1972 (9) TMI 45 - HC - Income Tax

The Income-tax Officer called upon the assessee during the years mentioned above to pay advance tax under section 18A(1) of the Indian Income-tax Act of 1922. Instead of paying the demanded amounts the assessee filed estimates under section 18A(2) and on the basis of the said estimates paid advance tax. Ultimately for the several years he filed returns ; and the Income-tax Officer finally determined his incomes too - When the assessee estimates the advance tax payable consistently at lower figure for several figures and the returned income being much higher and the assessed income being still higher whether penalty under section 18A(9)(a) can be levied on the assessee

Issues Involved:
1. Justification of penalties under section 18A(9)(a) of the Indian Income-tax Act, 1922.
2. Sufficiency of material evidence for penalty imposition.
3. Applicability of the Income-tax Act of 1961 for assessments of 1957-58 and 1958-59.
4. Delay in imposing penalties.

Issue-Wise Detailed Analysis:

1. Justification of Penalties under Section 18A(9)(a) of the Indian Income-tax Act, 1922:
The primary issue was whether penalties were properly levied on the assessee under section 18A(9)(a) of the Indian Income-tax Act, 1922, for the assessment years 1953-54, 1955-56, 1956-57, 1957-58, and 1958-59. The Income-tax Officer determined that the assessee had deliberately underestimated his income and paid lower advance taxes. The Appellate Assistant Commissioner and the Appellate Tribunal confirmed these findings. The court held that the wide disparity between the estimated and assessed incomes over several years indicated that the assessee knew or had reason to believe that the estimates were false.

2. Sufficiency of Material Evidence for Penalty Imposition:
The assessee's counsel argued that the materials before the Income-tax Officer were insufficient to establish that the assessee knowingly furnished false estimates. The court referred to the Supreme Court's decision in Commissioner of Income-tax v. Anwar Ali, which held that mere rejection of the assessee's explanation was insufficient for penalty imposition. However, the court noted that the Income-tax Officer's conclusion was not based solely on the rejection of the assessee's explanation but on the consistent and significant disparity between the estimated and assessed incomes. This, combined with the timing of the estimates, led to the conclusion that the assessee deliberately furnished false estimates.

3. Applicability of the Income-tax Act of 1961 for Assessments of 1957-58 and 1958-59:
The assessee argued that for the years 1957-58 and 1958-59, the penalties should be governed by the Income-tax Act of 1961, which includes a limitation period for penalty imposition, unlike the Act of 1922. The court examined section 297(2) of the 1961 Act, particularly clauses (f) and (g). The court concluded that the assessments were completed before the first day of April, 1962, as per clause (f), and thus, the Act of 1922 was applicable. The court rejected the argument that the assessments were completed only after the Tribunal or High Court's final orders.

4. Delay in Imposing Penalties:
The assessee's counsel also argued that there was undue delay in imposing penalties, particularly for the years 1957-58 and 1958-59. However, the court noted that this issue was not raised earlier and there were no materials before the court to consider this question. The revenue's counsel pointed out that the delay was at the request of the assessee. The court did not address this argument due to the lack of evidence and the fact that it was not part of the referred question.

Conclusion:
The court answered the referred question in the affirmative, indicating that the penalties were properly levied on the assessee under section 18A(9)(a) of the Indian Income-tax Act, 1922, for the assessment years in question. The court did not pass any order regarding costs and directed that a copy of the order be sent to the Tribunal as required by law.

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