1. The following question has been referred to this court for its opinion by the Income-tax Appellate Tribunal at the instance of the assessee :
'Whether, on the facts and in the circumstances of the case, the provisions of section 212(3A) are attracted and the levy of penalty of Rs. 8,977 under section 273(c) is justified in law ?'
2. The assessee is a registered firm and for the assessment year 1970-71, the Income-tax Officer raised an advance tax demand under section 210 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), in a sum of Rs. 49,722 in August, 1969, based on the then latest completed assessment for the year 1964-65 which showed a total income of Rs. 2,13,750. The assessee, without complying with the said demand, sent an estimate under section 212(1) on September 6, 1969, estimating its total income at Rs. 1,16,000 and the tax thereon at Rs. 14,916. Thereafter, the assessee filed a return of income for the year 1970-71 showing an income of Rs. 2,67,935. However, the assessment was completed on a total income of Rs. 5,87,200 resulting in a tax demand of Rs. 1,39,577. The Income-tax Officer thereafter initiated penalty proceedings for the assessee's failure to file an estimate in accordance with section 212(3A) of the Act and ultimately levied a penalty of Rs. 8,977.
3. Against the said levy of penalty, the assessee appealed to the Appellate Assistant Commissioner contending that since the assessee has filed an estimate of advance tax on September 6, 1969, under section 212, there was no obligation on its part to make an estimate under section 212(3A) and that, therefore, the levy of penalty was not sustainable in law. The Appellate Assistant Commissioner held that the firm had filed an estimate revising the demand made by the Income-tax Officer and that even though it happened to be an underestimate calling for action under section 273(a), there was no failure to comply with the terms of section 212(3A) on the part of the assessee. In that view, he cancelled the levy of penalty made by the Income-tax Officer.
4. The Revenue took the matter in appeal contending that the interpretation placed by the Appellate Assistant Commissioner on section 212(3A) is not correct, that wherever an assessee's current income on which advance tax is payable exceeds by 33-1/2% of the demand raised by the Income-tax Officer, there is an obligation to file an estimate under section 212(3A) and that the failure to do so attracts the provisions of section 273(c). In that view, the Tribunal held that the assessee is under an obligation to file an estimate under section 212(3A) and since he has not done so, the penalty levied is legally justifiable. Aggrieved by the decision of the Tribunal, the assessee has sought and obtained a reference to this court on the question referred to above.
5. From the facts stated above, it will be clear that the only point that is to be considered by us in this case is whether, on the facts and circumstances of this case, there is an obligation on the part of the assessee to make an estimate under section 212(3A). The scheme of advance tax is as follows. In the case of the assessees who are regularly assessed, the Income-tax Officer raises a demand on the basis of the latest completed assessment under section 210. The tax on the current income is to be collected in advance and the current income is estimated by the Income-tax Officer on the basis of the latest completed assessment. However, the assessee, who has the material to know what his current income is, is given an option under section 212(1) to estimate his current income and then reduce the advance tax payable by filing an estimate. He can also file a revised estimate thereafter in accordance with section 212(3A) which was introduced by the Finance Act of 1969 with effect from April 1, 1969. Section 212(3A) runs 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 33-113 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 -
(i) the current income, and
(ii) the advance tax payable by him on the current income calculated in the manner laid down in section 209,
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 sub-section (2).'
6. Having regard to the language of the said section, we are not inclined to accept the contention of the assessee that once an estimate is filed under section 212(1), there is no obligation to make any estimate under section 212(3A). We find that section 212(3A) extracted above requires the assessee on whom a notice has been issued under section 210 to make an upward revision of the tax if the current income exceeds the advance tax demanded by 33 1/3 per cent. There is nothing in section 212(3A) to indicate that this should be exercised only as soon as the receipt of a demand under section 210 and not on any later occasion. It is no doubt true, the assessee may, on receiving a demand for advance tax, reduce the demand by referring to his current income under section 212(1) if the situation so warranted. But that does not absolve the assessee from his liability to estimate the same under section 212(3A) if the current income increases after making the estimate under section 212(1). If the current income increases after making an estimate under section 212(1), the assessee is bound to send a fresh estimate under section 212(3A) or a revised estimate under section 212(2). If we agree with the contention put forward on behalf of the assessee that once an estimate is filed under section 212(1), there is no obligation on the part of the assessee to submit an estimate under section 212(3A) and if such an interpretation is placed on section 212(3A), then that section will become otiose. The filing of a revised estimate under section 212(2) and the filing of a fresh estimate under section 212(3A) are separate steps which would be taken by the assessee and they operate in two different fields. Sections 212(1) and 212(2) operate whenever the tax on the current incomes are lower than the demand under section 210. Section 212(3A), however, comes into operation only if the tax on the current income exceeds by the stipulated percentage over the tax demanded under section 210. It is also possible for an assessee to revise that estimate under section 212(3A) by a subsequent revision as section 212(2) is also applicable to such a situation. We have to hold therefore that there is an obligation on the part of the assessee to file an estimate under section 212(3A) and the assessee not having filed the estimate as required by him, the penalty levied cannot be held to be unjustified.
7. The learned counsel for the assessee, however, refers to the decision of the Bombay High Court in Hind Products (P.) Ltd. v. CIT : 121ITR903(Bom) , in support of his plea that once having given an estimate under section 212(1), the assessee is not under an obligation to submit an estimate under section 212(3A). But we do not see how that decision will apply to the facts of this case. There, the assessee filed an estimate of losses. However, profits accrued subsequently when the Income-tax Officer held that the estimate filed by the assessee was mala fide and unreal and, therefore, penalty was called for. When the matter reached the Bombay High Court, it was held that the estimated income may or may not be the same as the ultimate returned income shown by the assessee, that the word 'estimate' implies the concept of approximation and it can never be accurate, that therefore, merely because at the end of the year, an assessee is shown to have earned an income which is more than that shown in the estimate filed under section 18A(2) of the 1922 Act, which fact alone will not by itself indicate that the estimate was known to be untrue or that the assessee had filed an estimate having reason to believe that it was untrue. That situation does not arise here. Here we are concerned with the question as to whether the assessee who has filed an estimate under section 212(1) ceases to be under an obligation to file a return under section 212(3A). That question did not come up for consideration in the said decision.
8. In CIT v. Bharat Machinery & Hardware Mart : 136ITR875(Guj) , the Gujarat High Court, while considering the scope of section 212(3A) proceeded to hold that the question of the assessee being required to make an estimate of current income for purposes of advance tax under section 212(3A) arises only when he could reasonably be attributed with the knowledge that his current income was likely to be greater than the income on which advance tax was payable under section 210 and that the sine qua non for complying with the provisions of section 212(3A) is that the advance tax payable on the current income exceeded the amount of advance tax demanded from the assessee under section 210 by more than 33 1/3%. That condition is satisfied here and the mere fact that the assessee has earlier filed an estimate under section 212(1) showing a lesser income than what was estimated by the Income-tax Officer will not absolve him from filing an estimate under section 212(3A) if his income has exceeded the estimated income by 33 1/3%.
9. The decision of the Calcutta High Court in Ramnagar Cane & Sugar Co. Ltd. v. CIT : 134ITR609(Cal) may not apply to the facts of this case for, in that case, the court found that the assessee had no idea as to his actual-profits at the time when it paid advance tax on the basis of the profit earned in the immediately preceding year. It is for that reason that the court held that there is no failure on the part of the assessee to file an estimate of such tax in terms of section 212(3A) and, therefore, the order of penalty levied under section 273 was not justified.
10. In this case, after the Income-tax Officer had issued a demand based on the last completed assessment, the assessee, without accepting that demand, submitted his own estimate. Later, the assessee himself filed a return of income showing a considerably higher income than his estimated income. The fact that he made an estimate under section 212 does not dispense with his obligation to make a further estimate under section 212(3A). His failure to file an estimate under that section clearly attracts the provisions of section 273(c).
11. In this view of the matter, the question referred to us has to be and is answered in the affirmative and against the assessee. The Revenue will have its costs from the assessee. Counsel's fee Rs. 500.