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TMI Blog1974 (8) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... file an estimate of advance tax payable under section 212(3) and pay tax accordingly. The estimate was to be filed before 1st March, 1965, and the advance tax was to be paid before 15th March, 1965. It appears that on 25th March, 1965, the assessee filed an estimate showing an income of Rs. 3,66,000 and paid advance tax of Rs. 1,83,000 on 26th March, 1965. As the estimate was not filed before the due date, that is, 1st March, 1965, the Income-tax Officer imposed penalty. of Rs. 4,000. The assessee carried the matter in, appeal before the Appellate Assistant Commissioner who held that the assessee was liable to pay penalty but he directed that such penalty should be the minimum leviable under the said section and should be computed on the basis of the tax payable after deducting the amount of Rs. 1,83,000 paid by the assessee on 26th March, 1965. The Income-tax Officer, therefore, carried the matter in appeal before the Tribunal. A contention was raised on behalf of the Income-tax Officer that since the amount of Rs. 1,83,000 was paid after the due date, it should not be treated as part of the advance tax. The Tribunal was of the opinion, on reading section 273, that in cases of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which interest is payable under section 217." Therefore, in order to determine what should be the amount on which penalty should be levied, the income-tax authorities have to find out what is the amount on which interest is payable under section 217. Now referring to section 217, we find that it consists of two sub-sections, namely, (1) and (2). They read as under : " 217. Interest payable by assessee when no estimate made (1) Where on making the regular assessment the Income-tax Officer finds that any such person as is referred to in sub-section (3) of section 212 has not sent the estimate referred to therein, simple interest at the rate of nine per cent. per annum from the 1st day of April next following the financial year in which the advance tax was payable in accordance with the said provisions up to the date of the regular assessment shall be payable by the assessee upon the amount equal to the seventy-five per cent. referred to in sub-section (1) of section 215. (2) The provisions of sub-sections (2), (3) and (4) of section 215 shall apply to interest payable under this section as they apply to interest payable under that section." The next step, which the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mediately following assessment year is likely to exceed the maximum amount not chargeable to income-tax in his case by two thousand five hundred rupees, send to the Income-tax Officer-- (i) an estimate of the total income exclusive of capital gains of the said previous year ; (ii) an estimate of the advance tax payable by him calculated in the manner laid down in section 209 ; and shall pay such amount as accords with his estimate, on such of the dates specified in section 211 as have not expired by instalments which may be revised according to sub-section (2)." Now, according to section 211, advance tax is payable in equal instalments on the 1st day of June, 1st day of September, 1st day of December, and first day of March in the financial year except in cases of those assessments in respect of which the previous year in respect of any source of income ends after the 31st day of December and before the 30th day of April, in which case advance tax on that source of income shall be payable in three equal instalments on the 1st day of September, the 1st day of December and the 15th day of March, respectively. The admitted facts, therefore, so far as the present assesee-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of an assessee where he has furnished under section 212 an estimate of advance tax payable which he knew or had reason to believe to be untrue. In other words, it provides for a default by the assessee in furnishing an untrue estimate which he knew or had reason to believe it to be untrue. It deals with a case of an overt act with intention and knowledge thereof. Section 273(b) provides for a default on the part of the assesee where he has without reasonable cause failed to furnish an estimate of the advance tax payable by him as required by section 212(3). The consequences of either of the defaults referred to in clauses (a) and (b) of section 273 have been provided is section 273(i) or (ii), as the case may be. As far as the default under section 273(a) is concerned, it has been provided that the Income-tax Officer may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way of penalty a sum which shall not be less than ten per cent. but shall not exceed one and a half times the amount by which the tax actually paid during the financial year immediately preceeding the assessmen t year under the provisions of Chapter XVII-C falls shor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) is one which is 75% of, the tax determined on the basis of the regular assessment as reduced by the amount of tax deducted at source. However, by sub-section (2) of section 217 the provisions contained in sub-sections (2), (3) and (4) of section 215 have been made applicable to the interest payable under section 217. Sub-section (2) of section 215, which is relevant for our purposes, provides that where before the date of completion of regular assessment, a provisional assessment is made under section 141, or where tax is paid by the assessee otherwise than in pursuance of such a provisional assessment, interest is to be calculated in accordance with the provisions contained in section 215(l) up to the date on which the tax is paid either as provisionally assessed or otherwise, and for the period ,subsequent thereto, interest is to be calculated at the rate of 9% as provided under section 215(1), on the amount by which the tax so paid falls short of the said 75%. The Tribunal, therefore, while determining what is the amount on the basis of which penalty could be levied by the Income-tax Officer under section 217, considered the amount according to section 217 on which interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties with regard to the crucial date ; one, as contended on behalf of the revenue, the date of default ; second, the date on which interest becomes payable on the amount under section 217 ; and the third, as contended on behalf of the assessee-company, the date of the regular assessment. We are of the opinion that having regard to the tenor and tense of the language used in section 273(b) read with section 273(ii), it cannot be the date of default as contended on behalf of the revenue. The basis of penalty under section 273(ii) is the amount on which interest is payable under section 217. Now, clearly, therefore, on the date of the default, there was no amount on which interest was payable under section 217 because according to sub-section (1) of section 217 interest payable in case of default of not filing return as required by section 212(3) is to commence from the 1st day of April next following the financial year in which advance tax was payable, and it is to run up to the date of regular assessment. It is, therefore, clear to us that the basis of penalty, as prescribed under section 273(ii), being the amount on which interest is payable under section 217, the date with refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the opinion that this interpretation urged by Mr. Shah on behalf of the assessee company is an equally possible and reasonable interpretation. The submission of Mr. Shah has a great force in it because the basis of penalty is the amount on which interest is payable. That amount is one which is prescribed under section 217. Section 217 speaks of 75% of the amount on which interest would be payable for the default in filing estimate of the advance tax. Now, this 75%, according to section 215(1), is of the tax determined on the basis of regular assessment. It is, therefore, possible to contend reasonably that the crucial date on which the taxing authorities can determine the amount of penalty is the date when the tax is determined as a result of regular assessment. If that is the crucial date for purposes of determining what is the amount under section 217 on which interest is payable, the authorities must also look to sub-section (3) of section 217, which brings into play the provisions contained in sub-sections (2), (3) and (4) of section 215. If it is the correct interpretation of section 217 for purposes of determining the amount, which can be the basis of penalty under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing the financial year in which advance tax was payable, is also reasonable and possible, because the basis of penalty under section 273(ii) is the amount on which interest is payable, and that amount is to be determined as on the 1st day of April next following the financial year in which advance tax was payable. In view of these two possible and reasonable interpretations, it was urged by Mr. Shah, this court should take that interpretation which was more favourable to the assessee. In support of his contention, he relied on the decision of the Supreme Court in Commissioner of Income-tax v. Vegetable Products Ltd. where the court was concerned with the interpretation of the expression, "the amount of tax, if any, payable by him", in the earlier part of section 271(1)(a)(i) of the Income-tax Act, 1961, and whether it refers to tax payable under a notice of demand, for purposes of calculating the penalty for failure to file return of income within time without reasonable cause. On behalf of the revenue before the Supreme Court, it was contended that on a proper construction of section 271(1)(a)(i) it would mean that penalty had to be determined on the basis of the tax assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax, a sum by way of a penalty, " which in the case referred to in clause (b) shall not be less than 10% but shall not exceed one and a half times of the 75% of the assessed tax as defined in sub-section (5) of section 275 ". We are, therefore, fortified in the view which we are taking in this matter that the contention urged on behalf of the revenue as to the date of default being the crucial date for purposes of determining penalty is not sustainable in view of the scheme contained in section 273 read with sections 217 and 215 of the Act of 1961. Out of the two interpretations to which we have referred hereinabove, as to the crucial date being reasonable an d probable, we would prefer the third interpretation which is more favourable to the assessee and, therefore, for the reasons stated in this judgment, we are of the opinion that the view of the Tribunal that the assessee was entitled to claim a deduction of the payment of tax of Rs. 1,83,000 made on 26th March, 1965, was correct. In that view of the matter, therefore, we answer the question referred to us in the negative and against the revenue. The Commissioner shall pay costs of this reference to the assessee-company. ..... 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