Advance-tax estimate must be honestly based on available accounts; penalty upheld where the estimate was unsupported and materially inaccurate.

Penalty for an advance-tax estimate was upheld because the estimate was not shown to be an honest one based on the accounts available when it was filed. The court found a substantial disparity between the estimated and assessed income, and the assessee failed to explain the basis of the estimate or to show that it reflected the then existing accounts. On that record, the finding that the assessee knew or had reason to believe the estimate was untrue was sustained, and the levy of penalty was held lawful.

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Issues: Whether the levy of penalty under section 18A(9) read with section 28(1)(c) of the Income-tax Act, 1922 was lawful on the facts of the case.

Analysis: The estimate furnished under section 18A(2) was required to be an honest estimate made on the basis of the accounts available at the time of filing. The disparity between the estimated income and the assessed income was substantial, and the assessee failed to show the basis on which the estimate had been made. The materials before the authorities did not establish that the estimate was supported by the state of accounts then existing, and the explanation offered was not accepted. In these circumstances, the finding that the assessee knew or had reason to believe that the estimate was untrue was supported by the record.

Conclusion: The levy of penalty was held to be lawful and the question was answered in favour of the Revenue.

Ratio Decidendi: For the purposes of section 18A(9), an assessee must show that the advance-tax estimate was honestly made on a reasonable basis from the accounts available when the estimate was furnished; where he fails to do so and the estimate is materially inconsistent with the assessed income, penalty is justified.

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