1995 (5) TMI 71 - AT - Income Tax

Summary

Issues:
Levy of penalty under s. 273(2)(c) of the IT Act for failure to furnish estimate of advance tax in Form No. 29 for the asst. yr. 1985-86.
Discrepancy between the current income estimated for advance tax and income assessed due to disallowances made by the Assessing Officer.

Analysis:
The assessee, a firm engaged in the sale of motor pumps, monoblocks, etc., filed an estimate of advance tax declaring current income at Rs. 2,25,000, on which tax payable was Rs. 45,000. However, the assessment was completed on total income of Rs. 2,87,901, leading to penalty proceedings initiated by the Assessing Officer.

In response to the show-cause notice, the assessee contended that the difference in estimated and assessed income was due to certain disallowances that could not have been predicted at the time of filing the estimate. The Assessing Officer rejected this explanation, stating that since the disallowances were not challenged in appeal, the assessee should have filed a higher estimate of advance tax. The penalty was upheld by the CIT(A) and appealed by the assessee.

The assessee's counsel argued that the disallowances leading to the income difference were legitimate provisions made under various heads, and the penalty was unwarranted. The counsel emphasized that the onus of proving lesser advance tax payment was on the Revenue, which had not been discharged. The counsel also cited relevant case law to support the argument against the penalty.

The Departmental Representative contended that certain provisions made by the assessee were foreseeably disallowable, requiring a higher advance tax estimate. Referring to a High Court decision, it was argued that the penalty was correctly calculated as per the law.

The Tribunal noted that the income discrepancy was due to disallowances of provisions made by the assessee under certain heads of account. It was observed that the provisions were legitimate and made in accordance with the mercantile system of accounting, without any intent to evade tax. The Tribunal agreed with the assessee's argument that the penalty was unjustified, as the disallowances could not have been predicted at the time of filing the advance tax estimate. Therefore, the Tribunal allowed the appeal, holding that no penalty was leviable in this case.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee and determining that no penalty was applicable in this situation.