1997 (8) TMI 95 - AT - Income Tax

Summary

Issues:
Penalty under s. 273(2)(c) for failure to furnish an estimate of advance tax within the prescribed time.

Detailed Analysis:

Issue 1: Penalty under s. 273(2)(c)
The appeal was filed against the confirmation of penalty under s. 273(2)(c) by the CIT(A) for the assessment year 1987-88. The assessee had initially filed a return for the period from 1st July, 1985 to 30th June, 1986, declaring income. Subsequently, a revised return was filed for the period from 1st July, 1985 to 31st Jan., 1987, with a higher income declaration. The AO imposed a penalty as the advance tax paid was deemed insufficient. The assessee contended that the firm's dissolution and subsequent advice to file a revised return caused the discrepancy. The CIT(A) upheld the penalty, leading to the appeal.

Issue 2: Submission of Assessee
The assessee argued that the penalty was imposed based on presumption, emphasizing that they were unaware of the firm's dissolution when filing the estimate. The assessee maintained that they acted in good faith and had no reason to anticipate the dissolution. The revised return included income for the subsequent period, as advised, and the advance tax paid was based on the belief that the subsequent period would be assessed in the following year.

Issue 3: Departmental Representative's Argument
The Departmental Representative supported the penalty, citing the amendment in s. 273(2)(c) from 1st Sept., 1986, which removed the consideration of reasonable cause for failure to furnish an estimate of advance tax. They contended that the penalty should stand as per the amended provision.

Judgment and Conclusion
The Tribunal noted that the assessee had paid advance tax exceeding 75% of the assessed tax for both years, albeit with a mistaken belief regarding the assessment year for the subsequent period. Despite the amendment omitting "without reasonable cause," the introduction of s. 273B on the same day allowed for a reasonable cause defense. The Tribunal found the assessee's belief to be bona fide and accepted that a reasonable cause existed for the failure to furnish an estimate of advance tax. Consequently, the Tribunal directed the cancellation of the penalty, allowing the appeal.

In conclusion, the Tribunal allowed the appeal, emphasizing the assessee's good faith and reasonable cause for the failure to furnish an estimate of advance tax within the prescribed time, leading to the cancellation of the penalty under s. 273(2)(c).