1993 (8) TMI 135 - AT - Income Tax

Summary

Issues Involved:
1. Cancellation of penalty imposed under section 273(2)(a) of the Income-tax Act, 1961.
2. Validity of the assessee's estimate of advance tax at nil.
3. Justification for the penalty imposed by the Assessing Officer.

Detailed Analysis:

Issue 1: Cancellation of penalty imposed under section 273(2)(a) of the Income-tax Act, 1961
The Revenue filed an appeal against the order of the learned CIT(A), who had cancelled the penalty of Rs. 60,000 imposed by the Assessing Officer under section 273(2)(a) of the Income-tax Act, 1961. The Assessing Officer had initiated proceedings under section 273(2)(a) after assessing the income of the assessee at Rs. 23,12,923 and issued a show-cause notice under section 274. Despite several opportunities, the assessee did not provide any explanation, leading the Assessing Officer to impose the penalty.

Issue 2: Validity of the assessee's estimate of advance tax at nil
The assessee, a public limited company, filed an estimate of advance tax at nil based on its income for the assessment year 1982-83 and the set-off of unabsorbed investment allowance. The CIT(A) accepted the assessee's explanation that it was under a bona fide belief that its income for the year under consideration would be nil. The CIT(A) noted that there was no concrete material indicating that the assessee had intentionally filed an incorrect estimate and cancelled the penalty.

Issue 3: Justification for the penalty imposed by the Assessing Officer
The Revenue argued that the assessee, being a large industrial undertaking, had made a wrong claim of Rs. 8,49,395 by way of sales-tax, which it admitted did not pertain to the year under consideration. The assessee's finally assessed income stood at Rs. 7,12,724, and there was no reasonable basis for estimating its income at nil. The Revenue requested the restoration of the penalty cancelled by the CIT(A).

The Tribunal noted that under section 273(2)(a), the assessee is deemed to have committed a default if it furnished an estimate of advance tax which it knew or had reason to believe to be untrue. The Tribunal found that the assessee had filed its estimate at nil without any basis and had knowingly made incorrect entries in its books of account. The Tribunal also observed that the assessee failed to provide any explanation for its estimate despite several opportunities given by the Assessing Officer.

The Tribunal considered the case law cited by the assessee but found them not applicable to the present case. The Tribunal concluded that the assessee's conduct could not be said to be bona fide and that there was no reasonable cause for filing the wrong estimate of advance tax. The Tribunal held that the CIT(A) was not justified in cancelling the penalty and reversed the order, restoring the penalty imposed by the Assessing Officer.

Conclusion:
The Tribunal allowed the appeal filed by the Revenue, reversing the order of the CIT(A) and restoring the penalty of Rs. 60,000 imposed by the Assessing Officer under section 273(2)(a) of the Income-tax Act, 1961.