1980 (12) TMI 27 - HC - Income Tax

Summary

Issues Involved:
1. Compliance with Section 212(3A) of the Income Tax Act.
2. Imposition of penalty under Section 273(c) of the Income Tax Act.
3. Requirement of mens rea for penalty proceedings under Section 273(c).
4. Burden of proof in penalty proceedings.
5. Reasonable cause for failure to file an estimate of advance tax.
6. Validity of Tribunal's findings and its interpretation of facts.

Detailed Analysis:

Compliance with Section 212(3A) of the Income Tax Act:
The assessee, a limited company engaged in the manufacture and sale of sugar, was required to file an estimate of advance tax under Section 212(3A) of the Income Tax Act for the assessment year 1971-72. The Income Tax Officer (ITO) raised a demand for advance tax based on an estimated income, which the assessee paid in installments. However, the assessee did not file an estimate of advance tax as required under Section 212(3A).

Imposition of Penalty under Section 273(c) of the Income Tax Act:
The ITO initiated penalty proceedings under Section 273(c) for the assessee's failure to comply with Section 212(3A). The penalty was confirmed by the Appellate Assistant Commissioner (AAC) and subsequently by the Tribunal. The Tribunal observed that the assessee was aware of its increased turnover and profits but failed to file the required estimate.

Requirement of Mens Rea for Penalty Proceedings under Section 273(c):
The assessee argued that the penalty proceedings under Section 273(c) were quasi-criminal and required the establishment of mens rea, i.e., a conscious disregard of the statutory obligation. The Tribunal, however, held that Section 273(c) did not require the establishment of mens rea, unlike Section 273(a), which explicitly requires knowledge and intention.

Burden of Proof in Penalty Proceedings:
The Tribunal noted that the burden of proof in penalty proceedings under Section 273(c) did not lie with the department to establish mens rea but rather to show that the assessee failed to comply without reasonable cause. The Tribunal relied on decisions from the Kerala and Orissa High Courts to support this view.

Reasonable Cause for Failure to File an Estimate of Advance Tax:
The assessee contended that the delay in filing the estimate was due to unforeseen profits arising from the valuation of closing stock, which could not have been reasonably anticipated. The audited books of account were only available on 7th May 1971, after the deadline for filing the estimate. The Tribunal, however, found that the assessee had sufficient information by the end of the previous year to file an accurate estimate.

Validity of Tribunal's Findings and its Interpretation of Facts:
The High Court considered whether the Tribunal's findings were perverse or based on a misinterpretation of facts. The assessee argued that the Tribunal had failed to consider relevant material and had acted on inadmissible evidence. The High Court referred to the Supreme Court's decision in CIT v. S. P. Jain, which allows for interference with the Tribunal's findings if they are based on no evidence or are inconsistent with the evidence.

Conclusion:
The High Court concluded that the assessee had no reasonable cause for failing to file the estimate of advance tax and that the Tribunal's findings were not perverse. However, the High Court found that the penalty under Section 273(c) was not justified as the assessee had acted based on the information available at the time. The question referred to the court was answered in the negative, in favor of the assessee. Each party was ordered to bear its own costs.

Separate Judgment:
Sabyasachi Mukharji J. concurred with the judgment delivered by Sudhindra Mohan Guha J., agreeing with the conclusion that the Tribunal was not justified in sustaining the penalty under Section 273(c).

Final Decision:
The High Court ruled in favor of the assessee, stating that the Tribunal was not justified in sustaining the order of penalty under Section 273(c) of the Income Tax Act.