1998 (6) TMI 73 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of section 209A(4) of the Income-tax Act, 1961.
2. Justification for penalty under section 273(2)(c) of the Income-tax Act, 1961.
3. Determination of "reasonable cause" for failure to furnish an estimate of advance tax.

Issue-wise Detailed Analysis:

1. Applicability of section 209A(4) of the Income-tax Act, 1961:
The controversy pertains to the assessment year 1979-80. The Income-tax Officer (ITO) observed that the assessee-company filed a statement in Form No. 28A showing a loss of Rs. 3,199, while its income was assessed at Rs. 3,01,540. Consequently, the ITO initiated penalty proceedings under section 273(2)(c) of the Income-tax Act, citing the assessee's failure to file a revised estimate under section 209A(4). The ITO emphasized the statutory liability under section 209A(4) to file a revised estimate if the current income was likely to exceed the specified amount.

2. Justification for penalty under section 273(2)(c) of the Income-tax Act, 1961:
The ITO rejected the assessee's explanation and levied a penalty of Rs. 15,760. The Commissioner (Appeals) accepted the assessee's contention that the estimate was bona fide and the failure to revise was due to circumstances beyond control. The Tribunal upheld the Commissioner (Appeals)'s decision, noting that the Revenue failed to justify the penalty. The Tribunal emphasized that penalty under section 273(2)(c) is not automatic and requires the ITO's satisfaction that the failure was "without reasonable cause."

3. Determination of "reasonable cause" for failure to furnish an estimate of advance tax:
The assessee argued that the estimate was based on a bona fide belief of no profit, supported by accumulated losses and unabsorbed allowances. The Commissioner (Appeals) and the Tribunal found that the failure to revise the estimate was due to reasonable cause, such as the accountant's frequent indisposition. This finding of fact was not challenged. The court reiterated that penalty should not be imposed merely for non-compliance, especially if the assessee acted under an honest and genuine belief. The court referenced the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, emphasizing that penalty is not justified unless there is deliberate defiance of law, contumacious conduct, or conscious disregard of obligation.

Conclusion:
The court concluded that in the facts and circumstances of the case, no penalty was leviable under section 273(2)(c) for non-furnishing of the estimate of advance tax under section 209A(4). The question was answered in the negative, favoring the assessee and against the Revenue. The reference was disposed of with no order as to costs.