Advance-tax penalty under Section 273(b): bona fide belief rejected, but advance tax paid must be deducted when recomputing penalty.

Penalty under Section 273(b) was discussed in the context of an assessee's failure to file an advance-tax estimate under Section 212(3). The article notes that a plea of bona fide belief that no estimate was required was rejected on the facts, so the penalty could not be deleted on that ground. It also states that, for penalty computation, assessed tax must be taken net of advance tax already paid; accordingly, advance tax of Rs. 87,000 had to be deducted and the penalty recomputed on that basis.

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Issues: (i) Whether penalty under Section 273(b) could be sustained on the plea that the assessee had a bona fide belief that no estimate was required to be filed under Section 212(3). (ii) Whether advance tax of Rs. 87,000 paid on the basis of the estimate filed on 31 March 1975 had to be taken into account while computing the penalty.

Issue (i): Whether penalty under Section 273(b) could be sustained on the plea that the assessee had a bona fide belief that no estimate was required to be filed under Section 212(3).

Analysis: The assessee was a newly formed private limited company and the statutory obligation to file an estimate for advance tax purposes was attracted. The plea that no estimate was required to be filed was not accepted on the facts found by the lower authorities.

Conclusion: The contention based on bona fide belief was rejected, and the penalty could not be deleted on that ground.

Issue (ii): Whether advance tax of Rs. 87,000 paid on the basis of the estimate filed on 31 March 1975 had to be taken into account while computing the penalty.

Analysis: For the purpose of penalty under Section 273(b), the relevant base is the assessed tax, meaning the tax payable after giving credit for advance tax already paid. The amount of Rs. 87,000 was required to be deducted while recomputing the penalty.

Conclusion: The advance tax payment had to be considered, and the penalty was directed to be recomputed accordingly.

Final Conclusion: The assessee obtained only partial relief, as the plea against penalty failed, but the quantum of penalty was required to be recomputed by giving credit for advance tax paid.

Ratio Decidendi: For penalty under Section 273(b), assessed tax must be computed after deducting advance tax paid, and the penalty cannot be worked out on gross tax alone.

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