1995 (3) TMI 167 - AT - Income Tax

Assessing Officer, Failure To Pay Advance Tax, False Estimate, Levy Of Penalty, Regular Assessment

Issues Involved:
1. Penalty proceedings under section 273(2)(b) for failure to file an estimate of advance tax.
2. Penalty proceedings under section 273(2)(a) for filing an untrue estimate of advance tax.
3. Applicability and interpretation of sections 209A, 218, 273(2)(a), 273(2)(b), and 274 of the Income-tax Act, 1961.
4. Procedural requirements and curable irregularities under section 292B.

Detailed Analysis:

1. Penalty Proceedings under Section 273(2)(b):
The Assessing Officer (AO) initiated penalty proceedings against the assessee for failing to file the estimate of advance tax payable, as required under section 273(2)(b) of the Income-tax Act, 1961. The assessee demonstrated that he had filed the estimate on 13-12-1985. However, the AO noted that despite filing the estimate, the assessee did not pay the advance tax, leading the AO to consider the assessee a defaulter under section 273(2)(b).

2. Penalty Proceedings under Section 273(2)(a):
During the penalty proceedings, the AO observed that the estimate of advance tax payable by the assessee was untrue. Consequently, the AO issued a show-cause notice under section 273(2)(a) and, unsatisfied with the assessee's explanation, held the assessee a defaulter under both sections 273(2)(a) and 273(2)(b), imposing a penalty of Rs. 10,000.

3. Applicability and Interpretation of Relevant Sections:
The appellate authority (CIT(A)) ruled that since the assessee filed an estimate of advance tax payable, he was not a defaulter under section 273(2)(b). Furthermore, the proceedings were not initiated for a default under section 273(2)(a), thus no penalty could be levied under that provision either. The CIT(A) canceled the penalty, allowing the assessee's appeal.

The Departmental Representative (D/R) argued that any defect in the notice or proceedings was a curable irregularity, and since the assessee was given due notice of the default, the penalty should be restored. The assessee's counsel contended that no default under sections 273(2)(a) or 273(2)(b) occurred as the estimate was filed on time and was not proven untrue. The counsel cited decisions from the Madras High Court in CIT v. Smt. Vijayanthimala and the Gujarat High Court in CIT v. B. P. Mehta to support this view.

4. Procedural Requirements and Curable Irregularities:
The Tribunal noted that section 207 imposes an obligation to pay advance tax, and section 209A (omitted w.e.f. 1-4-1988) required the assessee to file an estimate and pay the advance tax. The Tribunal disagreed with the argument that non-payment of advance tax is punishable under section 218 and not under section 273, clarifying the distinct purposes of sections 218 and 273(2)(a) and (b).

Section 274(1) requires that no penalty be imposed without giving the assessee a reasonable opportunity of being heard. The Tribunal emphasized that procedural mistakes or omissions, as per section 292B, do not invalidate the proceedings if they conform to the Act's intent.

Merits of the Case:
The Tribunal found that the assessee, not previously assessed by regular assessment, had filed an estimate but did not pay the advance tax, making section 273(2)(b) inapplicable. The AO's view that non-payment constituted a default under section 273(2)(b) was incorrect. The Tribunal highlighted that section 273(2)(b) pertains to the failure to furnish an estimate, not to the non-payment of advance tax, which is addressed under section 273(2)(a).

The Tribunal also noted that the AO did not provide evidence of the assessee's mala fide intention or dishonest conduct. The assessee's explanation of a misplaced challan was uncontroverted, and the AO did not demonstrate that the estimate was knowingly untrue. The Tribunal cited the Madras and Gujarat High Court decisions to support the view that penalty imposition requires proof of willful default.

Conclusion:
The Tribunal upheld the cancellation of the penalty on merits, despite procedural errors by the CIT(A). The appeal was dismissed, affirming that no penalty under sections 273(2)(a) or 273(2)(b) was justified.

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