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Issues involved: Interpretation of section 273(b) of the Income-tax Act, 1961 in relation to assessments under section 147(a) read with section 143(3).
Summary: The High Court of Allahabad was presented with a question regarding the applicability of penalties under section 273(b) of the Income-tax Act, 1961 to assessments made under section 147(a) read with section 143(3) for the years 1961-62 to 1964-65. The assessee, who had not been assessed prior to 1961-62, did not file income estimates or pay advance tax as required. The Income Tax Officer (ITO) imposed penalties under section 273(b) for each year, which were subsequently canceled by the Appellate Assistant Commissioner (AAC) and upheld by the Tribunal based on the nature of the assessments. The central issue revolved around whether section 273(b) applied to assessments under section 147(a) read with section 143(3). Section 273(b) pertains to cases where the ITO is satisfied during proceedings related to regular assessments that the assessee failed to furnish an advance tax estimate without reasonable cause. The definition of "regular assessment" under section 2(40) includes assessments under section 143 or 144, subject to contextual interpretation. The Court analyzed the legislative intent and previous judicial interpretations to determine that the term "regular assessment" in section 273(b) should be confined to assessments made under section 143 or 144 only, excluding assessments under section 147(a). The Court emphasized that any legislative gaps should be addressed through statutory amendments rather than judicial interpretation. The decision was influenced by precedents from the Kerala, Punjab, and Patna High Courts, leading to a ruling in favor of the assessee against the department. In conclusion, the Court answered the question in the affirmative, supporting the assessee's position and awarding costs and counsel fees accordingly.
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