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Mahendra T. Panchal Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Ahmedabad
Decided On
Judge
Reported in(1983)6ITD612(Ahd.)
AppellantMahendra T. Panchal
Respondentincome-tax Officer
Excerpt:
.....he was asked to pay advance tax of rs. 37,695. on 28-12-1974, both the aforesaid appellants filed estimates of their advance tax suo moto declaring their liability to pay advance tax as follows :shri mahendra t. panchal 3,608shri motilal s. mistry 39,743 the increase on the tax payable as per the aforesaid estimates was rs. 614 in the case of shri mahendra t. panchal and rs. 2,048 in the case of shri motilal s. mistry. the aforesaid difference was much less than one-third of the tax demanded of them under section 210. the aforesaid taxes as per the estimates filed by the appellants were duly paid by them in the course of financial year ending 31-3-1975 immediately preceding the assessment year 1975-76.4 the assessees filed the returns of income for the assessment year 1975-76 in.....
Judgment:
1. The appellants are partners in Modern Engg. & Moulding Co., Naroda.

Penalties have been imposed on them for non-compliance of provisions of sub-section (3A) of section 212 of the Income-tax Act, 1961 ('the Act').

2. The facts bearing on the aforesaid appeals are common. They were, therefore, heard together and are being disposed of by a combined order, for the sake of convenience.

3. The accounting periods of both the appellants ended on Diwali 1974 for the assessment year 1975-76. The last date for filing the estimate of advance tax and paying advance tax in the cases of both the appellants was 15-12-1974 for the aforesaid assessment year. The ITO asked the appellants through notice under section 210 of the Act to pay advance tax for the assessment year 1975-76 amounting to Rs. 2,994 and Rs, 8,063, respectively vide notices issued on 2-9-1974. In the case of Shri Motilal S. Mistry, the notice dated 2-9-1974 was revised. On 6-12-1974, he was asked to pay advance tax of Rs. 37,695. On 28-12-1974, both the aforesaid appellants filed estimates of their advance tax suo moto declaring their liability to pay advance tax as follows :Shri Mahendra T. Panchal 3,608Shri Motilal S. Mistry 39,743 The increase on the tax payable as per the aforesaid estimates was Rs. 614 in the case of Shri Mahendra T. Panchal and Rs. 2,048 in the case of Shri Motilal S. Mistry. The aforesaid difference was much less than one-third of the tax demanded of them under section 210. The aforesaid taxes as per the estimates filed by the appellants were duly paid by them in the course of financial year ending 31-3-1975 immediately preceding the assessment year 1975-76.

4 The assessees filed the returns of income for the assessment year 1975-76 in due course declaring the following total incomes and taxes thereon :Name of the appellant Income Tax payable thereonShri Mahendra T. Panchal 1,08,240 59,948Shri Motilal S. Mistry 1,47,093 89,870 Inasmuch as the incomes returned by the assessee appellants and taxes payable thereon were much higher than the tax demanded from them under section 210 and inasmuch as the difference between the tax demanded under section 210 and tax payable on the returned incomes was more than one-third of the tax demanded of them under Section 210, the ITO initiated penalty proceedings against the appellants in terms of clause (c) of Section 273 of the Act for the appellants' alleged failure to comply with the provisions of Sub-section (3A) of Section 212. The findings of the authorities below with regard to the aforesaid controversy have been : (1) that the estimates filed by the appellants on 28-12-1974 were beyond the due date for filing of such estimates as prescribed by Sub-section (3A) of Section 212 and, therefore, the estimates in question were not the ones contemplated by Sub-section (3A) of Section 212 ; (ii) that the estimates in question cannot, in any case, be regarded as having been filed under Sub-section (3A) of Section 212, because the difference between the advance tax estimated in the said estimates and those demanded from the appellants under Section 210 was not one-third or more of the tax demanded under Section 210. The estimates would be eligible for being regarded as ones filed under Sub-section (3A) of Section 212 only if it could be shown that the difference between the estimated tax as per the said estimate and the tax demanded under Section 210 was more than one-third of the tax demanded of the assessee. If the difference was less than that, the estimate would not be one under Section 212(3A).

5. The aforesaid findings of the authorities below have been assailed by the assessees as erroneous. According to their learned counsel, any estimate which declared higher advance tax payable than the one demanded of him under Section 210, would be an estimate under Sub-section (3A) of Section 212, and the tax paid by the assessee within the financial year in accordance with the estimate filed within the financial year would have to be regarded as advance tax in accordance with the ratio of the decisions of the Hon'ble Gujarat High Court in the following casesCIT v. Kohinoor Flour Mills [1975] 99 ITR 54 and Chandrakant Damodardas v. 110 [1980] 123 ITR 748.

6. The department, it was pointed out, has also treated the aforesaid payments as advance tax and, therefore, the department could not be heard to say that the estimates filed by the assessees were not of advance tax and were not legal, and that they could not be taken note of by the revenue. The assessee could not, as such, be penalised on the ground that it had failed to file an estimate of advance tax in terms of Sub-section (3A) of Section 212. On merits, it was submitted on behalf of the assessee that the assessees filed estimates on the basis of the information received from the firm with regard to its current income, that there was no mala fide intention for filing untrue estimate and that the firm had already been penalised under Section 273(c) and, therefore, 'no penalty be levied here for same default'. In support of the above contention, the assessees' learned counsel relied on the decisions in the cases of CIT v. Smt. Parvati Devi [1983] 141 ITR 738 (Punj. & Har.), Addl. CIT v. Smt. Triveni Devi [1974] 97 ITR 390 (All.) and CIT v. Pratap Chand Maheshwari [1980] 124 ITR 653 (Punj.

& Har.).

7. Inasmuch as the entire controversy in the present appeals revolves round the provisions of Sub-section (3A) of section 212, it would be proper to take note of the said provisions at this stage. We quote the same, as far as they are relevant for our purpose, as follows : In the case of any assessee who is required to pay advance tax by an order under Section 210, if, by reason of the current income being likely to be greater than the income on which the advance tax payable by him under Section 210 has been computed or for any other reason, the amount of advance tax computed in the manner laid down in Section 209 on the current income (which shall be estimated by the assessee) exceeds the amount of advance tax demanded from him under Section 210 by more than 331 per cent of the latter amount, he shall, at any time before the date on which the last instalment of advance tax is due from him, send to the Income-tax Officer an estimate of (ii) the advance tax payable by him on the current income...and shall pay such amount of advance tax as accords with his estimate on such of the dates applicable in his case under Section 211 as have not expired, by instalments which may be revised according to subsection (2) . ...

(i) that the liability to file an estimate under Sub-section (3A) of Section 212 arises only if the assessee estimates that the amount of advance tax on the current income would exceed the amount of advance tax demanded from him under Section 2J0 by more than 33| per cent : (ii) that once the assessee is of the above opinion, he would send to the ITO an estimate of its current income and advance tax payable thereon at any time before the date on which the last instalment of advance tax is due from him.

8. Apart from the provisions of sub-section (3A) of Section 212 referred to above, the statute provides for filing of an estimate by the assessee of advance tax payable by him under Sub-section (1) of Section 212 also. The estimate referred to in Sub-section (1) is to be filed in the reverse situation, namely, where the assessee is of the opinion that the tax payable by him on his current income would be less than the tax demanded from him under Section 210. In such a situation the assessee can file an estimate of advance tax payable by him under Sub-section (1) of Section 212 and once it is done, the original notice of demand issued to the assessee under Section 210 becomes inoperative.

9. The rival contentions of the assessee and the revenue with regard to the interpretation of Sub-section (3A) of Section 212 have to be judged in the context of the above provisions of law. The assessee's contention, as noted earlier, is that any estimate filed by the assessee wherein he estimates the advance tax payable by him on his current income on a figure higher than that demanded of him by a notice under Section 210 would be one under Sub-section (3 A) of Section 212.

Contra-wise an estimate filed by him estimating advance tax payable by him on his current income at an amount less than that demanded of him under Section 210 would be an estimate under Sub-section (1) of Section 212. The departmental contention on the other hand, as noted earlier is that the estimate under Subsection (3A) of Section 212 would be valid only if the estimated advance tax exceeds the original advance tax demanded of the assessee by more than one-third of the originally demanded tax. If the difference between the estimated tax and the demanded tax is less than that, it would not be a valid estimate under Section 212(3A). The above stand of the department, though in accord with the technical requirements of sub-section (3A) of Section 212, should, in our opinion, nonetheless be rejected on the same reasoning as was advanced by their Lordships of the Hon'ble Supreme Court in the case of CIT v. Ranchhoddas Karsondas [1959] 36 ITR 569 wherein the issue involved was whether a return filed by the assessee showing less than the taxable income was a valid return under Sub-section (1) of Section 22 of the Indian Income-tax Act, 1922. The department's contention was that a return in order to be valid must show income more than minimum exempt (sic) from income-tax and that any return showing less than that income, would not be a valid return in terms of Sub-section (1) of Section 22. The above contention of the revenue was rejected and it was held by the Hon'ble Supreme Court that a return filed showing less than taxable income would be a valid return under Sub-section (1) of Section 22. On a parity of reasoning advanced therein, we are of the opinion that an estimate of advance tax, filed by an assessee showing higher estimate of advance tax payable by him than demanded of him under Section 210, would be a valid estimate under Sub-section (3A) of Section 212, even if the difference between estimated tax and the tax demanded under Section 210 was not more than one-third of the tax demanded. The assessee may file such an estimate 'to be on the safe side', as their Lordships pointed out. He may estimate his current income on the basis of certain deductions and allowances, which may or may not be finally accepted by the ITO. If the ITO did not accept the deductions, etc., the difference between the tax, which would become due on the assessee's current income ultimately, might exceed by more than one-third of the tax demanded of the assessee under Section 210. The assessees might then be charged of not filing their estimates of advance tax under Section 212(3A), in case the estimates had not been filed. The assessees may, therefore, like to play safe and may, on learning that the tax on the current income, being their share in the firm, would be more than what was demanded of them under Section 210, file estimates of advance tax under Sub-section (3A) of Section 212 to avoid subsequent penal consequences.

Such estimate would not cease to be an estimate under Section 212(3A) simply because the excess of the advance tax estimated over the tax demanded under Section 210 was not one-third of the tax demanded or more. The assessees' reasoning, therefore, that the estimates filed by them estimating higher advance tax than was demanded from them under Section 210 were estimates under Section 212(3 A) is, in our opinion, correct and we accept it.

10. The contention of the revenue, however, that an estimate in order to be one under Sub-section (3A) of Section 212 must be filed "at any time before the date on which the last instalment of advance tax is due from him", is, in our opinion, correct. The categorical terms in which the Legislature has spelled out the requirement in this regard leaves no scope for equivocation on this account. Provisions of Section 208(1) of the Act which state that "Advance tax shall be payable during .the financial year. ..." cannot be brought to the assistance of the assessee in the present case on account of the categorical terms in which the provisions of Sub-section (3A) of Section 212 have been couched by the Legislature, which prescribe that the estimate be filed "at any time before the date on which the last instalment of advance tax is due from him". The estimates filed by the assessees on 28-12-1974 are beyond the aforesaid date, which was 15-12-1974. They cannot, therefore, be termed to be estimates in accordance with Section 212(3A). Section 273(c) provides for imposition of penalty if the assessee "has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of Sub-section (3A) of Section 212". It is clear from the wording of the above clause that the estimate which will take the assessee out of the mischief of clause (c) of Section 273 would be the one which is "in accordance with the provisions of Section 213(3A)". To be in accordance with Section 212(3A), the estimate has to be filed 'at any time before' 15-12-1974. The present estimates being after the said date could not be termed to be "in accordance with the provisions of Sub-section (3A) of Section 212". The default in terms of Section 273(c) is, thus, clearly made out.

11. The decisions of Hon'ble Gujarat High Court, relied on by the assessee namely, Kohinoor Flour Mills' case (supra) and Chandrakant Damodardas's case (supra) do not, in our opinion, advance the case of the assessee. Kohinoor Flour Mills' case (supra) was dealing with sub-clause (b) of Section 273 read with Section 27307). The provisions of law, which were considered by their Lordships in that case, were those pertaining to the assessment year 1965-66. Section 273(r7), as it stood then, reads as follows : which, in the case referred to in clause (b), shall not be less than ten per cent but shall not exceed one and a half times the amount on which interest is payable under Section 217.

The said clause (ii) was amended by the Finance Act, 1969, with effect from 1-4-1970, and such amended clause reads as follows : which, in the case referred to in clause (b), shall not be less than ten per cent but shall not exceed one and a half times of seventy-five per cent of the assessed tax as defined in sub-section (5) of Section 215 ; and The basis of penalty considered by the Hon'ble Gujarat High Court in the case of Kohinoor Flour Mills (supra) was "the amount on which interest is payable under Section 217". This basis disappeared after 1-4-1970. The ratio of Kohinoor Flour Mills' case (supra) will, therefore, not apply to the present case.

12. Chandrakant Damodardas's case (supra) was similarly dealing with the interpretation of sections 211 and 214 of the Act and their Lordships turned the decision in that case on the ground that the Legislature had used in Section 214 the phrase 'payable under sections 207 to 213' and not 'paid in accordance with sections 207 to 213'. In the present appeals, we are concerned with the interpretation of provisions of Sub-section (3A) of Section 212 read with provisions of clause (c) of Section 273 and Section 273(H) wherein the words used are "in accordance with the provisions of Sub-section (3A) of Section 212".

No assistance can, therefore, be had from Chandrakant Damodardas's case (supra) either.

13. Sub-section (5) of Section 215 of the Act which was inserted by the Finance Act, 1969, with effect from 1-4-1970 reads as follows : In this section and sections 217 and 273, 'assessed tax' means the tax determined on the basis of the regular assessment [reduced by the amount of tax deductible in accordance with the provisions of sections 192 to 194, section 194A, section 194C, section 194D and section 195] so far as such tax relates to income subject to advance tax and so far as it is not due to variations in the rates of tax made by the Finance Act enacted for the year for which the regular assessment is made.

The above provisions define 'assessed tax' as tax determined on the basis of regular assessment reduced by tax deducted at source. Nothing else is to be deducted from the tax determined. The computation of penalty in terms of Section 273(c) can, therefore, be done without any difficulty on the basis of the aforesaid definition of the 'assessed tax' and there shall be no anomaly in its computation even if the tax paid after the due date mentioned in Section 211 is treated as an advance tax. Under clause (Hi) of Section 273, tax actually paid by way of advance tax is not at all a factor to be taken into account. There are only two parameters which are relevant, viz. (i) tax payable under Section 210 ; and (ii) 75 per cent of the assessed tax. The contention of the learned departmental representative, therefore, that the estimate filed by the assessee in the present case on 28-12-1974 is not in accordance with the provisions of Sub-section (3A) of Section 212 and that the assessee cannot take the stand that it is a valid estimate, appears to us to be correct, and so we uphold it. The estimate filed by the assessee on 28-12-1974 is, therefore, to be ignored for the purpose of determining as to whether or not penalty is imposable on the assessee under clause (c) of Section 273.

14. That brings us to the merits of the assessee's explanation to determine if the assessee had a reasonable cause for the default under Section 273(c). The assessees' first contention was that they had filed the estimates on the basis of the information given by the firm and that there was no mala fide intention for filing untrue estimate. The explanation apparently has no relevance to the default in question. It was not the case of the ITO that the assessee had filed an untrue statement. He wanted the assessees to explain as to why they did not file estimates of advance tax payable by them in accordance with Section 212(3A). Of this, there is no explanation.

15. The next limb of the assessees' explanation was that the firm had been penalised for the default under Section 273(c), and so the partners should not be penalised for the same default. We have not been able to discover any provision of the law which bars imposition of penalty on a partner on the ground that the firm has been penalised.

Under section 3 read with Section 2(31) of the Act, both the firm and the partners are assessees and both are under an obligation to file their estimates of advance tax independently of each other. Causes of action can, therefore, arise in the cases of both if the default mentioned in Section 273(c) is committed by either. The assessees had sought assistance from the decisionof their Lordships of the Punjab and Haryana High Court in the case of Smt. Parvati Devi (supra). The facts of the said decision, however, have no similarity with those of the present case. There, it was found that the firm could not have filed the estimate of its advance tax 'due to ignorance of its own income'.

This being so, the partners were also found to have reasonable cause for not estimating their respective shares of income from the said firm. In the present case, it has not been found as a fact that the firm had a reasonable cause for not filing its estimate of advance tax in terms of Sub-section (3A) of Section 212. On the contrary, it has been found, on the assessees' own admission, that the firm had no reasonable cause. No assistance can, therefore, be had from the ratio of the aforesaid decision to resolve the present controversy. The other decisions referred to by the assessees did not pertain to the default under Section 273(c). They are, therefore, of no help to the assessees.

In the result, we have to reject the assessees' contention on merits also.

16. It was contended in the alternative by the assessees' learned counsel that if penalty had to be imposed, it should not be more than 10 per cent of the difference between the assessed tax and the tax demanded under Section 210. This request of the learned counsel of the assessees appears to us to be reasonable and we, accordingly, direct that the ITO will recompute the penalties imposable on the assessee-partners at the rate of 10 per cent of the difference between the assessed tax as defined in Sub-section (2) of Section 215 and the tax demanded under Section 210.


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