2013 (3) TMI 72 - HC - Income Tax

Deletion of penalty imposed u/s 273(2)(a) - whether the ITAT ought to have recorded independent finding while confirming the order of the Commissioner of Income Tax (Appeals) - held that - Income Tax Appellate Tribunal was legally right in not quashing the penalty proceeding under Section 273(2) of the Act on the ground that no such proceedings were proposed in the draft assessment order nor any direction under Section 144B of the Act was given by the Inspecting Assistant Commissioner of the Income Tax in his order to the Assessing Authority. Wrong estimation of advance tax - held that - The provision of Section 273(2)(a) is attracted where an assessee furnishes estimate of advance tax payable by him which he knew or has reason to believe to be untrue. A thing which is in the knowledge or belief of an assessee, has to be proved by the assessee himself and not by the Revenue authorities. Thus, no benefit can be derived by the appellant from the aforesaid decision of the Hon ble Supreme Court in the case of Sarabhai Holdings Pvt. Ltd. (2008 (10) TMI 12 - SUPREME COURT). There cannot be any quarrel with the principles laid down by the Bombay High Court in the case of Hind Products Pvt. Ltd. (1980) 121 ITR 903) and of the Calcutta High Court in the case of Birla Cotton Spinning & Weaving Mills Ltd. (1985 (1) TMI 15 - CALCUTTA HIGH COURT) wherein it has been held that the very word estimate implies presumptions and not accuracy and merely because at the end of the year an assessee is shown to have earned an income which is more than that shown in the estimate. The finding of the Income Tax Appellate Tribunal that the assessee has not been able to specify the reasons as to why it considered the depreciation in investment allowance on the machinery which was yet to be installed for computing the income liable to pay advance tax, is neither perverse nor vitiated in law. Tribunal recorded its agreement with the findings of the Commissioner of Income Tax (Appeals) and consequently upheld the order of the Commissioner of Income Tax (Appeals) on this point. - It cannot be said that the Tribunal had not applied its mind to the matter of merits and as the assessee had failed to refute the specific finding of the Commissioner of Income Tax (Appeals), the Tribunal had agreed with its finding. Tribunal was not required to give its independent finding when it had concurred with the findings of the Commissioner of Income Tax (Appeals).

Summary

Issues Involved:

1. Whether the Income Tax Appellate Tribunal was legally right in not quashing the penalty proceedings under Section 273(2)(a) of the Income Tax Act, 1961.
2. Whether the finding of the Income Tax Appellate Tribunal regarding the appellant's failure to specify reasons for filing the wrong estimate is perverse and vitiated in law.
3. Whether the Income Tax Appellate Tribunal was correct in not recording independent findings and considering various materials on record regarding the reasonableness of the appellant for filing the estimate of income liable to advance tax.

Issue-wise Detailed Analysis:

1. Legality of Penalty Proceedings under Section 273(2)(a):

The appellant contested the initiation of penalty proceedings under Section 273(2)(a) on the grounds that such proceedings were not proposed in the draft assessment order, nor were any directions given under Section 144B by the Inspecting Assistant Commissioner. The court held that the draft order is not an assessment order in the strict sense, and the assessment proceedings continue until the final assessment order is passed. It was noted that the initiation of penalty proceedings does not constitute a "variation in the income or loss returned by an assessee" and hence does not need to be mentioned in the draft order. The court referenced the Supreme Court decision in Karanvir Singh Gossai, stating that the recitation in the assessment order directing the institution of penalty proceedings is not obligatory. Consequently, the Tribunal was legally right in not quashing the penalty proceedings.

2. Finding Regarding the Appellant's Failure to Specify Reasons for Filing the Wrong Estimate:

The appellant argued that the Tribunal's finding-that they failed to specify reasons for filing the wrong estimate-was perverse and vitiated in law. The court examined the facts: the appellant had filed an estimate of advance tax declaring nil income based on expected depreciation and investment allowance from machinery installation, which did not materialize. The court found that the appellant's internal reports were not credible and did not constitute reasonable cause. The penalty was justified as the appellant knowingly filed a wrong estimate. The court referenced the Supreme Court decision in Sarabhai Holdings Pvt. Ltd., which requires satisfaction that the estimate was untrue and known to be untrue by the appellant. The Tribunal's finding was upheld as neither perverse nor vitiated in law.

3. Tribunal's Failure to Record Independent Findings:

The appellant contended that the Tribunal should have recorded independent findings while confirming the Commissioner of Income Tax (Appeals)'s order. The court noted that the Tribunal had concurred with the detailed findings of the Commissioner of Income Tax (Appeals) and had recorded its agreement with those findings. The Tribunal had noted that the appellant had not refuted the specific findings of the Commissioner of Income Tax (Appeals) and thus upheld the order. The court held that the Tribunal was not required to give independent findings when it concurred with the Commissioner of Income Tax (Appeals)'s findings. The various case laws cited by the appellant were deemed not applicable in this context.

Conclusion:

The court answered all substantial questions of law in favor of the Revenue and against the appellant. The appeal was dismissed, and the Tribunal's decision to uphold the penalty under Section 273(2)(a) was affirmed.