1999 (11) TMI 120 - AT - Income Tax

Summary

Issues:
Imposition of penalty under section 273(1)(b) of the Income-tax Act, 1961 for assessment year 1988-89.

Analysis:
The appeal concerns the imposition of a penalty under section 273(1)(b) of the Income-tax Act, 1961 for the assessment year 1988-89. The dispute arose when the department levied a penalty of Rs. 5,215 on the assessee, an individual regularly assessed to tax, for not filing a statement of advance tax for the assessment year 1987-88. The department contended that the assessee should have filed a statement based on the income returned for that year, which was Rs. 66,270. However, the assessee argued that as the tax liability for the previous year was only Rs. 1,173, there was no obligation to pay advance tax or file a statement. The CIT(Appeals) upheld the penalty, leading to the appeal.

The assessee's main contention was that, as per the provisions of section 208(3) and section 209(1)(d) of the Act, there was no requirement to file a statement of advance tax unless self-assessment tax was paid under section 140A. The assessee relied on legal precedents, including the decision of the Bombay High Court in Patel Aluminium (P.) Ltd. v. Miss K.M. Tawadia, ITO, to support the argument that the income returned for a subsequent year cannot be the basis for filing a statement of advance tax without payment of self-assessment tax.

Upon review, the tribunal analyzed the relevant provisions of the Act and the legal precedents cited by the assessee. Referring to the case of Patel Aluminium (P.) Ltd., the tribunal highlighted that the obligation to file a statement of advance tax arises only when self-assessment tax has been paid. The tribunal emphasized that the plain reading of the provisions indicates that the income returned cannot be the basis for computing advance tax without payment of self-assessment tax under section 140A.

Additionally, the tribunal referenced the case of Madras Forgings & Allied Industries (CBE) Ltd., where it was established that the obligation to file a statement of advance tax is not applicable if self-assessment tax has not been paid for the relevant year. In line with this reasoning, the tribunal concluded that since the assessee had not paid self-assessment tax for the assessment year 1987-88, the income returned for that year cannot be the basis for imposing the penalty under section 273(1)(b). Consequently, the tribunal allowed the appeal and canceled the penalty levied on the assessee.

In summary, the tribunal's decision was based on the interpretation of the relevant provisions of the Income-tax Act, supported by legal precedents, which established that the obligation to file a statement of advance tax arises only when self-assessment tax has been paid. As the assessee had not paid self-assessment tax for the relevant year, the income returned for that year could not be the basis for imposing the penalty.