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Levy of penalty under section 18A(9)(a) read with section 28(1)(c) - Validity in law. Analysis: The case involved a reference application under the Indian Income-tax Act regarding the validity of a penalty of Rs. 1,000 imposed on the assessee under section 18A(9)(a) read with section 28(1)(c) of the Act. The facts revealed that the assessee, a partner in various firms, estimated his total income for the assessment year 1953-54 at Rs. 27,500 and paid advance tax based on this estimate. However, the department computed his total income for that year at Rs. 53,582, resulting in a tax levy of Rs. 6,794-11-0. The Income-tax Officer found the assessee's tax estimate fell below 80% of the final assessment, leading to a penalty notice under section 28 of the Act. The assessee explained that his estimate was based on business trends and unforeseen income spikes, justifying the original estimate. Despite this, a penalty of Rs. 1,000 was levied by the Income-tax Officer, which was upheld on appeal by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. The Tribunal emphasized the assessee's failure to provide a revised estimate despite increased income and concluded that the penalty was justified under section 18A(9)(a). The relevant sections of the Income-tax Act, particularly section 18A(9), were examined to determine the assessee's culpability. It was noted that penal provisions should not be applied oppressively and must adhere to fair and unbiased quasi-judicial proceedings. The burden of proof akin to a criminal charge was highlighted, necessitating a high standard of evidence to establish guilt. The judgment scrutinized whether the assessee knowingly furnished an untrue estimate under section 18A(2) and emphasized the importance of the assessee's state of mind at the time of estimation. The court found that the assessee's estimate was based on business accounts and the trend of income, indicating a genuine effort to estimate accurately. The failure to submit a revised return was deemed irrelevant to the assessment of the original estimate's validity. Ultimately, the court ruled that the penalty imposed on the assessee was unwarranted in law based on the facts and circumstances presented. In conclusion, the court answered the reference question in the negative, favoring the assessee and awarding costs to be borne by the department. The judgment underscored the necessity of a fair and evidence-based approach in imposing penalties under tax laws, ensuring that penal provisions are not misused against taxpayers.
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