Relying upon the decision of the Kerala High Court in Commissioner of Wealth tax, Kerala vs Smt.
V. Pathummabi it is argued that amendments made in 1964 and 1969 brought about a qualitative change in the nature of the default contemplated under section 18 and that what could have been a completed default before April 1, 1965 became a continuing default.
Even assuming that this argument is correct it has to be held that the decision of the High Court in so far as the default committed by the assessee in not filing the return in respect of the assessment year 1964 65 is concerned is not erroneous.
What remains to be considered is whether the decision in respect of the default committed by the assessee in not filing the return due on June 31), 1955 for the assessment year 1965 66 is liable to be interfered with.
To repeat, the relevant part of section 18 of the Act can be divided into two parts the first part contained in clause (a) of section 18(1) setting out the gist of the default and the second part prescribing the measure of penalty.
The former part has more or less remained the same from the commencement of the Act and it is only the latter part which has undergone changes.
The question is whether by reason of the changes in the latter pari, there has been a change in the nature of the wrong referred to in section 18 (1) (a) of the Act.
A liability in law ordinarily arises out of an act of commission or an act of omission.
When a person does an act which law prohibits him from doing it and attaches a penalty for doing it, he is stated to have committed an act of commission which amounts to a wrong in the eye of law.
Similarly when a person omits to do an act which is required by law to be performed by him and attaches a penalty for such omission, he is said to have 430 committed an act of omission which is also a wrong in the eye of law.
Ordinarily a wrongful act or failure to perform an act required by law to be done becomes a completed act of commission or omission, as the case may be, as soon as the wrongful act is committed in the former case and when the time prescribed by law to perform an act expires in the latter case and the liability arising therefrom gets fastened as soon as the act of commission or of omission is completed.
The extent of that liability is ordinarily measured according to the law in force at the time of such completion.
In the case of acts amounting to crimes the punishment to be imposed cannot be enhanced at all under our Constitution by any subsequent legislation by reason of Article 20 (I) of the Constitution which declares that no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.
In other cases, however, even though the liability may be enhanced it can only be done by a subsequent law (of course subject to the Constitution) which either by express words or by necessary implication provides for such enhancement.
In the instant case the contention is that the wrong or the default in question has been altered into a continuing wrong or default giving rise to a liability de die in diem, that is, from day to day.
The distinctive nature of a continuing wrong is that the law that is violated makes the wrong doer continuously liable for penalty.
A wrong or default which is complete but whose effect may continue to be felt even after its completion is, however, not a continuing wrong or default.
It is reasonable to take the view that the court should not be eager to hold that an act or omission is a continuing wrong or default unless there are words in the statute concerned which make out that such was the intention of the legislature.
In the instant case whenever the question of levying penalty arises what has to be first considered is whether the assessee has failed without reasonable cause to file the return as required by law and if it is held that he has failed to do so then penalty has to be levied in accordance with the measure provided in the Act.
When the default is the filing of a delayed return the penalty may be correlated to the time lag between the last day for filing it without penalty and the day on which it is filed and the quantum of tax or wealth involved in the case for purposes of determining the quantum of penalty but the default however is only one which takes place on the expiry of the last day for filing the return without penalty and not a continuing one.
The default in question does not, however, give rise to a fresh cause of action every day.
Explaining the expression 431 'a continuing cause of action ' Lord Lindley in Hole vs Chard Union observed: "What is a continuing cause of action ? Speaking accurately, there is no such thing; but what is called a continuing cause of action is a cause of action which arises from the repetition of acts or omissions of the same kind as that for which the action was brought." In the same decision, Lord Justice A. L. Smith who concurred with the above view said: "If once a cause of action arises, and the acts com plained of are continuously repeated, the cause of action continues and goes on de die in diem.
It seems to me that there was a connection in the present case between the series of acts before and after the action was brought; they were repeated in succession, and became a continuing cause of action.
They were an assertion of the same claim namely, a claim to continue to pour sewage into the stream and a continuance of the same alleged right.
In my opinion, there was here a continuing cause of action within the meaning of the rule.
" The distinction between a continuing offence and an offence which is not a continuing one is well brought out in the decision of the High Court of Bombay in State vs A. H. Bhiwandiwalla.
In that case, the accused respondent had been charged with two offences namely, (a) failure to apply for registration of his factory and to give notice of occupation and (b) running the factory without a licence issued under the .
The accused had a plea of limitation against the prosecution.
In that context the High Court observed: "In civil law, we often refer to a continuing or recurring cause of action.
Similarly, even in criminal law the expression "continuing offence" is frequently used.
As observed by Beaumount C. J. in 'Emperor vs Chhotalal Amarchand ', AIR 1937 Bom 1 (FB) the expression "continuing offence" is not a very happy expression.
It assumes, says the learned Chief Justice 432 ". that you can have a continuing offence in the sense in which you can have a continuing tort, or a continuing breach of contract, and I doubt, myself whether the assumption is well founded, having regard to the provisions of the Criminal Procedure Code as to the framing of charges and as to the charges which can be tried at one and the same trial.
It is quite clear that you could not charge a man with committing an offence 'de die in diem ' over a substantial period.
" Even so, this expression has acquired a well recognised meaning in criminal law.
If an act committed by an accused person constitutes an offence and if that act continues from day to day, then from day to day a fresh offence is committed by the accused so long as the act continues.
Normally and in the ordinary course an offence is committed only once.
But we may have offences which can be committed from day to day and it is offences falling in this latter category that are described as continuing offences.
" Accordingly the High Court of Bombay held in Bhiwandiwalla 's case (supra) that the failure to apply for registration of the factory under the and to give notice of occupation thereof was not a continuing offence but the running of the factory without a licence issued thereunder was a continuing offence.
Section 39 of the Indian Mines Act, 1923 which came up for consideration before the Patna High Court in The State vs Kunja Behari Chandra & Ors.
on which reliance was placed by the Revenue is a case of continuing offence.
Section 39 provided: "39.
Whoever contravenes any provision of this Act or of any regulation, rule or bye law or of any order made thereunder for the contravention of which no penalty is hereinafter provided shall be punishable with fine which may extend to one thousand rupees, and in the case of a continuing contravention, with a further fine which may extend to one hundred rupees for every day on which the offender is proved to have persisted in the contravention after the date of the first conviction.
" 433 In this case the language of the section itself made it obvious that its violation resulted in a continuing offence.
The true principle appears to be that where the wrong complained of is the omission to perform a positive duty requiring a person to do a certain act the test to determine whether such a wrong is a continuing one is whether the duty in question is one which requires him to continue to do that act.
Breach of a covenant to keep the premises in good repair, breach of a continuing guarantee, obstruction to a right of the way, obstruction to the right of a person to the unobstructed flow of water, refusal by a man to maintain his wife and children whom he ii bound to maintain under law and the carrying on of mining operations or the running of a factory without complying with the measures intended for the safety and well being of workmen may be illustrations of continuing breaches or wrongs giving rise to civil or criminal liability.
as the case my be, de die in diem.
In Balkrishna Savalram Pujari & Ors.
vs Shree Dayaneshwar Maharaj Sansthan & Ors.
Gajendragadkar, J. (as he then was) observed: "It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury.
If the wrongful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from the act may continue.
If, however, a wrongful act is of such a character that the injury caused by it itself continue, then the act constitutes a continuing wrong.
In this connection it is necessary to draw a distinction between the injury caused by the wrongful act and what may be described at the effect of the said injury.
" Section 18 of the Act with which we are concerned in this case, however, does not require the assessee to file a return during every month after the last day to file it is over.
Non performance of any of the acts mentioned in section 18(1)(a) of Act gives rise to a single default and to a single penalty, the measure of which, 434 however, is geared up to the time lag between the last date on which the return has to be fled and the date on which it is filed.
The default, if any committed is committed on the last date allowed to file the return.
The default cannot be one committed every month thereafter.
The words for every month during which the default continued ' indicate only the multiplier to be adopted in determining the quantum of penalty and do not have the effect of making the default in question a continuing one.
Nor do they make the amended provisions modifying the penalty applicable to earlier defaults in the absence of necessary provisions in the amending Acts.
The principle underlying section 6 of the General Clauses Act is clearly applicable to these cases.
It may be stated here that the majority of the High Courts in India have also taken the same view.
In the result we hold that where the default complained of is one falling under section(l)(a) of the Act, the penalty has to be computed in accordance with the law in force on the last day on which the return in question had to be filed.
Neither the amendment made in 1964 nor the amendment made in 1969 has retrospective effect.
The appeals therefore fail and are dismissed with costs.
Hearing fee one set.
S.R. Appeals dismissed.

dataset_name: IN-Abs

summary:
The assessee respondent filed his Wealth Tax returns for the assessment years 1964 65 and 1965 66 on March 18, 1971, while he was required by section D 14(1) of the Act to file the return for the assessment year 1964 65 on or before June 30, 1964 and the return for the assessment year 1965 66 on or before June 30, 1965.
The Wealth Tax officer completed the assessment for the said years on March 22, 1971 and also commenced proceedings for levying penalty under section 18(1) (a) of the Act for the late submission of returns.
The Wealth Tax officer levied the penalties for different periods at different rates, as provided by the 1964 and 1969 Amendments.
treating the failure to file the return in time as a "continuing offence".
The orders levying penalties were upheld in appeal by the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar.
A consolidated reference made by the Tribunal at the instance of the assessee was answered by the High Court of Punjab in favour of the assessee after rejecting the contention of the department that the default or failure to file the return in time was a continuing default and that the penalty had to be computed for the period prior to April 1, 1965 in accordance with section 18 as it stood prior to its amendment by the Wealth tax (Amendment) Act, 1964, for the period between April 1, 1965 to March 31, 1969 in accordance with section 18 of the Act as amended by the Wealth tax (Amendment) Act, 1964 and for the period between April 1, 1969 to March 18, 1971 (on which date the returns were filed) in accordance with section 18 of the Act as amended by the Finance Act, 1969.
Aggrieved by the decision of the High Court, the Department has filed these appeals under Article 136 of the Constitution.
G Dismissing the appeals, the Court ^ HELD 1:1.
Where the default complained of is one falling under section 18(1) (a) of the Wealth Tax Act, the penalty has to be computed m accordance with the law in force on the last day on which the return in question had to be filed.
Neither the amendment made in 1964 nor the amendment made in 1969 has retrospective effect.
[434 C D] 420 1:2.
Section 18 of the Wealth Tax Act does not require the assessee to file a return during every month after the last day to file it is over.
Non performance of any of the acts mentioned in section 18(1) (a) of the Act gives rise to a single default and to a single penalty, the measure of which, however, is geared up to the time lag between the last date on which the return has to be filed and the date on which it is filed.
The default, if any committed is committed on the last date allowed to file the return.
The default cannot be one committed every month thereafter.
[433 G H, 434 A] 1:3.
The words "for every month during which the default continued" indicate only the multiplier to be adopted in determining the quantum of penalty and do not have the effect of making the default in question a continuing one.
Nor do they make the amended provisions modifying the penalty applicable to earlier defaults in the absence of necessary provisions in the amending Acts.
The principle underlying section 6 of the General Clauses Act is clearly applicable to these cases.
[434 B C] 2:1.
A liability in law ordinarily arises out of an act of commission or an act of omission.
When a person does an act which law prohibits him from doing it and attaches a penalty for doing it, he is stated to have committed an act of commission which amounts to a wrong in the eye of law.
Similarly when a person omits to do an act which is required by law to be performed by him and attaches a penalty for such omission, he is said to have committed an act of omission which is also a wrong in the eye of law.
Ordinarily a wrongful act or failure to perform an act required by law to be done becomes a completed act of commission or of omission, as the case may be, as soon as the wrongful act is committed in the former case and when the time prescribed by law to perform an act expires in the latter case and the liability arising therefore gets fastened as soon as the act of commission or of omission is completed.
The extent of that liability is ordinarily measured according to the law in force at the time of such completion.
In the case of acts amounting to crimes the punishment to be imposed cannot be enhanced at all under our Constitution by any subsequent legislation by reason of Article 20(I) of the Constitution which declares that no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.
In other cases, however, even though the liability may be enhanced it can only be a subsequent law (of course subject to the Constitution which either by express words or by necessary implication provides for such enhancement.
[429 G H, 430 A D] 2:2.
The distinctive nature of a continuing wrong is that the law that is violated makes the wrongdoer continuously liable for penalty.
A wrong or default which is complete but whose effect may continue to be felt even after its completion is, however, not a continuing wrong or default.
[430 D E] 2:3.
The court should not be eager to hold that an act or omission is a continuing wrong or default unless there are words in the statute concerned which make out that such was the intention of the legislature.
In the instant case when ever the question of levying penalty arises what has to be first considered is whether the assessee has failed without reasonable cause to file the return as re 421 quired by law and if it is held that he has failed to do so then penalty has to be levied in accordance with the measure provided in the Act.
When the default is the filing of a delayed return the penalty may be correlated to the time lag between the last day for filing it without penalty and the day on which it is filed and the quantum of tax or wealth involved in the case for purposes of determining the quantum of penalty but the default however is only one which takes place on the expiry of the last day for filing the return without penalty and not a continuing one.
The default in question does not, however, give rise to a fresh cause of action every day.
[430 E H] 2:4.
Where the wrong complained of is the omission to perform a positive duty requiring a person to do a certain act the test to determine whether such a wrong is a continuing one is whether the duty in question is one which requires him to continue to do that act.
Breach or a covenant to keep the premises in good repair, breach of a continuing guarantee obstruction to a right of way, obstruction to the right of a person to the unobstructed flow of water, refusal by a man to maintain his wife and children whom he is bound to maintain under law and the carrying on of mining operations or the running of a factory without complying with the measures intended for the safety and well being of workmen may be illustrations of continuing breaches or wrongs giving rise to civil or criminal liability, as the case may be, de die in diem.
[433 A D] Hole vs Chard Union, , quoted with approval.
State vs A. Bhiwandiwalla, A. I. R. ; The State vs Kunja Behari Chandra and Ors.
A.I.R. 1954 Patna 371, approved, Balkrishna Savalram Pujari and Ors.
vs Shree Dayaneshwar Maharaj Sansthan and Ors., [1959] Supp. 2 S.C.R. 476, referred to.


judgement:
Civil Appeal Nos.
1217 1222 of 1973.
Appeals by certificate from the Judgment and order dated 21.12 1972 of the Gujarat High Court in Wealth Tax Reference No. 2 of 1969.
V. section Desai, Shardul section Shroff and H. section Parihar for the Appellant.
section T. Desai, P. A. Francis and Miss A. Subhashini for the Respondent.
The Judgment of the Court was delivered by VENKATARAMIAH, J.
On the basis of a certificate granted under section 29(1) of the (hereinafter referred to as the Act ) the appellant has filed these appeals against the judgment and order dated December 21 1972 of the High Court of Gujarat in Wealth tax Reference No 2 of 1969.
The questions referred to the High Court under section 27 of the Act by the In come tax Appellate Tribunal Ahmedabad Bench read thus: "(1) Whether on the facts and in the circumstances of the case the liability in respect of income tax payable on the concealed income disclosed by the assessee pursuant to section 68 of the Finance Act 1965 is deductible under section 2(m) of the in computing the net wealth of the assessee for the 405 assessment years 1959 60 1960 61 1961 62 1962 63 A 1963 64 and 1964 65.
(2) Whether the Tribunal was right in holding that the liability to pay tax on the amount disclosed under section 68 of the Finance Act 1965 arose not under that Finance Act but under section 3 of the Indian Income tax Act 1922.
Having regard to the assessment years in question the second question should be read as including within its scope also the question whether the Tribunal was right in holding that the liability to pay tax on the amount disclosed under section 68 of the Finance Act, 1965 arose not under that Finance Act but under section 4 of the Income tax Act 1961.
The assessee who is the appellant in these appeals had been assessed on the basis of his returns of net wealth and the statements filed therewith in the status of an individual to wealth tax under section 16(3) of the Act during the assessment years 1957 58 t 1964 65 on various dates between January 15 1960 and July 14 1964.
Subsequently the assessee made a disclosure under section 68 of the Finance Act 1965 (hereinafter referred to as the Finance Act) of Rs.7,00,000 which had been shown as having been covered by some hundi transactions with a concern known as M/s Abdul Razack & Co. in his books of account at the Bombay branch of his business.
Alongwith the declaration the assessee filed a statement that this concealed income had been earned by him during the assessment years 1957 58 to 1964 65.
He however did not allocate the total sum disclosed amongst different assessment years but showed it in a lump sum.
The amount of income tax was computed at 60% of the total concealed income and it was paid as contemplated under section 68 of the Finance Act.
The Wealth tax officer thereafter reopened the assessments or the assessee to wealth tax for assessment years 1957 58 to 1964 65 on the ground that he had reason to believe that certain wealth of the assessee had escaped assessment during the said years and that his belief was founded on the disclosure made by the assessee under section 68 of the Finance Act.
We are concerned in these appeals only with the assessment years 1959 60 to 1964 65.
On scrutiny it was found on the basis of peak cash credits in each assessment year that the amounts covered by hundies were as under: 406 Assessment years Peak cash credits 1959 60 RS.
4,57,465/ 1960 61 RS.
5,59,8231 1961 62 RS.
6,38,325/ 1962 63 RS.
6,82,974/ 1963 64 RS.
7,01,578/ 1964 65 RS.
7,01,578/ As can be seen from the above statement the assessee had substantial sums with him in the years in question which had not been disclosed earlier.
Since these amounts constituted the wealth which was liable to tax on the respective valuation dates the assessee filed returns of wealth for the above mentioned years in compliance with the notices issued to him and in the course of the assessment proceedings he claimed the deduction for income tax payable by him in respect of the sums which had been progressively earned by him from year to year and which were liable to income tax under the relevant income tax law in force during the years relying upon the decision of this Court in Kesoram Industries and Cotton Mills Ltd vs Commissioner of Wealth tax (Central), Calcutta.
The Wealth tax officer however held that since in his balance selects the assessee had not shown the liability to pay income tax the deduction of the amounts claimed could not be allowed in any of the assessment years and accordingly the orders of reassessment were passed by him after disallowing the claim made by the assessee.
He however included the sums mentioned in the above statement in the net wealth of the respective assessment years and determined the wealth tax payable by the assessee.
The appeals filed by the assessee against the orders of the Wealth tax officer before the Appellate Assistant Commissioner were dismissed.
On further appeal to the Income tax Appellate Tribunal the Tribunal held that the deduction claimed in respect of each assessment year was in truth and substance a liability under the Indian Income tax Act 1922 or the Income tax Act 1961 as the case may be and not a new liability created by the Finance Act and therefore it constituted a debt owed by the assessee on the respective valuation dates within the meaning of section 2(m) of the Act and that the deduction claimed should be allowed while computing the net wealth 407 of the assessee.
Accordingly the Tribunal allowed the appeals of the assessee.
Thereafter at the instance of the Commissioner of Wealth tax the Tribunal referred under section 27 of the Act the two questions mentioned above to the High Court.
After hearing the parties the High Court answered both the questions in the negative and in favour of the Revenue by its judgment dated December 21 1972.
On a certificate granted by the High Court under section 29(1) of the Act the assessee has come up in appeal to this Court.
The relevant part of section 2(m) of the Act reads: "2.
(m) net wealth means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets wherever located belonging to the assessee on the valuation date including assets required to be included in his net wealth as on that date under this Act is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than In the case of Kesoram Industries and Cotton Mills Ltd. (supra.) this Court has held that income tax other than that falling under clause (iii) of section 2(m) of the Act payable on the valuation date is a debt owed by the assessee and hence is deductible from the total wealth of the assessee while determining the net wealth for the purpose of levying wealth tax.
The principal question which arises for consideration in these appeals relates to the true character of the tax paid by the assessee in the proceedings under section 68 of the Finance Act and the applicability of the ratio of the decision of this Court in the case of Kesoram Industries and Cotton Mills Ltd. (supra).
Since it is contended by the assessee that the tax so paid was the tax which he was liable to pay under the relevant income tax law in force during the assessment years in question and it is urged by the Department that the said payment was in discharge of a liability created for the first time by the Finance Act it is necessary to examine the provisions of section 68 of the Finance Act in some detail in so far as they relate to the question involved in this case.
The relevant part of section 68 of the Finance Act which came into force on March 1 1965 reads: 408 "68.
Voluntary disclosure of income (1) Where any person makes a declaration in accordance with sub section (2) in respect of the amount representing income (a) which he has failed to disclose in a return of income for any assessment year filed by him before the first day of March 1965 under the Indian Income tax Act 1922 (Xl of 1922) or the Income tax Act 1961 (XLIII of 1961) or (b) which has escaped assessment for any assessment year for which an assessment has been made before the 1st day of March 1965 under either of the said Acts or (c) for the assessment of which no proceeding under either of the said Acts has been taken before the 1st day of March 1965, he shall notwithstanding anything contained in the said Acts be charged income tax at the rate specified in sub section (3) in respect of the amount so declared if he (i) pays the amount of income tax as computed at the said rate or (ii) furnishes adequate security for the payment there of in accordance with sub section (4) and under takes to pay such income tax within a period not exceeding six months from the date of the declaration as may be specified by him therein or (iii)On or before the 31st day of May 1965 pays such amount as is not less than one half of the amount of income tax as computed at the said rate or furnishes adequate security for the payment there of in accordance with sub section (4) and in either case assigns any shares in or debentures of a joint stock company or mortgages any immovable property in favour of the President of India by way o f security for the payment of the balance and undertakes to Fay such balance within the period referred to in clause (ii).
409 (2) The declaration shall be made to the Commissioner and shall specify the period required to be specified under clause (ii) of sub section (1) contain the name address and signature of the person making the declaration and also full information in respect of the following matters namely: B (a) Whether he was assessed to income tax or not and if assessed the name of the Income tax Circle in which he was assessed.
(b) The amount of income declared giving where available details of the financial year or years in which the income was earned and the amount pertaining to each such year.
(c) Whether the amount declared is represented by cash (including bank deposits) bullion investments in shares debts due from other persons commodities or any other assets and the name in which it is held and location thereof: Provided that the declaration shall be of no effect unless it is made after the 28th day of February 1965 and before the Ist day of June 1965.
F (3) The rate of income tax chargeable in respect of the amount referred to in sub section (1) shall be sixty per cent of such amount: Provided that if before the Ist day of April 1965 the tax on the amount declared is paid by the declarant at the rate of fifty seven per cent of such amount he shall not be liable to pay any further tax on such amount.
(4) A person shall not be considered to have furnished adequate security for the payment of the tax for the purposes of sub section (I) unless the payment is guaranteed by a scheduled bank or the person makes an assignment in favour of the President of India of any security of the Central or State Government.
Explanation For the purposes of this sub section where an assignment of Government securities is made in 410 favour of the President the amount covered by such assignment shall be the market value of the securities on the date of the assignment.
(5) Any amount of income tax paid in pursuance of a declaration made under this section shall not be refundable in any circumstances and no person who has made the declaration shall be entitled i n respect of any amount so declared or any amount of tax so paid to reopen any assessment or reassessment made under the Indian Income tax Act 1922 (XI of 1922) or the Income tax Act 1961 (XLIII of 1961) or the Excess Profits Tax Act 1943 (XV of 1940) or the Business Profits Tax Act 1947 (XXI of 1963) or the Companies (Profits) Surtax Act 194 (VII of 1964) or claim any set off or relief in any appeal reference revision or other proceeding in relation to any such assessment or reassessment.
(6) (a) Any amount declared by any person under this section in respect of which the tax referred to in subsection (3) is paid shall not be included in his total income for any assessment under any of the Acts mentioned hl sub section (5) if he credits in the books of account if any maintained by him for any source of income or in any other record the amount declared as reduced by the tax paid thereon under this section.
Section 68(1) of the Finance Act provides that where any person makes a declaration in accordance with section 68(2) in respect of any amount represent n g income which he has failed to disclose in his return or which has escaped assessment for any assessment year for which an assessment has been made before March 1, 1965 under either of the two Acts namely the Indian Income tax Act 1922 and the Income tax Act 19 1 or for the assessment of which no proceeding is taken before March 1, 1965 he shall notwithstanding anything contained in the said Acts be charged income tax at the rate specified in sub section (3) thereof in respect of the amount so declared.
If he pays the amount of income tax as computed at the said rate or furnishes adequate security for the payment thereof in accordance with sub section (4) thereof and undertakes to pay such income tax within the period specified in the section he would be absolved from the liability under the relevant law of in 411 come tax.
The declaration should however be filed with the particulars mentioned in section 68(2).
Section 68(3) provides that the rate of income tax chargeable in respect of the amount referred to in the declaration shall be sixty percent of such amount provided that if the tax is paid within April 1, 1965 the tax payable would be fifty seven percent.
Sub section (5) of section 68 of the Finance Act provides that any amount of income tax paid in pursuance of a declaration made under that section shall not be refundable in any circumstances nor a declarant is entitled in respect of any amount declared or tax paid thereon to reopen any assessment or reassessment made under the Indian Income tax Act 1922 or Income tax Act 1961 or any other Act mentioned therein.
He cannot also claim any set off or relief in any appeal reference revision or other proceeding in relation to any such assessment or reassessment.
Clause (a) of sub section (6) of section 68 grants immunity from proceedings under the Acts mentioned in section 68(5) to the assessee by providing that any amount declared by any person under section 68 in respect of which the tax referred to hl sub section (3) thereof is paid shall not be included in his total income for any assessment under any of the assessments made under any of the Acts mentioned in section 68(5) if he credits in the books of account if any maintained by him for any source of income or hl any other record the amount declared as reduced by the tax paid thereon under section 68.
On an examination of the several provisions contained in section 68 of the Finance Act it becomes clear that they had been enacted as a part of the measures adopted with a view to unearthing unaccounted money in possession of the members of the public on which income tax had not been paid and also to create an incentive to such persons to make disclosure of their unaccounted incomes and to pay tax thereon at the specified rate without the liability to pay any interest thereon or penalties for non compliance with the law of income tax.
The declaration to be riled by a person under section 68 is about an amount representing his income earned in an earlier accounting period which has not been subjected to tax in the ordinary course although income tax was payable hl respect of it.
If the declarant pays tax at the rate specified in sub section (3) of section 68 he would be absolved from any further liability to tax on such income.
The declaration has to be made before the Commissioner of Income tax and it should contain full information namely whether he was assessed to income tax or not and if assessed the name of the Income tax circle in which he was assessed the 412 amount of income declared giving w ere available details of the financial year or years in which the income was earned and the amount pertaining to each such year and whether the amount declared is represented by cash (including bank deposits) bullion investment in shares debts due from other persons commodities or any other assets and the name in which it is held and the location thereof.
Section 68 also states at more than one place that what is payable pursuant to a declaration is income tax.
Section 68 (1) contains words such as he shall notwithstanding anything contained in the said Acts be charged income tax at the rate specified in sub section (3) .
if he pays the amount of income tax at the said rate and undertakes to pay such income tax .
Section 68(3) contains the words: the rate of income tax chargeable.
Section 68(5) refers to: (a) any amount of income tax paid and section 68(7) contains the words: paid the income tax under this section .
These words show that Parliament was of the view that what was payable under section 68 was income tax.
The points of difference between any Finance Act that may be passed annually fixing the rates of income tax and section 68 of the Finance Act however relate to (i) the time within which and the manner in which information in regard to the income is to be furnished (ii) the method of computation of taxable income and E(iii) the rate of tax payable on such income.
The declaration which is equivalent to a return to be filed under the Indian Income tax Act 1922 or Income tax Act 1961 need not contain all the particulars that have to be furnished in such return.
The declaration can be filed during the period mentioned in proviso to section 68(2).
There is no provision to claim various deductions exemptions set off etc.
in respect of the income disclosed in the declaration as in the case of income shown in an ordinary return.
Since the rate of tax is a uniform one and does not vary with the quantum of the income disclosed there is no need to trace it to any specific assessment year.
Further the declaration is a voluntary one and it is not pursuant to any notice issued by the Department.
The question is whether these distinguishing features make the amount disclosed in a declaration anything different from the income of an assessee and the tax paid under section 68 anything different from a tax on income.
In other words does section 68 impose a new charge on the income of the declarant for the first time wholly independent of the levy under section 3 of the Indian Income tax Act 192 ' or section 4 of the Income tax Act 1961 ? The High 413 Court has given the following reasons for holding that the tax paid under section 68 is not tax on income payable under the Indian Income tax Act 1922 and Income tax Act 1961: (i) the charge under the Income tax Act is on the total income of the previous year and not on any particular item of income but that is not so under section 68,(ii) payment of tax under section 68 has no reference to any assessment year and unless it is correlated to an assessment year it can not be ordinary income tax and (iii) the disclosed income is chargeable to tax without allowing usual deductions and without providing for any procedure for qualification.
The High Court proceeded to hold that section 68 enacted a new charge of tax on an ad hoc basis on disclosed income irrespective of the assessment year in which it was earned.
The disclosure of concealed income coupled with the payment of tax as contemplated in clause (i) of sub section (1) according to the High Court not only created a charge of tax but also satisfied it.
In its view the disclosure of concealed income coupled with furnishing of security and undertaking as contemplated in clause (ii) created a new charge of tax and when the undertaking was carried out by payment of tax the liability arising from the charge of tax was satisfied.
one basic fallacy underlying the conclusion of the High Court that a new charge is being levied under section 68 appears to be the assumption that the amount in question in respect of which tax is payable under that provision was not liable to income tax earlier.
lt should be borne in mind that the declaration contemplated under section 68 is a declaration in respect of income of earlier years which had been concealed and on which tax was payable during the relevant assessment years in the ordinary course.
Section 3 of the Indian Income tax Act 1922 and section 4 of Income tax Act 1961 which are couched more or less in the same language state that where any Central Act enacts that inc me tax shall be charged for any year at any rate or rates income tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions of the relevant Act in respect of the total income of the previous year or previous years as the case may be of every person.
Now it is well settled by a series of judicial decisions that the liability to income tax arises by virtue of the charging section in the relevant Income tax Act and it arises not later than the close of the previous year even though the rate of tax for the year of assessment may be fixed after the close of the previous year and the assessment has necessarily to be made after the previous year.
414 The quality of chargeability of any income to tax is not dependent upon the passing of the Finance Act though its quantification may be governed by the provisions of the Finance Act in respect of any assessment year vide Wallace Brothers and Co. Ltd. vs Commissioner of Income tax.
Messers Chatturam Horilram Ltd. vs Commissioner of Income tax and Ors.
and Kalwa Devadattam & Ors.
vs The Union of India & Ors.
In the case of Kesoram Industries and Cotton Mills Ltd. (supra) Subba Rao J. (as he then was) summarised the legal position thus : To summarize: A debt is a present obligation to pay an ascertainable sum of money, whether the amount is payable in prasenti or in futuro: debitum in prsesenti, solvendum in futuro.
But a Sum payable upon a contingency does not become a debt until the said contingency has happened.
A liability to pay income tax is a present liability though it becomes payable after it is quantified in accordance with ascertainable data.
There is a perfected debt at any rate on the last day of the accounting year and not a contingent liability.
The rate is always easily ascertainable.
If tile Finance Act is passe l it is the rate fixed by that Act; if the Finance Act has not yet been passed it is the rate proposed in Finance Bill pending before Parliament or the rate in force in the preceding year whichever is more favourable to the assessee.
All the ingredients of a debt are present.
It is a present liability of an ascertain able amount.
It is thus clear that it the assessee had brought to the notice of the Department in the usual course the existence of incomes which were later on declared under section 68 they would have been taxed during the relevant assessment year.
Hence merely because they are disclosed in a declaration filed under section 68, they cannot cease to be income not already charged for income tax.
It is true that the Finance Act in question merely levied a fixed rate of tax in respect of all the income disclosed without allowing deductions exemptions and set off under the relevant income tax law yet its function was no more than that of a Finance Act passed annually even though it made certain alterations with regard to filing of declaration and computation of taxable income 415 It was however urged on behalf of the Department that the nature of the declaration which was dependent upon the volition of the declarant and the fact that the liability to tax the amount mentioned therein was contingent upon the willingness of the declarant to disclose the amount ought to make a difference.
We do not think so because any such voluntary disclosure by an assessee even in the absence of section 68 would have exposed him to an assessment or reassessment as the case may be being made in respect of the sum disclosed as part of the income of the relevant assessment year and of course with the additional liability to payment of interest and levy of penalty and perhaps with the right to claim deductions if any admissible in the circumstances of the case and the benefit of other procedural rights.
The voluntary character of the declaration cannot therefore alter the character of the tax.
There is also no substance in the contention that in the absence of the allocation of the amount disclosed amongst different assessment years the tax payable under section 68 cannot be termed as a tax on income because such allocation would not achieve any additional purpose in the scheme of section 68 Irrespective of the other income which may have been determined in an ordinary proceeding under the relevant law of income tax a fixed rate of tax is payable under section 68(3) and hence the amount disclosed being treated as the income of any particular year would not make any difference regarding the quantum of tax.
Nor is there any other purpose to be served by such allocation.
Section 68 is in the nature of a package deal but the net result achieved is that the declarant is treated as having discharged all his liability in respect of the said income under the income tax law.
There is one other circumstance which may be noticed here.
The tax levied under section 68 can be only a tax on income.
If we hold it otherwise it may become a tax on wealth itself.
The basis of the liability in this case is the admission made by the declarant that the amount declared was his income earned in previous years but concealed from the knowledge of the Department.
In these circumstances it cannot be said that the amount declared under section 68 is not income which was not taxable under the Indian Income tax Act 1922 or the Income tax Act 1961 as the case may be.
The finding of the High Court that section 68 created a fresh charge is incompatible with the foundation of the very reassessment proceedings under section 17 of the Act.
The basis of these proceedings is the information which the Wealth tax officer acquired 416 from the declaration filed by the assessee in this case that the assessee was in possession of unaccounted funds represented by the non genuine hundis which had progressively reached the level of Rs. 7,01,578 during the assessment year 1964 65 from the level of Rs. 4,57;465 in 1959 60 by gradual accumulation of income.
But for this assumption in the absence of any other material reassessment under the Act would have been possible only in the last year in which the disclosure was made.
That however is not the case here.
The High Court in support of its view has relied on the decision of the Kerala High Court though not the reason given in support of that decision in C. K. Babu Naidu vs Wealth tax Officer.
That decision has since been reversed in appeal by a Division Bench of that Court in C. K. Babu Naidu vs Wealth tax Officer, 'A ' Ward, Calicut & anr in which the Kerala High Court has held that the liability for tax arising under section 68 of the Finance Act was nothing other than the liability under the Income tax Act 1961 itself and accordingly has allowed the deduction of tax paid under section 68 as a debt owed on the valuation date.
In Commissioner of Wealth Tax, Haryana, H.P. & Delhi III vs Girdhari Lal, Commissioner of Wealth tax vs B. K Sharma, Commissioner of Wealth tax, West Bengal III, Calcutta vs Bansidhar Poddar, D. C. Shah vs commissioner of Wealth tax Mysore and Shri Bhagwandas Jain vs Addl.
Commissioner of Wealth tax, M. P., the High Courts of Delhi Allahabad Calcutta Karnataka and Madhya Pradesh have accepted the view that the tax paid under section 68 of the Finance Act should be treated as a debt owed for purposes of determining net wealth as denied in section 2(m) of the Act.
The High Court of Bombay has also recalled the same conclusion in Bhagwandas Binani vs Commissioner of Wealth tax, Bombay City III but in doing so it observed that it appears to us that although it is not possible to say that the amount of income tax paid under section 68 of the Finance Act 1965 is income tax under the charging sec 417 tion 3 or section 4 of the I.T. Acts it must be regarded as income tax paid in lieu of such income tax and would be entitled to the same considerations as lavished by the Supreme Court on the ordinary charge of income tax.
The High Court of Bombay appears to take the view as the High Court of Gujarat has done in the decision under appeal that a new liability is created by section 68 but it however would not have any adverse effect on the right of the assessee to claim the deduction.
While we approve of the conclusion reached by the High Court of Bombay we feel that the said decision to the extent it attempts to follow the reason given by the Gujarat High Court to hold that the liability under section 68 is a fresh liability is not correct.
The true position is that the amount declared has the liability to pay income tax imbedded in it on the valuation date but only the ascertainment of that liability is postponed to a future date.
In the instant case its determination is allowed to he done in accordance with the provisions of section 68.
Even though it may appear to be itself a complete code it is only a scheme which provides a method for the liquidation of an already existing income tax liability which was present on the relevant valuation date.
The view does not in any way To counter to any observations made by this Court in Commissioner of Income Tax, Bombay City I vs Khatau Makanji Spinning and Weaving Co. Ltd. In that case this Court was concerned with the validity of a charge levied by the Finance Act 1951 in respect of dividends distributed in excess of the specified limit under clause (ii) of the proviso to Paragraph of Part I of the First Schedule to that Act as applied to the assessment year 1953 54 by the Finance Act 1953.
This Court held that income tax was a tax on income of the previous year and it would not cover some thing which was not the income of the previous year or made fictionally so and according to the scheme of that provision it was impossible to say that the additional income tax was properly laid upon the total income because what was actually taxed was never a part of the total income of the previous year.
This decision is clearly distinguishable from the present case where what is taxed is the income which was ordinarily liable to tax but which had not been included in the return of the assessee or which had escaped assessment or which was still to be assessed to income tax under the relevant Income tax Act.
It was in fact a part of the total income though not assessed till the declaration was made.
Merely because it is stated that the rate of tax charged on the 418 amount declared is sixty per cent or fifty seven per cent as the case may be it does not cease to be a part of the total income.
This is not a case where what was not in fact income had been converted into income by section 68.
For the same reason the Department cannot derive any support from the observations made by this Court in Madurai District Central Co operative Bank Ltd. vs Third Income tax officer, Madurai.(l) We are therefore of the view that the assessee was entitled to claim deduction of income tax payable on the amounts added to his total wealth under section 2(m) of the Act in the course of the reassessment proceedings.
In the result these appeals are allowed the judgment of the High Court is set aside and the questions referred to it are answered in the affirmative and in favour of the assessee.
The Department will pay the costs of the appellant assessee Hearing fee one set.
P.B.R. Appeals allowed.

summary:
As part of a measure to mop up unaccounted money on which no income tax had been paid, an incentive scheme was prepared by the Government under which a person disclosing such income was required to pay a specified rate of tax without attracting the penal provisions of the Income Tax Act.
Section 68 of the Finance Act, 1965 provided that a person making voluntary disclosure of his income in accordance with the provisions of the section would be charged income tax at a specified rate notwithstanding anything contained in the Income Tax Act.
The assessee had a large sum of such unaccounted money in his possession.
Without allocating the total sum amongst the different assessment years, he declared that he had a sum of Rs. 7 lakhs in his possession which was earned by him during the assessment years 1957 58 to 1964 65.
Income Tax in respect of this income computed in accordance with section 68 of the Finance Act was paid by him.
In the wealth tax returns filed by him in response to the notice issued by the Wealth Tax officer for re assessment consequent on the disclosure of his wealth the assessee claimed deductions of income tax paid under section 68 of the Finance Act.
But the Wealth Tax officer disallowed the claim holding that since the assessee had not shown the liability to pay income tax in his balance sheets for the respective years the deductions claimed by him could not be allowed in any of the assessment years.
The Appellate Assistant Commissioner dismissed the assessee 's appeal.
The Tribunal, on the other hand, held that the liability constituted a "debt owed" because in truth and substance, it was a liability under the Income Tax Act, 1922 or 1961 and not a new liability created by the Finance Act, 1965.
On reference the High Court held in favour of the Revenue on the ground that section 68 of the Finance Act enacted a new charge of tax on an ad hoc 403 basis on disclosed income and, therefore, it was not a "debt owed" which could be allowed as a deduction under the Wealth Tax Act.
On behalf of the Revenue it was contended that since the tax paid by the assessee under the voluntary disclosure scheme was in discharge of a liability created for the first time by the Finance Act, 1965 it was not an allowable deduction under the Wealth Tax Act.
Allowing the appeal, ^ HELD: The assessee was entitled to claim deduction of income tax paid on the amounts added to his total wealth under section 2 (m) of the Wealth Tax Act in the course of the assessment proceedings.
[418 B] C 1.
Merely because the amounts were disclosed in a declaration under section 68 of the Finance Act, they did not cease to be incomes not already charged to income tax.
Although the Finance Act merely levied a fixed rate of tax in respect of all the income disclosed without allowing deductions, exemptions and such other allowances which are allowable under the Income Tax Acts, its function was no more than that of an annual Finance Act despite the fact that it made certain alterations in regard to the filing of declaration and computation of taxable income.
[414 G H] 2.
The nature of the declaration which was dependent on the volition of the declaring and the fact that the liability to tax the amount was contingent upon the willingness of the declaring to disclose the amount would not make a difference because such voluntary disclosure, even in the absence of section 68, would have exposed the assesseee to assessment or reassessment.
The voluntary character of the declaration cannot alter the character of the tax.
[415 A B] 3.
The true position is that the amount declared has the liability to pay income tax embedded in it on the valuation date but only the ascertainment of that liability is postponed to a future date.
[417 C] In the instant case its determination was allowed to be done in accordance with the provisions of section 68.
Even though this section was a complete code in itself it was only a scheme which provided a method for the liquidation of an already existing income tax liability which was present on the relevant valuation date.
[417 D] 4.
Nor did the absence of allocation of the amount disclosed amongst different assessment years detract the tax from being called a tax on income because such allocation would not achieve any additional purpose in the scheme of section 68 This section is in the nature of a package deal.
The net result achieved was that the declarant was treated as having discharged all his liability in respect of such income under the income tax law.
[415E] 404 5.
The finding of the High Court that section 68 created a fresh charge is incompatible with the foundation of the very reassessment proceedings under section 17 of the Wealth Tax Act.
[415 H] 6.
Moreover section 68, at more than one place stated that what was pay able was income tax which clearly showed that what was payable under the section was income tax.
[412 B C] C.I.T. vs Khalau Makanji Spinning and Weaving Co. Ltd., Madurai District Central Cooperative Bank Ltd. vs Third I.T.O. , distinguished.
C. K. Bahu Naidu vs Wealth Tax Officer, ; C. Ii T vs GirdhariLal, ; C.W.T. vs B.K Sharma, ; C.W.T. vs Bansidhar Poddar.
; D.C. Shah vs C.W.T., ; Bhagwandas Jain vs Addl.
C.W.T. and Bhagwanidas Binani vs C.W.T., , approved.