Strict construction of advance-tax penalty provisions: later income increase does not prove an estimate was false when filed.

Section 18A(9)(a) is a penal provision and must be construed strictly; penalty for an advance-tax estimate arises only if, when furnishing it, the assessee knew or had reason to believe the estimate was untrue. A later increase in income, or failure to file a revised estimate, does not by itself prove the requisite mens rea. On the facts, the estimate was treated as honest and fair on the basis of the accounts and prevailing income trend, and there was insufficient material to show it was false when submitted. Penalty was therefore not exigible.

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Issues: Whether penalty could be levied for furnishing an estimate of advance tax under section 18A(2) that was later found to be lower than the final assessment, on the ground that the assessee knew or had reason to believe the estimate was untrue when it was made.

Analysis: Section 18A(9)(a) is a penal provision and must be construed strictly. Liability turns on the assessee's state of mind at the time the estimate was furnished, namely whether the estimate was knowingly or recklessly untrue when made. The subsequent failure to file a revised estimate, even if the income later increased, does not establish the requisite mens rea for penalty under section 18A(9)(a). On the facts, the estimate was treated as an honest and fair one based on the accounts and prevailing trend of income, and there was no sufficient material to show that it was false when submitted.

Conclusion: Penalty was not exigible, and the answer was in favour of the assessee.

Ratio Decidendi: Penalty for an untrue advance-tax estimate is attracted only if the assessee knew or had reason to believe, at the time of furnishing the estimate, that it was false; later events or failure to revise the estimate do not by themselves prove culpability.

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