1984 (2) TMI 153 - AT - Income Tax

Summary

Issues Involved:
1. Validity of notice under Section 210 of the IT Act, 1961.
2. Obligation to file an estimate of advance tax under Section 212(3A).
3. Justification for the imposition of penalty under Section 273(c).

Issue-wise Detailed Analysis:

1. Validity of Notice under Section 210:

The primary issue was whether the notice issued under Section 210 of the IT Act, 1961, was valid. The assessee argued that the notice dated 6th June 1974, demanding advance tax based on an income of Rs. 66,420 for the assessment year 1971-72, was invalid. This contention was based on the fact that the Appellate Assistant Commissioner (AAC) had passed an order on 27th May 1974, which resulted in a loss of Rs. 7,253 for the assessment year 1971-72, instead of the income of Rs. 66,420. The Tribunal found that the order of the AAC, which had the effect of converting the assessed income into a loss, was effective from the date it was passed. Therefore, the notice under Section 210 was based on an assessed income that had become non-existent in the eye of law on the passing of the AAC's order. The Tribunal concluded that the notice under Section 210 was invalid.

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

Given the invalidity of the notice under Section 210, the Tribunal held that the assessee was not under any legal obligation to file an estimate of advance tax payable and to pay the same as envisaged under Section 212(3A) of the Act. The Tribunal emphasized that the assessee's duty to file an estimate and pay advance tax arises only if a valid notice under Section 210 is served. Since the notice was invalid, the assessee had no duty to file an estimate under Section 212(3A).

3. Justification for Imposition of Penalty under Section 273(c):

The Tribunal examined whether the penalty imposed under Section 273(c) was justified. The assessee's counsel argued that the position about the brought forward losses was uncertain due to pending appeals for earlier years. Additionally, the goods booking receipts for the last two months of the accounting year were significantly higher than the average monthly receipts, which could not have been anticipated. The Tribunal found these submissions to be correct, noting that the assessee could not have anticipated the increase in income and the quantum of brought forward loss was vague. The Tribunal concluded that there was no justification for penalizing the assessee under Section 273(c) and ordered the penalty to be struck down.

Separate Judgment by U.S. Dhusia, J.M.:

Judge U.S. Dhusia dissented from the majority view, arguing that the assessee had the information necessary to make an estimate of income and that the appellate order of the AAC did not become effective until communicated to the parties. He emphasized that the assessee had filed a return for the assessment year 1974-75 showing an income of Rs. 1,47,350 and that the goods booking for the first ten months of the year under consideration was almost equal to the entire previous year's booking. He concluded that the assessee was in a position to file an estimate of advance tax by 15th Dec 1974 and upheld the penalty.

Conclusion:

The majority view of the Tribunal held that the notice under Section 210 was invalid, and consequently, the assessee was not obligated to file an estimate of advance tax under Section 212(3A). The penalty imposed under Section 273(c) was found to be unsustainable and was canceled. The dissenting opinion argued for the validity of the notice and upheld the penalty, but the majority view prevailed. The appeal of the assessee was allowed.