1980 (8) TMI 120 - AT - Income Tax

Summary

Issues:
1. Levy of penalty under section 273(c) of the IT Act, 1961 for the assessment year 1974-75.
2. Requirement to file a further estimate of advance tax under section 212(3A) of the Act.
3. Bona fide belief of the assessee regarding the difference between advance tax demanded and correct income.

Detailed Analysis:
1. The appeal was against the penalty of Rs. 1,100 imposed on the assessee for the assessment year 1974-75 under section 273(c) of the IT Act, 1961. The penalty was initiated as the Income Tax Officer (ITO) found that the difference between the advance tax demanded and the assessed tax exceeded 33 1/3 per cent, leading to the conclusion that the assessee should have filed a further estimate of advance tax under section 212(3A) of the Act. The ITO imposed the penalty as the assessee failed to file the additional estimate despite the difference. The assessee contended that the difference was less than 33 1/3 per cent, and hence, no further estimate was required. However, the ITO proceeded with the penalty, which was upheld by the Appellate Assistant Commissioner (AAC).

2. The issue of whether the assessee was required to file a further estimate of advance tax under section 212(3A) was crucial in this case. The assessee argued that the increase in income was due to the application of a higher gross profit rate by the firm, which was not anticipated. The assessee believed that the difference between the advance tax demanded and the correct income was not more than 33 1/3 per cent, relieving him from the obligation to file an additional estimate. The Appellate Tribunal noted that the increase in income was a result of the firm's assessment, which was beyond the assessee's anticipation. Considering the facts and circumstances, the Tribunal held that the assessee was under a bona fide belief that no further estimate was necessary as the tax on the current income did not exceed the tax demanded by more than 1/3rd of the demand.

3. The Tribunal, in its judgment, emphasized that the assessee's obligation to file a further estimate of advance tax arises when the current income surpasses the income on which the advance tax was demanded by more than 33 1/3 per cent. In this case, the unforeseen increase in income due to the firm's assessment was a key factor. The Tribunal found that the assessee acted in good faith and could not have predicted the change in income. Therefore, considering the circumstances, the Tribunal concluded that no penalty was warranted in this case. Consequently, the Tribunal canceled the penalty and allowed the appeal in favor of the assessee.