1990 (8) TMI 193 - AT - Income Tax

Summary

Issues:
1. Penalty imposed under section 273(2)(c) of the IT Act, 1961 for failure to file an estimate of advance tax.
2. Interpretation of Explanation 2 to section 273(2)(c) regarding penalty imposition on a firm as if it were an unregistered firm.

Detailed Analysis:
Issue 1:
The appellant filed an appeal against the penalty levied by the Income Tax Officer (ITO) under section 273(2)(c) for not filing an estimate of advance tax despite the income exceeding the threshold. The appellant argued that they believed there would be two assessments due to a change in the firm's constitution, leading to a higher estimate not being filed. However, both the ITO and the Appellate Authority rejected this argument and upheld the penalty. The Tribunal noted that the appellant failed to provide a reasonable cause for not filing the estimate of advance tax as required by section 209A(4). The Tribunal concluded that the appellant's failure to file the estimate was without reasonable cause, leading to the imposition of a penalty.

Issue 2:
The Tribunal analyzed Explanation 2 to section 273(2)(c), which states that for penalty imposition, a registered firm or an unregistered firm assessed under section 183 should be treated as an unregistered firm. The Tribunal interpreted that the tax payable should be determined as if the firm were unregistered. By treating the appellant as an unregistered firm, the tax payable based on the statement of income would be different. The Tribunal calculated the minimum penalty imposable based on this interpretation, reducing the penalty imposed by the ITO from Rs. 2,000 to Rs. 500. The Tribunal clarified that the ITO incorrectly computed the maximum and minimum penalty amounts. The Tribunal's decision to reduce the penalty was based on the correct interpretation of the penalty provisions under section 273(2)(c) and Explanation 2.

In conclusion, the Tribunal partially allowed the appeal, reducing the penalty imposed on the appellant from Rs. 2,000 to Rs. 500 based on the correct interpretation of the penalty provisions and Explanation 2 of section 273(2)(c) of the IT Act, 1961.