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TMI Blog1998 (6) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed at Rs. 3,01,540. The Income-tax Officer, therefore, initiated proceedings for levy of penalty under section 273(2)(c) of the Income-tax Act, 1961 ("the Act"). A notice under section 274 of the Act was served on the assessee calling upon it to show cause why penalty should not be levied under section 273(2)(c) of the Act. In response to this notice, the assessee showed cause vide its letter dated February 11, 1980, wherein it was stated that the assessee had accumulated losses and unabsorbed allowances amounting to Rs. 28,897 and that on the date of submission of the statement in Form No. 28A, it had expected to make a profit of Rs. 25,698 only during the previous year relevant to the assessment year under consideration. It was contended that revised estimate under section 209A(4) of the Act was not submitted because the accounts could not be audited and the correct income could not be ascertained. The Income-tax Officer rejected the above explanation of the assessee and levied a penalty of Rs. 15,760 under section 273(2)(c) of the Act. While doing so, the Income-tax Officer observed that it was the statutory liability of the assessee under section 209A(4) of the Act to fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he, learned counsel for the Revenue, who submits that mens rea or contumacious or guilty mind is not an essential ingredient of the offence under section 273(2)(c) of the Act. According to learned counsel, in the facts and circumstances of this case, the Tribunal was not justified in upholding the deletion of the penalty levied under section 273(2)(c) of the Act. We have carefully considered the above submissions of Mr. Sathe. Section 273 of the Act provides for levy of penalty for furnishing of false estimate of advance tax or failure to pay advance tax. Sub-section (2) thereof, which is relevant for the present purpose, as it stood at the material time, reads as follows : "S. 273. False estimate of, or failure to pay, advance tax.---... (2) If the Assessing Officer, in the course of any proceedings in connection with the regular assessment for the assessment year commencing on the 1st day of April, 1970, or any subsequent assessment year, is satisfied that any assessee---... (c) has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of sub-section (4) of section 209A or sub-section (3A) of section 212 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfaction of the Income-tax Officer in regard to the failure of the assessee to furnish an estimate of the advance tax payable by him in accordance with the provisions of section 209A(4) of the Act "without reasonable cause" is thus the condition precedent for imposition of the penalty under this clause. In the instant case, both the Commissioner (Appeals) and the Tribunal have recorded a finding that there was reasonable cause for the failure of the assessee to submit the estimate under sub-section (4) of section 209A. This finding, obviously is a finding of fact which is not the subject-matter of challenge before us in this reference. What is sought to be contended on behalf of the Revenue is that penalty under section 273(2)(c) is more or less automatic once there is non-compliance of the provisions of section 209A(4) of the Act. This contention of the Revenue, in our opinion, is untenable for reasons more than one. First, though section 273(2)(c) provides for levy of penalty for failure to furnish an estimate of advance tax under sub-section (4) of section 209A of the Act, liability to pay penalty does not arise merely on the proof of failure to furnish the estimate because th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the estimate under sub-section (4) of reasonable cause for not furnishing the same (sic). It was on the basis of this finding that the penalty was cancelled by the Commissioner (Appeals) and the Tribunal. This finding is, primarily and essentially, a finding of fact which ordinarily is final and binding. Moreover, in this reference, there is no challenge to this finding of fact. That being so, the Tribunal was justified in holding that section 273(2)(c) of the Act was not attracted in the facts and circumstances of the present case. We are supported in our above opinion by the decision of this court in Hind Products P. Ltd. v. CIT [1980] 121 ITR 903. In that case also the controversy was in regard to levy of penalty for furnishing untrue estimate of advance tax under section 18A(2) of the Indian Income-tax Act, 1922 (corresponding to section 273(2)(c) of the 1961 Act). This court examined the question when an estimate can be said to be untrue and observed : "Having regard to these provisions, unless an Income-tax Officer is satisfied that the assessee, who had furnished a return under section 18A(2), knew or had reason to believe that the estimate which he had filed was untr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imate by the assessee. An incorrect or inaccurate view of the trend of the business in the future will not necessarily make the estimate with regard to income an untrue one. If the relevant material on the basis of which the estimate has been prepared is placed on record and if on the basis of that material it would be reasonably possible to conclude that the assessee could not be normally said to be expecting to make profits in the months to follow, an estimate showing that he was not liable to pay any advance tax, could not be said to become untrue merely because by reason of some circumstances subsequent to the date of the filing of the estimate, the assessee has earned profits." The legal position was summed up in the following words : "A penal provision must always be construed very strictly and unless the conduct of the assessee falls squarely within the four corners of the penal provision, the penalty provision could not be made applicable to his case. Whether a person had knowingly filed a false estimate or he had reason to believe that the estimate is untrue is a question which has to be determined on the material appearing in each case. But once the assessee had produ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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