2004 (11) TMI 93 - HC - Income Tax

Section 273(2) - (i) Whether Tribunal was justified in restoring the order of the Income-tax Officer on the ground that payment made after the last date of payment of third instalment of advance tax but before close of the financial year (relevant to assessment year) is not a proper compliance with section 209A for the purpose of imposition of penalty u/s 273(2) (ia), whether or not a revised estimate has been filed? (ii) Whether the tax paid during the previous financial year (up to March 31) should be treated as advance tax for the purpose of computation of penalty u/s 273(2)(aa) or not? We answer the first question referred to us in the negative, i.e., in favour of the assessee In respect of second question held that any amount of advance tax, which is deposited subsequent to the date prescribed for depositing the tax in the relevant financial year is to be treated as advance tax.

Summary

Issues:
1. Justification of canceling the order of the Commissioner of Income-tax (Appeals) by the Tribunal regarding the compliance with section 209A for penalty imposition under section 273(2)(ia) of the Income-tax Act, 1961.
2. Treatment of tax paid during the previous financial year as advance tax for penalty computation under section 273(2)(aa).

Analysis:

1. The case involved a penalty imposed under section 273(2)(ia) of the Income-tax Act for the assessment year 1980-81. The respondent initially declared advance tax payable at Rs. 1,51,575 but later revised it to Rs. 4,83,750, paying Rs. 4,78,756 by December 15, 1979. The Income-tax Officer imposed a penalty, which was canceled by the Commissioner of Income-tax (Appeals) but reinstated by the Tribunal. The Tribunal's decision was based on the timing of payment after the last date of the third installment of advance tax but before the end of the financial year. However, as per section 273(2)(ia), the penalty is applicable when the advance tax paid falls short of 75% of the assessed tax. In this case, the advance tax paid exceeded 75% of the assessed tax, amounting to Rs. 6,53,756 against an assessed tax of Rs. 6,91,020. Therefore, the Tribunal's decision to reinstate the penalty was unjustified as the payment was compliant with the statutory requirements.

2. The second issue addressed whether tax paid in the previous financial year should be considered as advance tax for penalty computation under section 273(2)(aa). The court, in a related case, had already determined that any amount of advance tax paid after the prescribed date for the relevant financial year should be treated as advance tax. Consequently, the court answered this question in the negative, favoring the assessee and rejecting the Revenue's contention. The treatment of tax paid during the previous financial year as advance tax for penalty calculation was clarified, aligning with the legal interpretation established in a previous judgment.

In conclusion, the High Court of ALLAHABAD ruled in favor of the assessee on both issues, emphasizing compliance with statutory provisions and established legal interpretations in determining penalties under the Income-tax Act, 1961.