2007 (1) TMI 166 - HC - Income Tax

Delay of one day in filing the estimate of advance tax - reasons for delay was totally beyond the control of the assessee as his main source of income was share from B and filing of estimate of advance tax was dependent upon the intimation by the said firm - Once a reasonable explanation is available, there was no justification for levy of penalty for mere technical default when the delay was merely of a day

Summary

Issues:
1. Interpretation of section 212(3A) regarding the filing of estimates of current income and advance tax.
2. Validity of penalty under section 273(2)(c) for delay in filing the estimate of advance tax.

Issue 1: Interpretation of section 212(3A) regarding the filing of estimates of current income and advance tax:
The court was tasked with interpreting section 212(3A) of the Income Tax Act, which requires an assessee to file an estimate of current income and advance tax payable if the current income is likely to be greater than the income on which advance tax was computed. The assessee in this case filed the estimates on March 15, 1978, one day after the last instalment of advance tax was due. The Income-tax Officer considered these estimates invalid as they were filed beyond the prescribed time. The court analyzed the provision and the circumstances, emphasizing that the assessee's main income source was dependent on information from another firm, leading to the delay. The court held that the delay of one day did not warrant such a harsh penalty, especially when the assessee had a reasonable explanation for the delay. The court concluded that the estimate filed by the assessee should not be declared invalid based on a technical default of a single day.

Issue 2: Validity of penalty under section 273(2)(c) for delay in filing the estimate of advance tax:
The penalty under section 273(2)(c) was levied on the assessee for the delay in filing the advance tax estimates. The Commissioner of Income-tax (Appeals) ruled in favor of the assessee, stating that the delay was not deliberate but beyond the assessee's control. However, the Tribunal overturned this decision. Upon hearing arguments from both parties, the court sided with the assessee, noting that the penalty for a mere one-day delay in filing the estimate was unjustifiably harsh. The court emphasized that the delay was due to circumstances beyond the assessee's control, as the filing was dependent on information from another firm. The court found no reasonable cause for the penalty in this case and ruled in favor of the assessee, stating that there was no justification for imposing a penalty for a minor technical default when the delay was only for a day.

In conclusion, the court answered the referred question in favor of the assessee and against the Revenue, disposing of the reference accordingly.