Advance-tax penalty requires statutory shortfall, and delayed payments made before year-end must be counted in full.

Penalty under section 273(2)(a) of the Income-tax Act applies only where the assessee furnishes an estimate known, or reasonably believed, to be untrue and the statutory shortfall is established. The relevant comparison is the tax actually paid during the financial year against 75% of the assessed tax, or the amount payable under section 210 notice, whichever is less. Advance-tax payments made before the close of the financial year, even if delayed beyond the due date, must be included in the computation. On the stated facts, no qualifying shortfall existed, so no penalty was leviable.

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Issues: Whether penalty under section 273(2)(a) of the Income-tax Act, 1961 was leviable for filing an untrue estimate of advance tax, and whether the tax paid during the financial year had to be taken into account if it was paid before the close of the financial year though after the due date.

Analysis: Penalty under section 273(2)(a) is attracted only when the assessee furnishes an estimate which he knew or had reason to believe to be untrue, but the quantum of penalty is governed by the shortfall between the tax actually paid during the relevant financial year and 75 per cent of the assessed tax, or the amount payable under a notice under section 210, whichever is less. On the facts, the tax paid by the assessee did not fall short of 75 per cent of the assessed tax, so the statutory basis for levying penalty was absent. For this computation, all advance tax payments made during the financial year, whether timely or delayed but made before the close of that year, were required to be included.

Conclusion: No penalty was leviable, and the cancellation of penalty was / upheld in favour of the assessee.

Ratio Decidendi: Penalty for an untrue advance-tax estimate cannot be sustained unless the statutory shortfall prescribed by section 273(2)(a) is established on the basis of all advance tax paid during the financial year.

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