1992 (2) TMI 119 - AT - Income Tax

Bona Fide, Carry Forward, Failure To Pay Advance Tax, False Estimate, Losses And Depreciation, Reasonable Cause

Issues Involved:
1. Levy of penalty under section 273(1)(b) of the IT Act, 1961.
2. Reasonable cause for non-furnishing of statement of advance tax.
3. Burden of proof for absence of reasonable cause.
4. Deletion of interest under section 215.
5. Adjustment of prepaid taxes and its impact on interest under section 214.

Detailed Analysis:

1. Levy of Penalty under Section 273(1)(b):
The primary issue in this appeal is the confirmation of a penalty of Rs. 2,12,450 under section 273(1)(b) of the IT Act, 1961. The appellant-company initially filed a return showing nil income but later revised it to disclose an income of Rs. 11,97,046, leading to a tax liability of Rs. 6,74,826. The Income Tax Officer (ITO) completed the assessment at an income of Rs. 37,08,890 and initiated penalty proceedings under section 273(a), ultimately imposing a penalty for failing to furnish a statement of advance tax.

2. Reasonable Cause for Non-Furnishing of Statement of Advance Tax:
The appellant argued that the estimate of current income for advance tax purposes should be based on the bona fide estimate at the time the statement was required. The company believed that unabsorbed business loss and depreciation from an amalgamated company (EIMC) would be allowable from the assessment year 1981-82, thus reducing its taxable income to nil. Additionally, the company had made provisions for royalty payments, which were later disallowed, but this disallowance occurred after the due date for the advance tax statement.

3. Burden of Proof for Absence of Reasonable Cause:
The appellant contended that the burden of proof lies with the department to establish the absence of reasonable cause for the failure to furnish the statement. The ITO failed to provide any material evidence to prove this absence. The appellant cited various judgments to support the contention that the default occurred due to a bona fide belief that the income would be nil or negative.

4. Deletion of Interest under Section 215:
The appellant highlighted that the interest charged under section 215 was deleted in the quantum appeal by the CIT(Appeals), and the department did not contest this deletion. This supports the appellant's argument that no penalty should be levied under section 273(1)(b).

5. Adjustment of Prepaid Taxes and Its Impact on Interest under Section 214:
The appellant requested the adjustment of prepaid taxes against the tax payable for the revised assessment year, which, if done, would have negated the need for interest under section 214. The tribunal observed that proper adjustments could have prevented the imposition of significant interest amounts, indicating a lack of due diligence by the concerned officers.

Conclusion:
After careful consideration, the tribunal concluded that the penalty under section 273(1)(b) could not be sustained. The appellant's belief regarding the carry forward of losses and royalty deductions was found to be bona fide, and the burden of proof was not met by the department. The deletion of interest under section 215 further supported the appellant's case. Consequently, the penalty was cancelled, and the appeal was allowed.

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