Advance-tax penalty requires proof that the estimate was knowingly false when filed, not merely that later profits arose.

Penalty under the advance-tax scheme applies only where the assessee, at the time of filing the estimate, knew or had reason to believe that the estimate was untrue. An estimate based on then-available trial balance and business results is not rendered false merely because the year later ends in profit. Where the assessee discloses the material used for the estimate, the revenue must prove that profit could reasonably have been foreseen or that the estimate was otherwise knowingly inaccurate. Penal provisions are to be strictly construed, and later events matter only if they were reasonably foreseeable when the estimate was made.

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Issues: Whether penalty under the advance-tax provisions was exigible where the assessee filed an estimate on the basis of then-available trial balance showing loss, but later the year ended in profit.

Analysis: The estimate was required under the advance-tax scheme and penalty could follow only if the assessee had furnished an estimate which it knew or had reason to believe was untrue. An estimate is by nature approximate, and the mere fact that the ultimate income exceeded the estimate does not, by itself, establish that the estimate was false when made. Where the assessee places on record the material on which the estimate was based, including business results up to the relevant date, the revenue must show that the assessee could reasonably have foreseen profits or otherwise knew the estimate to be untrue. Penal provisions must be strictly construed, and later events are relevant only if they were reasonably foreseeable at the time of filing.

Conclusion: The assessee's estimate was bona fide on the material available when it was filed, and penalty was not leviable. The answer to the reference was therefore against the revenue and in favour of the assessee.

Ratio Decidendi: For penalty under the advance-tax penalty provision, the revenue must prove that the assessee, at the time of filing the estimate, knew or had reason to believe that the estimate was untrue; a later profit by itself does not establish falsity of the estimate.

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