2014 (7) TMI 263 - HC - Income Tax

Obligation to pay advance tax - Revision of estimate - Levy of penalty - Interpretation of section 273(2)(c) of the Act - Whether there was a reasonable cause in not revising the estimate in the months of September and December, 1981 - Held that - The assessee had filed an estimate of income on 9.6.1981 showing the advance tax liability at nil - The estimate has not been further revised in the months of September and December, 1981- there was a reasonable cause in not revising the estimate under sub-section (4) of Section 209A of the Act Decision in the case of Commissioner of Income Tax vs. Sulphur Refinery Pvt. Ltd. 1998 (6) TMI 73 - BOMBAY High Court followed. on the day when the assessee was obliged to revise the return, the appellant had a bonafide belief of loss inasmuch as the details of the returns for the assessment years 1980-81 and 1981-82 were available. For both the assessment years, the returns of loss were filed, thus, it can be reasonably inferred that the appellant acted bonafidely in not revising the estimate under Section 209A (4) of the Act. - thus, the penalty imposed is set aside Decided in favour of assessee.

Issues Involved:
1. Interpretation of Section 273(2)(c) of the Income Tax Act.
2. Applicability of Section 273(2)(c) in the context of the assessee's obligation to pay advance tax and file an estimate of advance tax.

Issue-wise Detailed Analysis:

1. Interpretation of Section 273(2)(c) of the Income Tax Act:
The primary issue revolves around whether the Income Tax Appellate Tribunal (ITAT) was correct in upholding the levy of penalty under Section 273(2)(c) of the Income Tax Act. Section 273(2)(c) stipulates that if the Assessing Officer is satisfied that any assessee has, without reasonable cause, failed to furnish an estimate of advance tax payable in accordance with the provisions of subsection (4) of Section 209A, a penalty may be levied.

The court examined the statutory language of Section 273(2)(c) and Section 209A(4) to determine the conditions under which penalties could be imposed. The court noted that the penalty under Section 273(2)(c) is contingent upon the absence of a "reasonable cause" for failing to furnish an estimate of advance tax. The court emphasized that the burden of proving the absence of a reasonable cause lies with the revenue.

2. Applicability of Section 273(2)(c) in the Context of the Assessee's Obligation to Pay Advance Tax and File an Estimate of Advance Tax:
The appellant, a Public Limited Company, argued that it filed an estimate on 9.6.1981 showing the advance tax liability at nil based on the losses for the assessment years 1980-81 and 1981-82. The company did not revise this estimate in September and December 1981, as it believed that the business conditions had not improved, and thus, there was no need to revise the estimate.

The court examined whether the appellant had a reasonable cause for not revising the estimate of advance tax. The appellant contended that it had filed returns showing significant losses for the previous years and reasonably believed that it would not have a tax liability for the assessment year 1982-83. The court found this explanation credible, noting that the returns for the assessment years 1980-81 and 1981-82 were filed showing losses, and the assessments for these years were completed only after the relevant dates for revising the estimate had passed.

The court referred to precedents, including the Bombay High Court's decision in Commissioner of Income Tax vs. Sulphur Refinery Pvt. Ltd., which held that if an assessee had a reasonable cause based on accumulated losses, the penalty under Section 273(2)(c) is not leviable. Similarly, the Calcutta High Court in Commissioner of Income Tax vs. Birla Cotton Spinning & Weaving Mills Ltd. emphasized that the burden of proving that an estimate was false or inaccurate lies with the revenue, and the mens rea must be judged based on the facts at the time the estimate was submitted.

The court concluded that the appellant had a bona fide belief of loss based on the available information and acted reasonably in not revising the estimate. Consequently, the court found that there was a reasonable cause for the appellant's actions, and the penalty under Section 273(2)(c) was not justified.

Conclusion:
The court allowed the appeal, answering the substantial questions of law in favor of the assessee and against the revenue. The penalty imposed under Section 273(2)(c) of the Income Tax Act was set aside. The court's decision underscores the importance of reasonable cause and the burden of proof in the context of penalty provisions under the Income Tax Act.

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