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P.A. Mohamed Abdul Khader and Co. Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Cochin
Decided On
Judge
Reported in(1983)3ITD334(Coch.)
AppellantP.A. Mohamed Abdul Khader and Co.
Respondentincome-tax Officer
Excerpt:
.....assessment year was due on 15-12-1976. the assessee, however, filed the estimate on 26-3-1977 and paid advance tax of rs. 33,935. the assessee-firm was not assessed previously and the estimate was made under section 212(3). after the assessment, the tax liability was determined at rs. 46,035. the ito took this as the tax liability and found that 75 per cent of that was rs. 34,525. as against this, he considered that the assessee had not paid any advance tax as such because the estimate was filed beyond the due date of the filing of the estimate by the assessee. in the actual assessment the sum of rs. 33,935 was taken as tax otherwise paid. the minimum penalty leviable was rs. 3,453 and the maximum penalty of rs. 51,789. the ito, as mentioned earlier, has levied a penalty of rs. 4,000......
Judgment:
1. This appeal relating to the assessment year 1977-78 has been filed by the assessee. The appeal is against the order of the Commissioner (Appeals), Kerala, Ernakulam, whereby he confirmed a penalty of Rs. 4,000 levied by the ITO under Section 273(6) of the Income-tax Act, 1961 ('the Act'). The assessee is a registered firm whose accounts are closed at the end of each calendar year. Its estimate of advance tax for this assessment year was due on 15-12-1976. The assessee, however, filed the estimate on 26-3-1977 and paid advance tax of Rs. 33,935. The assessee-firm was not assessed previously and the estimate was made under Section 212(3). After the assessment, the tax liability was determined at Rs. 46,035. The ITO took this as the tax liability and found that 75 per cent of that was Rs. 34,525. As against this, he considered that the assessee had not paid any advance tax as such because the estimate was filed beyond the due date of the filing of the estimate by the assessee. In the actual assessment the sum of Rs. 33,935 was taken as tax otherwise paid. The minimum penalty leviable was Rs. 3,453 and the maximum penalty of Rs. 51,789. The ITO, as mentioned earlier, has levied a penalty of Rs. 4,000. On appeal, the Commissioner (Appeals) held that there was no provision for condoning the delay in filing the estimate, that the estimate filed by the assessee cannot be considered to be a valid estimate filed by the assessee in accordance with the provisions of Section 212(3). He was of the view that, in the instant case, the failure of the assessee was a failure to furnish an estimate of advance tax payable but not a failure to pay the tax. He considered that the decisions quoted by the assessee before him dealing with the question of tax to be deducted in computing the penalty, are, therefore, of no use in interpreting the law. Finally he pointed out that even if the payment that was made on 26-3-1977 is excluded there is still a balance of Rs. 12,100 on which the minimum penalty would be Rs. 1,210 and the maximum Rs. 18,150. Since the penalty levied by the ITO was Rs. 4,000 which is below the maximum of Rs. 18,150, he confirmed the penalty levied by the ITO, 2. It is urged on behalf of the assessee that the estimate filed by the assessee should be taken as a valid estimate in view of the decision in Addl. CIT v. Chitra Sagar [1980] 121 ITR 699 (Mad.). It is also submitted that in quantifying the penalty leviable under Section 273(B) the tax paid otherwise should be treated as tax paid in advance and excluded. For this purpose, he relied on the decision in CIT v. P.B.Nanda [1980] 125 ITR 429 (Punj. & Har.). It is pointed out that the decision of the Gujarat High Court in CIT v. Kohinoor Flour Mills [1975] 99 ITR 54 is more or less on the facts identical to the facts in the case of the assessee here and it has been held in that case that the tax belatedly paid as advance tax should be taken out of the reckoning for the purpose of quantifying the penalty under Section 273(6). It is also submitted that the assessee has voluntarily filed the estimate and paid the advance tax even though there was a delay in making the estimate and paying the tax. This according to the assessee's counsel would clearly show that the assessee is not guilty of any contumacious conduct and, therefore, in view of the decision of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 no penalty is leviable under Section 273(6). It is also pointed out that under Section 273(6) it is not mandatory that the ITO should levy a penalty on the assessee, that it is left to the discretion of the ITO to levy or not to levy a penalty under this provision. It is pointed out that the ITO has not charged interest under Section 217 wherein the same delay in the filing of the estimate and the payment of the advance tax has been condoned and the assessee has been given credit for the tax of Rs. 33,935. It is also submitted that in view of the decision of the Kerala High Court in Santha S. Shenoy v. Union of India [1982] 135 ITR 39, all payments made before the end of the financial year should be given credit as advance tax for the purpose of calculating interest under Section 214. The same ratio would apply in respect of the levy of penalty under Section 273(6). Further, reliance is placed in this regard on the decision of the Gujarat High Court in Chandrakant Damodardas v. ITO [1980] 123 ITR 748 and of the Bombay High Court in CIT v. Traub (India) (P.) Ltd. [1979] 118 ITR 525. It is pointed out in the decision of the Bombay High Court in Traub (India) (P.) Ltd.'s case (supra) that there was similar delay though not to the same extent as in the case of the assessee here and it was held that the payment should be treated as advance tax for the purpose of paying interest under Section 214.

3. On behalf of the department, it is submitted that the assessee has not filed a valid estimate and, therefore, the assessee comes clearly within the provisions of Section 273(b). It is pointed out that the facts in the case of Santha S. Shenoy (supra) are that there has been a valid estimate but only the payment was delayed, but in the case of the assessee here the estimate filed being beyond the due date for the filing of the estimate is not a valid estimate. It is also pointed out that even if the sum of Rs. 33,935 is given credit to, the penalty levied by the ITO would still be within the limits laid down under Section 273.

4. We have carefully considered these arguments. The assessee has filed an estimate of the advance tax payable by him beyond the date on which the assessee should have made that estimate. This date was 15-12-1976.

The estimate has been filed on 26-3-1977.

5. Apart from the delay in the filing of the estimate and the payment of advance tax, the tax estimated by the assessee is also less than 75 per cent of the assessed tax. On this there is no dispute. There is also no dispute that the assessee has paid the sum of Rs. 33,935 before the end of the financial year preceding the assessment year.

6. The contention of the assessee is that the estimate has been filed within the financial year and, therefore, there is a substantial compliance with the provisions of Section 212(3). There is no contumacious conduct on the part of the assessee. We would agree with the assessee that the voluntary act on the part of the assessee to furnish the estimate and pay the advance tax within the financial year even though belatedly would establish the absence of any contumacious conduct on the part of the assessee. The provisions of Section 273(6) which refer to the failure on the part of an assessee to furnish an estimate without reasonable cause, in our opinion, are not attracted in the case of the assessee here because the assessee has been able to show that it is not guilty of any contumacious conduct. It has been held by the Supreme Court in Hindustan Steel Ltd.'s case (supra) that penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. It has been further observed that penalty will not also be imposed merely because it is lawful to do so. The circumstances in this case, viz., that the assessee proceeded to comply with the legal requirement under Section 212(3) although beyond the due date prescribed in the relevant provision, clearly establish that the assessee has not acted deliberately in defiance of law and that the assessee is not guilty of conduct which is contumacious or dishonest.

We would, therefore, hold that the assessee is not liable to penalty under Section 273. The ITO has proceeded to levy penalty under Section 273(6) treating the estimate filed by the assessee as not a valid estimate. Since the penalty proceedings have been taken by the ITO under Section 273(6) of the Act and since such proceedings have been confirmed by the Commissioner (Appeals), we would only consider in this appeal whether the assessee is liable to a penalty under Section 273(6). The liability of the assessee to penalty under Section 273(a) cannot be considered. In view of the fact that the default on the part of the assessee in filing the estimate beyond the due date is only a technical default and, therefore, the assessee has not acted in deliberate defiance of law, we would hold, applying the ratio of the decision of the Supreme Court in the case of Hindustan Steel Ltd. (supra), that the assessee is not liable to any penalty under Section 273(6). The penalty levied is, therefore, cancelled.

7. Since we are cancelling the penalty on the above ground the other submission made by the assessee regarding the quantification of the penalty is not considered by us.


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