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TMI Blog1979 (2) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... e total income was, however, determined at Rs. 24,617. The ITO being of the view that the assessee had furnished an estimate of tax under s.18A(2) which he knew or had reason to believe to be untrue issued on 30th August, 1962, a show-cause notice as to why penalty should not be levied. This notice was under s. 28(1)(c) read with s. 18A(9) of the I.T. Act, 1922. The ITO sent another letter dated 17th July, 1964 (sic), to the assessee indicating his intention to levy penalty on the basis of the notice issued earlier. The assessee in reply to the said notice submitted that it had already furnished an explanation and the predecessor-ITO had agreed to drop the penalty proceedings. Since the ITO was not satisfied that the proceedings were promised to be dropped, he sent a second letter dated 3rd July, 1964, calling upon the assessee to furnish its explanation in writing. The assessee then sent its reply dated 17th July, 1964, which is annexed to the statement of the case as annex. A. In this letter the explanation given by the assessee was that the assessee had shown that there was a loss as per trial balance as on 31st May, 1960, and, therefore, the estimate submitted by the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not challenged the bona fides of the assessee as regards the estimate filed by him on 14th June, 1960. He, therefore, held that no penalty could be levied and set aside the order. Against this order, the ITO filed an appeal before the Income-tax Appellate Tribunal. The Tribunal posed a question as to whether the assessee did honestly believe by reason of the fact that there was a loss as on 31st May, 1960, that the whole year would result in a loss and took the view that, apart from a mere statement that profit was earned subsequently, no material was brought on the record to show that this was a fact. The Tribunal then took the view that as per books there was a profit of Rs. 15,290 in the year under consideration and, unless there was something to show that though as per accounts as on 31st May, 1960, there was a loss of Rs. 4,000, the assessee equally thought or believed that the year as a whole ended 31st December, 1960, would show a loss, the assessee cannot be said to have made a bona fide estimate on 31st March, 1960. It found that there was nothing in the present case to show that the assessee did honestly believe that there would be a loss for the whole year. The appeal fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c), in addition to any tax payable by him, a sum not exceeding one and a half times the amount of the income-tax and supertax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income. Having regard to these provisions, unless an ITO is satisfied that the assessee, who had furnished a return under s.18A(2), knew or had reason to believe that the estimate which he had filed was untrue, no penalty could be levied against him. In the instant case, the estimate was filed on 14th June, 1960. The assessee had produced before the ITO a copy of the trial balance on which it was apparent that as on 31st May,1960, there was a loss. It is true that when an estimate is required to be filed under s. 18A(2), that estimate must necessarily show the estimated income for the year in question. Estimated income may or may not be the same as the ultimate returned income shown by the assessee. Just as it is possible that in a given case, the returned income may be more, it may also be that in a given case, the returned income may be less than the estimate. The very word " estimate " implies the concept of approximation and it can never be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal 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 produced on record the material on which he has based his estimate, then the burden will be on the revenue to show as to why a finding must be recorded in its favour that the estimate was untrue or that the assessee had reason to believe that the estimate was untrue. It is important to point out that the time with reference to which the knowledge of the assessee or his belief that the estimate was being filed correctly is the point of time when the return is filed. Subsequent events may not have much to do with the knowledge of the assessee at the time of filing of the estimate unless it is possible to say that the subsequent events which resulted in profits were such that they could be reasonably foreseen by the assessee. It appears to us from the or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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