1. The only contention raised by the assessee in this appeal is in respect of penalty amounting to Rs. 550 levied by the ITO under Section 273(1)(A)(ii) of the Income-tax Act, 1961 ("the Act"), and confirmed by the AAC in the assessee's first appeal before him for default of the assessee under Section 209A(1)(a) of the Act. The assessment year involved is 1979-80.
2. The facts pertaining to the issue are in short compass. The appellant was an old assessee. Up to the date when first instalment of advance tax was due, the assessee did not file any estimate of advance tax as contemplated by Section 209A(1)(a), i.e., up to 15-9-1978. The assessee, however, filed estimate in Form No. 29 on 12-3-1979 estimating its liability to tax at Rs. 6,325. When the assessment in this case under Section 143(3) of the Act was framed at Rs. 85,469 and while levying the said penalty, the ITO observed as under : The assessee had, however, come forward with an explanation before the ITO that it had not filed any statement of advance tax as its current income was below taxable limit up to the date of first instalment, i.e., 15-9-1978.
3. When the issue was carried by the assessee before the AAC, he came to confirm the said penalty.
4. It is this action of the AAC which is contested by the assessee before us. The learned counsel for the assessee, Shri D.S. Gupta, after reading out Section 209A submitted that it is not obligatory in all cases to warrant filing of estimate of advance tax up to the date of first instalment due for advance tax. He also submitted that the assessee had come forward with an explanation before the ITO which though finds a mention in his order but was not dealt with or rejected as such by him. In order to highlight the bonafides of the assessee, he submitted that at the time when third instalment of advance tax was due the assessee came forward with an estimate of income and filed the same and deposited the tax accordingly. He submitted that it was under the bona fide belief that his income was below taxable limit. For the purpose of filing the said estimate that the assessee did not file the same (sic) and, according to him, the ITO came to a conclusion without a finding in respect of the assessee's explanation raised before him.
5. The learned departmental representative, Shri R.S. Khichi, beside relying on the orders of the two lower authorities, submitted that the assessee had filed a return showing a total income of about Rs. 85,000 whereas limit provided under Section 208 for registered firm, which the assessee was, is only Rs. 20,000 and on that basis it cannot be said that the assessee had any case and it was not under the bonafide belief that the estimate was not filed up to the due date of first instalment.
6. After taking into consideration the rival submissions and perusing Sections 209A and 273 carefully, we are of the view that it is not mandatory under Section 209A under all circumstances to file the estimate of income. The assessee is obliged to file the same only in case he feels that his current income is likely to exceed the amount specified in Sub-section (2) of Section 208 of the Act. In respect of the said belief, the assessee came forward with the following explanation before the ITO : It is submitted that at the time of first instalment, assessee has not filed any statement of advance tax of the income as his current income is likely to be below the taxable limit and at the time of third instalment he has filed an estimate of income in Form No. 29 and paid the tax accordingly. As such, assessee has not committed any default under the said provisions. The proceedings have been started by mistake.
It is, therefore, requested that proceedings started under the said provisions may kindly be droped.
We do not find that the ITO gave any opportunity further to the assessee to substantiate its contention pertaining to bona fide belief that at the time of first instalment its current income was likely to be below taxable limit. Perusal of the ITO's order nowhere shows that he checked the veracity of the said explanation and then came to reject it. The observation from the ITO's order, which is extracted and placed above, shows that he was of the view that under all circumstances the assessee was obliged to file the estimate under Section 209A. On similar presumption, the ITO confirmed the said penalty as is apparent from para 4 of the order. We are of the view that under all circumstances, the assessee is not obliged to file the estimate, as is apparent from Section 209A, which provides that obligation of the assessee is only if he thinks that his current income is likely to exceed the amount specified in Sub-section (2) of Section 208. When the ITO's order is perused, it is found that he nowhere gave a finding that the explanation given by the assessee was false and as such the assessee had failed without reasonable cause. The penalty levied by the ITO and confirmed by the AAC is, therefore, cancelled.