1997 (5) TMI 74 - AT - Income Tax

Summary

Issues:
Levy of penalty under section 273(2)(a) for failure to pay correct amount of advance tax.

Analysis:
The appeal pertains to the imposition of a penalty under section 273(2)(a) for the failure to pay the correct amount of advance tax. The Assessing Officer initiated penalty proceedings under section 273(2)(1) due to the assessee's failure to pay the correct amount of advance tax on time, citing insufficiency of funds as the reason for non-payment. The penalty of Rs. 20,474 was levied under section 273(2)(a).

In the first appeal, the CIT (Appeals) rejected the assessee's plea of lack of funds as a reasonable cause for non-payment of advance tax. The CIT (Appeals) emphasized the importance of actual payment of tax over the mere filing of tax estimates, citing various judicial precedents to support the decision. The CIT (Appeals) upheld the penalty, concluding that there was no sufficient cause for the default.

During the appeal before the tribunal, the assessee's counsel argued that the relevant section primarily addresses the failure to pay advance tax, while also asserting financial stringency as a valid reason for non-payment. The Departmental Representative contended that the failure to make actual payment of advance tax is covered under the relevant section, supported by legal precedents emphasizing the legislative intent to ensure timely tax payments.

The tribunal analyzed the provisions of section 273(2) which focus on furnishing false estimates or failing to furnish estimates of advance tax, without explicitly mentioning the failure to make payment of advance tax. The tribunal highlighted the strict construction required for penal provisions and referenced expert opinions to support its interpretation that non-payment of advance tax falls under a different penal provision, not section 273(2).

Ultimately, the tribunal concluded that penalties under section 273(2)(a) cannot be imposed solely for non-payment of advance tax, as the section specifically addresses false estimates or failure to furnish estimates. The tribunal disagreed with the CIT (Appeals) decision and canceled the penalty, ruling in favor of the assessee.

Therefore, the tribunal allowed the appeal filed by the assessee, reversing the CIT (Appeals) order and directing the cancellation of the penalty imposed under section 273(2)(a) for failure to pay the correct amount of advance tax.