1985 (1) TMI 15 - HC - Income Tax

Summary

Issues Involved:
1. Imposition of penalty u/s 273(a) for the assessment years 1966-67 and 1968-69.
2. Basis for the estimates submitted by the assessee.
3. Revenue's contention against the Appellate Assistant Commissioner's decision.
4. Tribunal's decision on the appeal by the Revenue.
5. Legal precedents cited by both parties.

Summary:

1. Imposition of Penalty u/s 273(a):
The Income-tax Officer (ITO) imposed penalties on the assessee for the assessment years 1966-67 and 1968-69 under section 273(a) of the Income-tax Act, 1961. The penalties were based on the contention that the assessee had furnished estimates of advance tax that were untrue and that the assessee knew or had reason to believe them to be untrue.

2. Basis for the Estimates Submitted by the Assessee:
For the assessment year 1966-67, the assessee filed multiple estimates, ultimately declaring an income of Rs. 6.8 lakhs, whereas the final assessed income was Rs. 13.45 lakhs. The Appellate Assistant Commissioner (AAC) found that the difference arose due to profits from ginning and pressing factories, which were not fully known at the time of filing the estimates. Similarly, for the assessment year 1968-69, the difference between the estimated and assessed income was due to increased profits from ginning and pressing factories, which the assessee could not have anticipated.

3. Revenue's Contention Against the Appellate Assistant Commissioner's Decision:
The Revenue appealed against the AAC's decision, arguing that the AAC had accepted the assessee's statements without primary evidence and that the estimates were based on irrelevant circumstances. The Revenue contended that the assessee, being a part of a well-known industrial group, should have had a better understanding of its business trends and should have provided convincing evidence to justify its estimates.

4. Tribunal's Decision on the Appeal by the Revenue:
The Tribunal upheld the AAC's decision, stating that the ITO had not verified whether the exact yield could be determined before May/June 1966. The Tribunal found no evidence of mala fide intention on the part of the assessee and noted that the assessee had a history of paying advance tax regularly. The Tribunal concluded that the estimates were based on the trend of the business and materials available at the time, and there was no reason to believe that the estimates were untrue.

5. Legal Precedents Cited by Both Parties:
The Revenue relied on the decisions in Appavoo Pillai v. CIT [1965] 57 ITR 41 (Mad) and United Asian Traders Ltd. v. CIT [1970] 77 ITR 711 (Cal), arguing that the principles laid down in these cases should govern the present case. The assessee, on the other hand, cited several decisions, including CIT v. S. B. Electric Mart P. Ltd. [1981] 128 ITR 276 (Cal) and Ramnagar Cane & Sugar Co. Ltd. v. CIT [1982] 134 ITR 609 (Cal), to support the contention that mere disparity between estimated and assessed income does not justify the imposition of penalty.

Conclusion:
The High Court affirmed the Tribunal's decision, holding that the Revenue failed to establish that the assessee had consciously filed untrue estimates. The estimates were based on reasonable grounds and materials available at the time, and there was no evidence of mala fide intention. Therefore, the Tribunal was right in cancelling the orders of penalty for the assessment years 1966-67 and 1968-69. The question was answered in the affirmative and in favor of the assessee, with no order as to costs.