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TMI Blog1990 (12) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... , cancelled the penalty. 2. Assessee is a registered firm and for the year ending31st March, 1981filed an estimate of income on13th March, 1981estimating the income at Rs. 3 lakhs. Assessee filed a return of income on14th May, 1982declaring an income of Rs. 5,59,010. Assessment was, however, made at an income of Rs. 5,56,015. Since there was disparity between the assessed/returned income and the income estimated by the assessee, later was required to explain as to why penalty under section 273 may not be levied for having filed an estimate which it knew or had reason to believe to be untrue. Assessee furnished a written reply dated24th July, 1985explaining the circumstances under which estimate of Rs. 3 lakhs was made. It was pleaded befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the part of the assessee was an unimpeachable piece of evidence as to the mens rea of the assessee. He also cited an authority of the Allahabad High Court in the case of CIT v. U.P. Tannery Co. (P.) Ltd. [1977] 107 ITR 842 wherein it was held that assessee having received a sum of Rs. 4,98,868 two months before it filed the estimate of advance-tax, the failure of the assessee to include that amount in the estimate was thus definitely deliberate. He accordingly pleaded that the order of CIT(A) being erroneous may be set aside and that of the Assessing Officer restored. 4. The learned counsel for the assessee Shri H. Mitter contended that a perusal of the penalty order would reveal that Assessing Officer has not applied his mind before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en credited to Sales Account by the Accountant of the firm and Assessing Officer vide letter dated 24th January, 1985 was informed that Sh. S.P. Dubey who had compiled the figures of estimate was appearing in person of examination as desired by the Assessing Officer. According to Shri Mitter, Assessing Officer has not pointed out the circumstances under which an estimate filed by the assessee could be held to be untrue to the knowledge or belief of the assessee. Shri Mitter cited the authority of the Bombay High Court in the case of Hind Products (P.) Ltd. v. CIT [1980] 121 ITR 903 in support of his contention that 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 estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is that, where there are no materials, he cannot levy any penalty. The Assessing Officer by calling for an explanation from the assessee and rejecting it either summarily or by picking holes in it does not make up for the deficiencies in the evidence before him. Section 273 does not empower the Assessing Officer to levy penalty by rejecting the explanation where one is offered on the ground that he considers it unsatisfactory. Similar view has been taken by their Lordships of the Calcutta High Court in the case of S.B. Electric Mart (P.) Ltd. wherein it has been held that in order to attract penalty under section 273 there must be evidence to show that the estimate filed by the assessee was false to the knowledge of the assessee or tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been held "that in deciding the question as to what was the state of mind of the assessee when it filed the estimate originally, the entire circumstances of the case has to be taken into consideration. The existence of wide disparity between the estimate of income and the income finally assessed in all the relevant years though such disparity of differences did not necessarily lead to the inference that the assessee knew or had reason to believe that the estimates were false are one of the several factors on the basis of which a finding has to be arrived at on the crucial point'. The Gauhati High Court has not laid down that by mere disparity in the estimated or returned income, penalty under section 273 is warranted. Similarly in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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