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Issues: Interpretation of sections 210, 212, and 218 of the Income-tax Act, 1961 regarding penalty imposition for default in advance tax payment.
The judgment by the High Court of Calcutta addressed the issue of penalty imposition under section 221 of the Income-tax Act, 1961, based on the default amount in advance tax payment by the assessee. The case involved a dispute over whether the penalty amount should be Rs. 9,505 or Rs. 32,275. The assessee had received a notice of demand requiring payment of Rs. 64,549 by way of advance tax, with the first installment of Rs. 32,275 due on 15th December 1971. However, the assessee later filed an advance tax estimate on 3rd February 1972, stating the total advance tax payable as Rs. 18,505, paid in two installments of Rs. 9,000 and Rs. 9,505. The Appellate Tribunal held that the penalty amount should be based on the revised advance tax due of Rs. 9,505, as per the estimate filed by the assessee, superseding the original demand amount. The Tribunal emphasized that under section 212, the estimate filed by the assessee supersedes the demand made by the Income Tax Officer (ITO), and the penalty should be restricted accordingly. The Tribunal also noted that in penalty provisions, the view favorable to the assessee should be taken, and upheld the direction of the Appellate Assistant Commissioner (AAC) to reduce the penalty to Rs. 9,505. The judgment further analyzed the interplay between sections 210, 212, and 218 of the Income-tax Act, 1961. Section 218 states that a default occurs if an assessee fails to pay an installment on time. However, section 212 provides the assessee with the option to file an estimate before the last installment is due and pay advance tax accordingly. In this case, the assessee filed an estimate before the last installment fell due, thereby superseding the default under section 210. The court highlighted that the assessee should have paid the entire sum according to the estimate by 15th March 1972, but the partial payment of Rs. 9,000 on 1st March 1972 and the remaining amount before the end of March was considered in determining the default amount. The judgment affirmed that the Tribunal correctly upheld the AAC's direction to reduce the penalty to Rs. 9,505 based on the revised advance tax due. The judgment referenced decisions from the Patna High Court and Madras High Court, emphasizing that the principles discussed in those cases were not directly applicable to the facts of this case. Ultimately, the High Court of Calcutta concurred with the Tribunal's decision, finding it to be in accordance with the provisions of sections 210, 212, and 218 of the Income-tax Act, 1961, and in favor of the assessee. The court concluded that the penalty should be based on the revised advance tax due of Rs. 9,505, and there was no order as to costs.
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