1976 (3) TMI 76 - AT - Income Tax

Summary

Issues Involved:
1. Imposition of penalty under Section 273(a) of the Income Tax Act, 1961.
2. Calculation and quantum of penalty.
3. Justification and bona fides of the assessee's income estimate.

Issue-wise Detailed Analysis:

1. Imposition of penalty under Section 273(a) of the Income Tax Act, 1961:
The primary issue revolves around whether the penalty under Section 273(a) for filing an untrue estimate of advance tax is justified. The assessee filed an initial estimate of income at Rs. 60,000 and later revised it to Rs. 1,00,000. However, the final assessed income was Rs. 1,91,507. The Income Tax Officer (ITO) imposed a penalty of Rs. 33,950, stating that the assessee knew or had reason to believe the estimate to be untrue. The Appellate Assistant Commissioner (AAC) upheld the imposition of penalty but reduced it to 10%.

2. Calculation and quantum of penalty:
The ITO calculated the penalty at 30% of the 75% of the total tax on assessed income, amounting to Rs. 33,950. The assessee argued that the quantum was excessive and that the ITO did not consider tax deducted at source, tax paid in advance, and a refund due for the assessment year 1964-65. The AAC acknowledged some of these points but considered the refund issue irrelevant to the penalty calculation. Ultimately, the AAC reduced the penalty to 10%, deeming the initial quantum excessive.

3. Justification and bona fides of the assessee's income estimate:
The assessee contended that the estimate was based on available information and trends up to February 1966. The significant increase in income and decrease in expenditure in March 1966 could not have been foreseen. The assessee argued that the estimate was bona fide and that no penalty should be levied as there was no intent to file an untrue estimate. The Tribunal found the assessee's explanations reasonable, noting that the sudden increase in income in March 1966 was unforeseeable. The Tribunal also considered the assessee's act of revising the estimate as indicative of bona fide intentions.

Conclusion:
The Tribunal concluded that no penalty was leviable under Section 273(a) as the assessee did not have reason to believe the revised estimate was untrue. The Tribunal found the explanations for the income variation reasonable and accepted that the estimate was made in good faith. The appeal of the assessee was allowed, and the penalty was canceled.