1995 (2) TMI 90 - AT - Income Tax

Summary

Issues Involved:
1. Validity of penalty under Section 273(2)(c) of the IT Act, 1961.
2. Technical defect regarding the issuance of notice under Section 273(2)(a) instead of Section 273(2)(c).
3. Obligation of the assessee to file an estimate of advance tax under Section 209A(4).
4. Merits of the penalty imposed.

Issue-wise Detailed Analysis:

1. Validity of Penalty under Section 273(2)(c):
The appeal concerns the reduction of a penalty from Rs. 6,00,000 to Rs. 40,000 by the CIT(A)-II, Baroda, under Section 273(2)(c) of the IT Act, 1961. The assessee initially filed a return showing an income of Rs. 9,40,930, which was later revised to Rs. 8,50,976. The AO determined the total income at Rs. 13,13,100 and initiated penalty proceedings under Section 273(2)(c). After adjustments, the total income stood at Rs. 8,31,588. The assessee contended that there was no obligation to file a statement of advance tax since the income was nil, but the AO imposed a maximum penalty of Rs. 6,00,000. The CIT(A) reduced this penalty, considering that the delay in payment of tax was about 6-1/2 months.

2. Technical Defect Regarding Notice Issuance:
The assessee argued that the AO's satisfaction was recorded under Section 273(2)(a), not Section 273(2)(c), making the penalty invalid. The AO initially issued a notice under Section 273(2)(a) but later modified it to Section 273(2)(c). The Tribunal found that this was a typographical error corrected promptly, and the assessee contested the proceedings under Section 273(2)(c). Thus, the technical defect argument was dismissed, and the penalty under Section 273(2)(c) was deemed valid.

3. Obligation to File Estimate of Advance Tax:
The assessee claimed no obligation to file an estimate of advance tax under Section 209A(4), as previous assessments showed nil income. The Tribunal noted that Section 209A(4) requires filing an estimate if the current income is likely to exceed the previous year's income by more than 33-1/2%. The assessee's current income was substantial, and the obligation to file an estimate was clear. Case laws cited by the assessee were distinguished as they involved nil income in previous years, unlike the substantial income in the current year.

4. Merits of the Penalty Imposed:
The assessee argued that it incurred a business loss and had no current income up to 15th Dec., 1983. The CIT(A) rejected this, noting that foreign commission and customs duty refund were substantial and should have been estimated. The Tribunal agreed, stating that the assessee could have reasonably estimated its income, given the substantial amounts involved. The penalty was justified as the assessee failed to file the required estimate.

Conclusion:
The Tribunal dismissed the appeal, upholding the penalty of Rs. 40,000 imposed by the CIT(A). The assessee's arguments on technical defects, lack of obligation to file an estimate, and merits of the penalty were all rejected. The Tribunal found that the assessee was indeed liable to file an estimate of advance tax and had failed to do so, justifying the penalty under Section 273(2)(c).