TMI Blog1972 (8) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to pay any of the instalments specified in the notice of demand and the Income-tax Officer, therefore, issued a notice dated 4th May, 1966, calling upon the assessee to show cause why penalty should not be imposed upon it for default in payment of the instalments under section 221, sub-section (1), read with section 218. The show-cause notice was served on the assessee on 12th May, 1966, but the assessee failed and neglected to give any reply with the result that the Income-tax Officer ultimately passed an order dated 4th August, 1966, levying penalty of Rs. 1,712 on the assessee under section 221, sub-section (1), read with section 218. The assessee preferred an appeal against the order of penalty to the Appellate Assistant Commissioner but the appeal was unsuccessful. Thereupon, a further appeal was preferred to the Tribunal but this appeal also met with the same fate. The Tribunal, thereafter, at the instance of the assessee, referred the following question of law arising out of its order for the opinion of this court. " Whether, on facts and in the circumstances of the case, the penalty levied under section 221(1) of the Income-tax Act, 1961, is valid ? " The determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n requires that the total income, exclusive of capital gains, of the assessee referred to in sub-clause (i) of clause (a) of section 209 should have exceeded the maximum amount not chargeable to income-tax by two thousand five hundred rupees. The total income referred to in sub-clause (i) of clause (a) of section 209 is the total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment. If, therefore, it is found in the case of an assessee that his total income of the latest previous year in respect of which he has been assessed by way of regular assessment exceeded the maximum amount not chargeable to tax by two thousand five hundred rupees, he would be liable to pay advance tax in the financial year. The second condition applies to a case of a person who has not been assessed previously by way of regular assessment under the income-tax law and it required that such a person should "before the 1st day of March in each financial year, if his total income exclusive of capital gains of the period which would be the previous year for the immediately following assessment year is likely to exceed the maximum amount not chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on provisional assessment. The rates for determining the amount of tax are to be those in force in the financial year. Section 210 provides for making of an order for payment of advance, tax and, omitting portions immaterial, it reads as follows: "210. (1) Where a person has been previously assessed by way of regular assessment under this Act or under the Indian Income-tax Act, 1922 (XI of 1922), the Income-tax Officer may, on or after the 1st day of April in the financial by order in writing, require him to pay to the credit of the Central Government advance tax determined in accordance with the provisions of sections 207, 208 and 209. (2) The notice of demand issued under section 156 in pursuance of such order shall specify the instalments in which the advance tax is payable under section 211." Now, if the matter had rested here and no further provisions were made, an assessee against whom an order for payment of advance tax was made by the Income-tax Officer under section 210 would be liable to pay instalment of advance tax on the specified dates. But this might cause great hardship to the assessee, because the amount of advance tax specified in the order of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instalment as is not paid becomes due, send under sub-section (1) or sub-section (2) of section 212 an estimate or a revised estimate of the advance tax payable by him, he shall be deemed to be an assessee in default in respect of such instalment or instalments. (2) If any assessee has sent under sub-section (1) or sub-section (2) or sub-section (3) of section 212 an estimate or a revised estimate of the advance tax payable by him, but does not pay any instalment in accordance therewith on the date or dates specified in section 211, he shall be deemed to be an assessee in default in respect of such instalment or instalments......" What shall be the consequence of an assessee being in default in making payment of tax is provided in section 221, sub-section (1). That sub-section says that when an assessee is in default or is deemed to be in default in making payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under sub-section (2) of section 220, be liable to pay by way of penalty, an amount which, in the case of a continuing default, may be increased from time to time, so, however, that the total amount of penalty does not excee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble by him that he can file an estimate under section 212, sub-section (1) or sub-section (2). Here, in the present case, said the assessee, it estimated that a loss would arise to it during the relevant previous year and in fact the order of assessment which came to be made subsequently clearly shows that a loss was sustained by it and, therefore, there was no question of its submitting an estimate under sub-section (1) or sub-section (2) of section 212 and if that be so, the second condition could not possibly be said to be satisfied in its case. The assessee submitted that in the circumstances it could not be said to be in default in respect of the instalments of advance tax specified in the order of the Income-tax Officer and, consequently, no penalty could be levied upon it under section 221, sub-section (1). This argument of the assessee clearly ignores the scheme of advance payment of tax to which we have referred. It is clear from the scheme that if section 212 had not been enacted, the assessee would have been liable to pay advance tax according to the determination made by the Income-tax Officer on the basis of the regular assessment completed for the latest previous ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (2) of section 212 and the other, where no such estimate or revised estimate has been filed by him. Here, in the present case, the assessee did not file an estimate or revised estimate of the advance tax payable by it under sub-section (1) or sub-section (2) of section 212 and, therefore, manifestly, on the plain terms of the provision, sub-section (1) of section 218 must apply, once it is found that the assessee failed to pay the instalment of advance tax on the specified dates as required by the order under section 210. We have no doubt that the assessee could have filed an estimate under sub-section (1) of section 212 if it wanted to avoid compliance with the obligation to pay advance tax imposed by the order under section 210. It is no doubt true that the words used in section 212, sub-section (1), postulate that some advance tax may be payable by the assessee according to his own estimate of the income of the relevant previous year but it must be remembered that the Income-tax Act deals with tax on income and, therefore, the words used by the legislature would necessarily be couched in that form. These words used in section 212, sub-section (1), cannot be read in a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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