1992 (7) TMI 119 - AT - Income Tax

Summary

Issues: Levy of penalty under section 273(a) of the IT Act, 1961 for the assessment year 1978-79 based on inaccurate estimate of advance tax.

The judgment revolves around the challenge to the penalty of Rs. 12,23,145 imposed by the Assessing Officer under section 273(a) of the IT Act, 1961 for the assessment year 1978-79. The charge against the assessee was that it furnished an estimate of advance tax under section 212, which was allegedly untrue. The initial estimate showed an income of Rs. 529.15 lacs, while the revised return declared income of Rs. 703.39 lacs, resulting in a significant difference. The Assessing Officer concluded that the estimate was not based on proper grounds and lacked justification, despite detailed explanations provided by the assessee. The CIT(A) also upheld the penalty, considering the past history of the assessee's advance tax estimates and the methodology used for estimating income. The CIT(A) noted deficiencies in the assessee's gross profit register, emphasizing that the estimate was not scientifically based and did not include all expenses. The assessee contended that it made a reasonable estimate based on available information and the nature of its multi-unit business. The dispute centered on whether the estimate was knowingly inaccurate.

The appellate tribunal analyzed the submissions of both parties, emphasizing that estimates need not be mathematically precise but require an honest effort from the assessee. It acknowledged the assessee's systematic approach to estimating income and the use of average profits for units with incomplete data. The tribunal found that the difference in estimates did not necessarily indicate willful misrepresentation by the assessee. It highlighted the absence of concrete evidence supporting the Department's claim of contumacious conduct by the assessee. While past history could be considered for penalty determination, it should not solely dictate the penalty for the current assessment year. The tribunal concluded that the estimate of advance tax was not proven to be knowingly untrue by the assessee and, therefore, overturned the penalty imposed by the tax authorities. The tribunal emphasized the need to assess each case based on its specific facts rather than relying solely on past conduct. Consequently, the tribunal set aside the orders of the tax authorities and canceled the penalty, allowing the appeal in favor of the assessee.