1. These two appeals arise out of a common order dated 23-3-1981 of the Commissioner (Appeals) and are, therefore, disposed of by this single order.
2. Both these matters related to penalties levied by the ITO under Section 273(a) of the Income-tax Act, 1961 ('the Act'). For the first year, i.e., 1974-75 the ITO issued a notice presumably on the ground that the assessee had not paid any advance tax. In response to the show-cause notice the assessee's representative contended that there was a claim for refund to the tune of Rs. 1,58,180 which if duly considered would result in a case of no liability. The ITO, however, held that this contention was not acceptable as the assessee had failed to pay advance tax without any reasonable cause. He, therefore, levied a penalty of Rs. 5,387. For the next year the ITO noticed that the assessee was served with a notice under Section 210 of the Act asking for payment of advance tax to the tune of Rs. 2,87,090. It filed an estimate in Form No. 29 showing the estimate of tax liability at Rs. 65,000, but paid only Rs. 22,000 on 3-12-1974. The return was filed on 12-11-1975 showing an income of Rs. 4,92,550. Consequently, the ITO initiated penalty proceedings under Section 273 in response to which the assessee's contention was that on account of detention under MISA of Shri J.G. Patel, director of the company, there was a complete dislocation in the business and as such correct estimate could not be made and filed. The ITO, however, noticed that the assessee was an old one and supposed to know the provisions for payment of advance tax. The financial position of the assessee during this period was sound. But even then the assessee had not paid the advance tax even on the estimate filed by it. He, therefore, levied a penalty of another sum of Rs. 24,623 again under Section 273(a). Both these penalties were confirmed by the Commissioner (Appeals) on appeals and, consequently, the assessee has come up in second appeal before us.
3. We have heard the representatives of the parties at length in both these appeals and to our mind the penalties as such cannot be sustained. The first thing to note in this behalf is that both the penalties purport to have been levied by the ITO on the alleged default of the assessee for failure to pay advance tax. In the case of the first year it has been clearly mentioned in the order of the ITO that the assessee had failed to pay advance tax without any reasonable cause. In the second year although there is a discussion about the assessee's explanation regarding dislocation of business and consequent failure to file a correct estimate of advance tax, the calculation of penalty has been made with reference to the amount by which the advance tax paid was short of the demand and not with reference to the difference in the estimate of advance tax filed by the assessee and 75 per cent of the assessed tax or the tax which would have been payable if the assessee had furnished a correct and complete estimate in accordance with the provision of Section 209A(1)(a) of the Act. So that it follows that the emphasis by the ITO was on the failure of the assessee to pay the tax. The provisions of Section 273(a), however, do not contemplate levy of any penalty for failure to pay advance tax. Of course, the marginal note to the section reads : 'False estimate of or failure to pay advance tax'. But the actual provisions of the section contemplate levy of penalty only if the ITO was satisfied that the assessee had furnished a statement of advance tax which he knew or had reason to believe to be untrue or had without reasonable cause failed to furnish a statement of advance tax payable by him in accordance with the provision of Section 209A(1)(a). Mere failure to pay advance tax does not appear to come within the ambit of this section. Referring to a number of authorities mentioned in foot note 21 at page 5, it has been opined by Kanga and Palkhivala in their Law and Practice of Income-tax, 1976, 7th edition that marginal notes to the section cannot control the construction of the statute. Since the wording of Section 273 appears to be fairly clear, the mention of the words 'or failure to pay' in the marginal note would not be sufficient to depart from the plain language used therein.
4. It may be urged for the revenue that in any case the assessee had failed to pay advance tax and since huge liabilities were avoided, some penalty ought to be levied and the section could be corrected by this Tribunal. We are afraid it would not be possible for us to go that far.
There are clear cut provisions for such case. Under Section 218 of the Act, if the assessee has sent any statement or an estimate or revised estimate of advance tax payable by him but does not pay any instalment in accordance therewith he shall be deemed to be an assessee in default in respect of such instalment. Under Section 220 of the Act any amount specified as payable in a notice of demand shall be paid within 30 days of the service of notice at the place and to the persons mentioned in the notice and under Sub-section (4) the assessee shall be deemed to be in default if the amount is not paid by him within the time limited under Sub-section (1) or Sub-section (3). Under Section 221 of the Act where the assessee is in default or deemed to be in default, he shall, in addition to the amount of arrears or the amount of interest payable under Section 220(2), be liable to pay such penalty as the ITO may direct. The calculation of the penalty is not to be made in the manner in which the ITO has done in the present case. Liabilities for interest under Sections 215, 217 and 220(2) would be there, in any case, but at present we are not concerned with them. Obviously a penalty under Section 273(a) cannot be justified.
5. It may be argued that for the second year there is also the assessee's liability for filing of under estimate showing the advance tax payable to be only Rs. 65,000 whereas the assessed tax actually came to Rs. 35,71,647, so that it can be argued for the revenue that the assessee had furnished a statement of advance tax payable by him which it knew or had reason to believe to be untrue. It may be correct but the ITO has not said a word about the assessee's knowledge of the falsity of the estimate filed by it. The whole case has proceeded on the ground that the estimate filed was much lower than the actual assessed tax. That fact, however, would not alone be sufficient to levy the present penalty. In CIT v. S.B. Electric Mart (P.) Ltd.  128 ITR 276 it was held by the Hon'ble Calcutta High Court that : Before the penal provision under Section 273(a) of the Income-tax Act, 1961, can be attracted there must be evidence to show that the estimate filed by assessee was false to the knowledge of the assessee or he had reason to believe it to be untrue. If in a particular case the estimate is filed at the close of the accounting period that does not by itself establish that the estimate which is filed is not only false but also false to the knowledge of the assessee. Before the expiry of the accounting year, an assessee may or may not have a full picture of the result of the income earned in that year. The time for making that calculation comes at the time of filing of the return. Therefore, unless there is evidence to indicate that 10 or 12 days prior to or after the close of the accounting period the assessee knew or had reason to believe that the estimate filed by him was false, it cannot be presumed, simply because he had filed it after the expiry of the accounting year, that he had such knowledge. (p. 276) In the present case, not a word has been suggested by the ITO that the estimate was untrue to the knowledge of the assessee. In these circumstances, the penalty under Section 273(a) obviously cannot be maintained. Accordingly, we accept both the appeals and cancel the penalties.