1983 (8) TMI 94 - AT - Income Tax

Summary

Issues Involved:
1. Justification of penalty under Section 273(b) of the IT Act, 1961.
2. Bona fide belief and reasonable cause for non-filing of advance tax estimate.
3. Quantum of penalty imposed.

Detailed Analysis:

1. Justification of Penalty under Section 273(b) of the IT Act, 1961:
The core issue was whether the penalty of Rs. 25,000 imposed under Section 273(b) for the assessment year 1975-76 was justified. The assessee, a Private Limited Company dealing in medicines, failed to file an estimate of its income for the previous year ending 31st March 1975, and did not pay the advance tax by the due date of 15th March 1975. The Income Tax Officer (ITO) initiated penalty proceedings, which were upheld by the Commissioner of Income Tax (Appeals) [CIT(A)].

The ITO argued that the assessee's failure to file the estimate was without reasonable cause, noting that the assessee-company and Messrs. Indo-German Alkaloids, both managed by the same person, had substantial business income. The CIT(A) concurred, emphasizing the significant sales figures and the lack of any reasonable cause for the omission.

2. Bona Fide Belief and Reasonable Cause for Non-filing of Advance Tax Estimate:
The assessee's defense was based on the claim of a bona fide belief that no advance tax was payable, citing the first year of business and the complexity of the IT law. The assessee relied on the judgment in CIT vs. Co-operative Cane Development Union, which was distinguished by the ITO and CIT(A) as the Co-operative Society in that case believed its income was exempt from tax.

The Tribunal analyzed the facts and found the cases cited by the assessee (Co-operative Cane Development Union, Southern Publications Pvt. Ltd. vs. CIT, and Addl. CIT vs. Bipanlal Kuthiala) distinguishable. The Tribunal noted that the statutory obligation under Section 212(3) required an estimate of income, not actual figures, and the assessee's belief was deemed unreasonable given the substantial income earned.

3. Quantum of Penalty Imposed:
The Tribunal partially agreed with the assessee's alternative argument regarding the quantum of penalty. Considering the nature and extent of the assessee's business, the Tribunal felt that justice would be served by reducing the penalty to the minimum imposable under the law or Rs. 15,000, whichever is higher.

Conclusion:
The Tribunal upheld the penalty under Section 273(b), finding that the assessee failed to provide a reasonable cause for not filing the advance tax estimate. However, the quantum of the penalty was reduced to Rs. 15,000, acknowledging the circumstances of the case. The appeal was thus partly allowed.