2004 (11) TMI 76 - HC - Income Tax

Advance tax invalid estimate penalty u/s 273(a) - it appears that even where an estimate of advance tax has been incorrectly filed or is untrue, the quantum of penalty is to be calculated with reference to the tax paid during the financial year immediately preceding the year which falls short of 75 % of the assessed tax or the amount of tax payable where the notice under section 210 was issued to the assessee, whichever is less. In the present case it is not in dispute that the amount of tax deposited by the respondent did not fall short of 75 per cent. of the assessed tax and therefore no penalty was leviable. Thus order of CIT (Appeals) deleting the penalty does not suffer from any legal infirmity. - For calculating the amount of tax paid during the year, the entire amount of advance tax whether it has been paid in time or after the due date but not after the close of the financial year has to be taken into consideration. Revenue appeal dismissed

Summary

Issues involved:
1. Justification of confirming the cancellation of penalty under section 273(a) by the Income-tax Appellate Tribunal.
2. Justification of considering all payments within the financial year for penalty levy under section 273(a) even if made in pursuance of an invalid estimate.

Analysis:

Issue 1:
The case involved the imposition of a penalty under section 273(a) of the Income-tax Act, 1961 by the Income-tax Officer, which was subsequently cancelled by the Commissioner of Income-tax (Appeals) and affirmed by the Income-tax Appellate Tribunal. The Tribunal justified the cancellation of the penalty by considering the provisions of section 273(i) of the Act, which penalizes the filing of false estimates or failure to pay advance tax. The Tribunal correctly noted that the penalty is to be calculated based on the tax paid during the financial year preceding the assessment year, falling short of 75% of the assessed tax or the amount payable under a notice issued to the assessee, whichever is less. In this case, as the tax deposited did not fall short of 75% of the assessed tax, no penalty was leviable. Therefore, the Tribunal's decision to cancel the penalty was legally sound.

Issue 2:
The second issue revolved around whether all payments within the financial year should be considered for penalty levy under section 273(a), even if made in pursuance of an invalid estimate. The Court clarified that for calculating the amount of tax paid during the year, the entire amount of advance tax, whether paid in time or after the due date but before the close of the financial year, must be taken into account. This interpretation ensures that all payments made by the assessee within the financial year are considered for penalty calculation purposes. Consequently, the Tribunal's decision to include all payments within the financial year for penalty levy, despite being made in pursuance of an invalid estimate, was legally justified.

In conclusion, the High Court answered both questions of law in favor of the assessee and against the Revenue, upholding the decisions of the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal. The judgment provided a detailed analysis of the relevant provisions of the Income-tax Act, ensuring a fair and accurate application of the law in the case at hand.