1984 (4) TMI 74 - AT - Income Tax

Summary

Issues Involved: Validity of penalty under section 273(a) of the Income-tax Act, 1961 for filing an erroneous estimate of advance tax.

Detailed Analysis:

1. Background and Penalty Imposition:
The assessee appealed against the order of the Commissioner (Appeals) who sustained the penalty levied by the IAC (Assessment) under section 273(a) for the assessment year 1976-77. The IAC (Assessment) had initially imposed a penalty of Rs. 1,45,355, which was later reduced by the Commissioner (Appeals).

2. Facts Leading to Penalty:
The assessee was served with a notice under section 210 of the Act to make an advance tax payment of Rs. 30,25,977, based on a total income of Rs. 44,33,666. The assessee responded with an estimate of Rs. 13,23,001 on an estimated total income of Rs. 21 lakhs. Subsequently, the assessee paid Rs. 10 lakhs as advance tax. The IAC (Assessment) completed the assessment on a total income of Rs. 58,35,456, which was later raised to Rs. 58,76,310 after an appeal. The IAC (Assessment) initiated penalty proceedings under section 273(a), asserting that the assessee filed an estimate it knew or had reason to believe was untrue. The assessee did not respond to the show-cause notices, leading the IAC (Assessment) to impose the penalty.

3. Assessee's Arguments:
The assessee contended that the notice under section 210 was erroneous as it was based on the total income of Rs. 44,33,666, which included capital gains that should have been excluded. The assessee also argued that the estimate was flawed due to an oversight by the Chief Accountant, who excluded income from the Furnace Division and was influenced by a debit note from Punjab Concast Steel Ltd. The Chief Accountant's affidavit was provided to support this claim. The assessee further argued that the additional advance tax payment of Rs. 10 lakhs demonstrated an attempt to rectify the error.

4. Commissioner (Appeals) Decision:
The Commissioner (Appeals) was not convinced by the assessee's explanations, maintaining that the reasons for the low estimate were contradictory and upheld the penalty, albeit with a reduced quantum.

5. Tribunal's Consideration:
The Tribunal considered the arguments and submissions from both parties. It emphasized that under section 273(a), the satisfaction of the assessing officer regarding the untrue estimate is crucial. The Tribunal noted that the appellate authorities could review if the assessing officer's discretion was properly exercised but could not replace the assessing officer's satisfaction with their own. The Tribunal agreed with the revenue's stance that the Commissioner (Appeals) should not have considered the pleas that were not presented before the IAC (Assessment).

6. Tribunal's Findings:
The Tribunal found that the IAC (Assessment) did not provide sufficient material to show that the assessee knew or had reason to believe the estimate was untrue when filed. The IAC's reliance on the discrepancy between the estimated and assessed tax was insufficient to prove the assessee's knowledge or belief of the estimate being untrue. The Tribunal emphasized that the burden was on the IAC to establish this knowledge or belief, which was not adequately demonstrated.

7. Conclusion:
The Tribunal concluded that the IAC (Assessment) failed to establish the necessary conditions under section 273(a) to justify the penalty. Consequently, the penalty imposed by the IAC (Assessment) was canceled, and the appeal was allowed, reversing the Commissioner (Appeals) decision.