1973 (10) TMI 14 - HC - Income Tax

Unexpected receipt found after furnishing of estimate of income by assessee - Whether, on the facts and in the circumstances of the case, the levy of penalty of Rs. 2,500 on the assessee under section 18A(9) read with section 28(1)(c) of the Act was valid in law? - Held that levy of penalty of Rs. 2,500 on the assessee under section 18A(9) read with section 28(1)(c) of the Act was not valid in law.

Issues Involved:
1. Validity of the penalty imposed under section 18A(9) read with section 28(1)(c) of the Indian Income-tax Act, 1922.
2. Whether the failure to revise the tax estimate by March 15, 1957, constituted a positively untrue statement.
3. Whether the Tribunal's findings of fact are final and binding on the High Court.
4. The relevance of subsequent events and the conduct of the assessee in determining the validity of the estimate.

Issue-wise Detailed Analysis:

1. Validity of the penalty imposed under section 18A(9) read with section 28(1)(c) of the Indian Income-tax Act, 1922:
The court examined the provisions of section 18A(9) and section 28(1)(c) of the Act. Section 18A(9) states that if an assessee furnishes an estimate of tax payable which he knew or had reason to believe to be untrue, he shall be deemed to have deliberately furnished inaccurate particulars of his income. Section 28(1)(c) provides for a penalty for such concealment or inaccuracy. The court emphasized that the knowledge or belief that the estimate was untrue must be contemporaneous with the furnishing of the estimate. The court concluded that the assessee's estimate of Rs. 50,000 submitted on September 13, 1956, and repeated on December 14, 1956, was honest at the time of submission, and subsequent unexpected income did not render the original estimate dishonest. Therefore, the penalty imposed under section 18A(9) read with section 28(1)(c) was not valid in law.

2. Whether the failure to revise the tax estimate by March 15, 1957, constituted a positively untrue statement:
The court noted that the assessee received unexpected income in December 1956, which increased its profits. However, the court held that the failure to revise the estimate by March 15, 1957, did not constitute a positively untrue statement within the meaning of section 18A(9) read with section 28(1)(c). The court referenced P. Arunachala Mudaliar's case, where it was held that the mens rea of the assessee at the time of making the estimate could not be adjudged by subsequent conduct. The court agreed that penal provisions should not affect the subject unless plainly caught within the literal statutory language.

3. Whether the Tribunal's findings of fact are final and binding on the High Court:
The court acknowledged that the findings of fact by the Tribunal are generally final and binding. However, it noted that when the point for determination is a pure question of law or a mixed question of law and fact, the High Court can review the Tribunal's decision. The court referenced the Supreme Court's decision in Sree Meenakshi Mills case, which stated that the legal effect of the Tribunal's findings could be reviewed by the court.

4. The relevance of subsequent events and the conduct of the assessee in determining the validity of the estimate:
The court held that subsequent events and the conduct of the assessee after submitting the estimate are not relevant in determining the truth or untruth of the original estimate. The court emphasized that the knowledge or belief that the estimate was untrue must be contemporaneous with the furnishing of the estimate. The court cited the Madras High Court's decision in P. Arunachala Mudaliar's case, which held that the failure to submit a revised return in March 1953 was not a relevant consideration for determining the mens rea at the time of making the estimate.

Conclusion:
In conclusion, the court held that the levy of penalty of Rs. 2,500 on the assessee under section 18A(9) read with section 28(1)(c) of the Act was not valid in law. The court emphasized that the knowledge or belief that the estimate was untrue must be contemporaneous with the furnishing of the estimate, and subsequent unexpected income did not render the original estimate dishonest. The reference was answered accordingly, and the department was directed to pay the costs of the assessee.

← Previous Next →