1986 (7) TMI 179 - AT - Income Tax

Summary

Issues:
1. Confirmation of penalty under section 273(2)(a) of the Income-tax Act, 1961 for assessment year 1981-82.
2. Incorrect estimate of advance tax filed by the appellant firm.
3. Applicability of penalty provisions under section 273(2)(aa) for default.
4. Burden of proof on the revenue to establish knowingly false estimate.
5. Justification for penalty imposition based on substantial disparity between estimated and actual income.

Detailed Analysis:
1. The judgment concerns the confirmation of a penalty of Rs. 52,990 imposed by the ITO under section 273(2)(a) of the Income-tax Act, 1961 for the assessment year 1981-82. The penalty was contested in the second appeal by the appellant firm.

2. The appellant firm initially submitted an estimate of income of Rs. 90,160 under section 209A(4) on 11-9-1980, later revising it to Rs. 8 lakhs on 13-3-1981. However, the actual income filed in the return was Rs. 38,79,170, resulting in the penalty imposition by the ITO.

3. The penalty was incorrectly captioned under section 273(2)(a) by the ITO, but the correct provision for penalty was determined to be under section 273(2)(aa) based on the facts of the case. The wrong mention of the section was deemed not consequential as long as the proceedings were correctly initiated under section 273.

4. The burden of proof to establish that the appellant knowingly filed an untrue estimate of advance tax was on the revenue. The ITO solicited information regarding the appellant's business transactions to ascertain the reasonableness of the estimate. The substantial disparity between the estimated and actual income led to the confirmation of the penalty.

5. The appellant's argument that the estimate of Rs. 8 lakhs was bona fide due to unforeseen business transactions was not accepted, as the appellant could have reasonably estimated its income based on known transactions before the filing of the estimate. The judgment emphasized that a mere self-serving statement by the assessee without justifying the basis of the estimate would not be sufficient to escape liability under section 273.

6. Ultimately, the appellate tribunal dismissed the appeal and confirmed the penalty order, considering the substantial disparity between the estimated and actual income as a valid basis for penalty imposition under section 273(2)(aa).