TMI Blog1998 (8) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... n came to Rs. 16,97,105. The AO completed the assessment on 27th March, 1987, determining total income at Rs. 26,86,310. However, the total income of the assessee was reduced to Rs. 26,85,130 in appeal by the CIT(A). According to the AO, the advance tax payable on the basis of the estimate filed by the assessee was less than 75 per cent of the assessed tax and, therefore, he initiated penalty proceedings under s. 273(2)(a) of the IT Act, 1961. The AO also issued a notice to the assessee requiring it to show cause as to why a penalty under s. 273(2)(a) of the Act, should not be levied for the default committed by it. A reply to the said show-cause notice was submitted by the assessee. It was also pleaded before the AO that the accounts of the assessee-company were not completed at the time of furnishing the estimate and, therefore, the correct income could not be estimated. While rejecting the assessee's contention, the AO held that the actual figures of income for the asst. yr. 1983-84 were available with the assessee and, therefore, the estimate would have been based on those figures. The AO further observed that the assessee-company had not cared even to file a higher estimate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... major portion of the income would be set off against the loss for the earlier, only an amount of Rs. 3 to 4 lakhs would be the net income for the year under consideration. In view of the above submissions, the assessee urged before the CIT(A) that the assessee had acted in a bona fide manner while filing the estimate and, therefore, the penalty levied by the AO should be cancelled. 3. The CIT(A) after considering the relevant facts of the case and the submissions made on behalf of the assessee, confirmed the action of the AO in levying the penalty under s. 273(2)(a) of the Act. However, the CIT(A) reduced the amount of penalty to Rs. 1,50,000 against Rs. 10 lakhs imposed by the AO. The CIT(A) has held that if it is assumed that the books of the assessee-company for the period relevant to asst. yr. 1983-84 had not been completed at the time of filing the estimate in question, it was unimaginable that the assessee was not aware of the profitability of the period relevant to the asst. yr. 1983-84. He further observed that the income of the assessee for asst. yr. 1983-84 exceeded Rs. 20 lakhs and this was more or less the amount of loss for asst. yr. 1981-82, which was required to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00. . Asst. yr. 1981-82 23-11-1981 Revised return of income filed—Loss Rs. 24,42,890 24-9-1984 AO for asst. yr. 1981-82 passed—Income Rs. 84,82,490 30-3-1988 Fresh AO passed for asst. yr. 1981-82—Loss Rs. 23,13,510. . Asst. yr. 1982-83 15-9-1982 Return of Income filed—Income Rs. Nil 10-1-1983 Revised return of income filed—Income Rs. Nil 15-3-1985 AO passed—Income Rs. 5,48,520 24-4-1986 Rectification order passed—Income Rs. 2,84,700 . Asst. yr. 1983-84 29-8-1983 Return of Income filed—Income Rs. Nil 22-3-1984 Revised return of income filed—Loss Rs. 2,70,745 27-3-1986 AO passed—Income Rs. 22,44,176 29-7-1988 Order under s. 154 passed—Income Rs. 2,16,366 . Asst. yr. 1984-85 15-6-1983 Estimate of income filed—Income Rs. 3,38,000 10-9-1986 Return of income filed—Income Rs. 24,86,600 27-3-1987 AO passed—Income Rs. 26,86,310 Ahmedabad Sd/- Dt. 23-12-1997 R.K. Carpenter" 5. In view of the above chart, the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed the income at Rs. 26,86,310. Thus it cannot be said that the estimate filed by the assessee was an honest estimate. He, therefore, contended that the penalty levied is justified. 7. We have carefully considered the rival submissions and have also gone through the entire material placed on record. In our opinion the penalty under s. 273(2)(a) is leviable only when the assessee has furnished an estimate of advance tax payable by it which it knew or had reason to believe to be untrue. At the same time it is also true that only because there is a difference in the income estimated by the assessee on the relevant date and the income assessed by the AO no penalty under s. 273(2)(a) could be levied. The knowledge that the estimate is untrue or which the assessee believes to be untrue must be at the point of time when he submits the estimate. In the instant case, the estimate for the year under consideration was filed on 15th June, 1983. It was explained by the assessee before the authorities below that the estimate filed by it on 15th June, 1983, was true and correct. The assessee also claimed that the estimate filed by it was an honest estimate based on the accounts which were av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that for asst. yr. 1981-82 the assessee had filed its return of income showing loss at Rs. 24,42,890 and ultimately the assessment was completed on 30th March, 1988, determining total loss at Rs. 23,13,510. In this view of the matter, it is also not disputed that the accounts for the period relevant to asst. yr. 1983-84 were not available with the assessee at the time of filing of estimate and obviously the assessee was under the impression that a major portion of the loss determined for asst. yr. 1981-82 would be available for being set off against the income of the year under consideration. In absence of accounts for asst. yr. 1983-84, the assessee could not have anticipated that the entire loss for asst. yr. 1981-82 would be adjusted against the income for asst. yr. 1983-84. 8. Keeping in view the above narrated facts, the only conclusion which can be drawn in the instant case is that the estimate submitted by the assessee on 15th June, 1983 was an honest estimate based on the accounts, which were available with the assessee on the date of estimate. It is also well-settled law that where the estimate of income is submitted on the basis of bona fide belief but it turns out to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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