1992 (7) TMI 61 - HC - Income Tax

Court cancels penalty under Income-tax Act, ruling failure to pay advance tax, not estimate, not penalized.

The High Court ruled in favor of the assessee, holding that the penalty under section 273(2)(c) of the Income-tax Act, 1961, was not justified. The Court ... Advance Tax, Penalty Issues:1. Interpretation of provisions related to advance tax payment and penalty under the Income-tax Act, 1961.2. Justification of cancellation of penalty imposed under section 273(2)(c) of the Income-tax Act, 1961.Analysis:Issue 1: Interpretation of provisions related to advance tax payment and penalty under the Income-tax Act, 1961:The case involved a situation where the assessee, an individual deriving income from various sources, filed an estimate of advance tax payable under section 212(3A) of the Income-tax Act, 1961, but failed to make the payment as per the estimate. The Income-tax Officer initiated penalty proceedings under section 273(2)(c) for this default. However, the Income-tax Appellate Tribunal canceled the penalty, stating that failure to pay advance tax does not attract penalty under section 273(2)(c). The Tribunal highlighted that the penalty can only be imposed for the failure to furnish an estimate of advance tax, not for the failure to pay the amount of advance tax. The Tribunal emphasized that the language of the relevant provision, section 273(2)(c), specifically addresses the failure to furnish an estimate, not the failure to pay the advance tax. Therefore, the Tribunal held that the penalty was not justified in this case.Issue 2: Justification of cancellation of penalty imposed under section 273(2)(c) of the Income-tax Act, 1961:The Appellate Assistant Commissioner upheld the penalty imposed by the Income-tax Officer, but the Income-tax Appellate Tribunal reversed this decision. The Tribunal found that the assessee had indeed filed an estimate of advance tax under section 212(3A) before the due date but failed to make the payment as per the estimate. The Tribunal concluded that the provisions of section 273(2)(c) would not apply in this scenario. The Tribunal's decision was based on the interpretation that penalty under section 273(2)(c) is triggered only by the failure to furnish an estimate of advance tax, not by the failure to pay the advance tax as per the estimate. Therefore, the Tribunal canceled the penalty imposed on the assessee. The High Court, in its judgment, upheld the Tribunal's decision, emphasizing that the penalty provision was not applicable in cases where the assessee fails to make the payment of advance tax as per the estimate but has furnished the estimate as required by law.In conclusion, the High Court answered the questions referred to it in favor of the assessee, stating that the penalty under section 273(2)(c) of the Income-tax Act, 1961, was not justified in the given circumstances. The Court highlighted the distinction between the failure to furnish an estimate of advance tax and the failure to pay the advance tax as per the estimate, clarifying that the penalty provision applies only to the former situation.