1986 (4) TMI 99 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the notice under section 210 of the Income-tax Act, 1961.
2. Obligation to file an estimate under section 212(3A).
3. Bona fide belief of the assessee.
4. Imposition of penalty under section 273(c).

Detailed Analysis:

1. Validity of the Notice under Section 210:

The ITO issued a notice under section 210 to the assessee, requiring the payment of advance tax based on the latest regular assessment. The assessee challenged the validity of this notice, arguing that it was based on the tax payable under section 140A, which had not been paid before the issuance of the notice. The ITO revised the order under section 210(3), increasing the advance tax demand. The assessee contended that both the original and revised notices were invalid as they were not in accordance with the law.

The Commissioner (Appeals) found that the service of a valid notice under section 210 is a condition precedent to the obligation to file an estimate under section 212(3A). The Commissioner (Appeals) accepted the assessee's contention that the notices were invalid, which constituted a reasonable cause for not filing the estimate. However, the Tribunal held that the basic requirement of section 209(1)(a) was satisfied, and the notice under section 210 was not bad in law.

2. Obligation to File an Estimate under Section 212(3A):

The ITO initiated proceedings under section 273(c) for the assessee's failure to furnish an estimate of advance tax under section 212(3A). The assessee argued that there was no obligation to file an estimate because the demand notice under section 210 was invalid. The ITO disagreed, stating that the assessee had accepted the order and paid two instalments of advance tax, thereby waiving any irregularity.

The Tribunal observed that given the high income returned by the assessee, there was an obligation to file an estimate under section 212(3A). The Commissioner (Appeals) initially accepted the assessee's contention of no obligation due to the invalid notice but was overruled by the Tribunal, which restored the ITO's order.

3. Bona Fide Belief of the Assessee:

The assessee claimed that it entertained a bona fide belief that it was not required to file an estimate under section 212(3A) due to the invalidity of the notice under section 210. The Commissioner (Appeals) accepted this belief as reasonable cause, noting that the assessee had written letters to the ITO before the due date, expressing this belief and seeking rectification of the notices.

The Tribunal, however, did not accept this contention, noting that the assessee's payment of instalments indicated an acknowledgment of the notice's validity. The Tribunal found that the belief entertained by the assessee was not bona fide or reasonable.

4. Imposition of Penalty under Section 273(c):

The ITO imposed a penalty of Rs. 1 lakh under section 273(c) for the assessee's failure to file an estimate of advance tax. The Commissioner (Appeals) cancelled the penalty, citing the assessee's bona fide belief as reasonable cause. The Tribunal, however, reversed this decision, restoring the ITO's order.

The Tribunal noted that penalty provisions do not require the establishment of mens rea (criminal intent). It referenced several judicial decisions, including those from the Kerala, Andhra Pradesh, and Madhya Pradesh High Courts, which held that mens rea is not required for penalty provisions under the Income-tax Act.

Conclusion:

The Tribunal concluded that the notice under section 210 was valid and that the assessee had an obligation to file an estimate under section 212(3A). The assessee's claim of a bona fide belief was not accepted as reasonable cause for failure to file the estimate. Consequently, the penalty imposed by the ITO under section 273(c) was upheld, and the order of the Commissioner (Appeals) was reversed. The appeal by the revenue was allowed.