1990 (12) TMI 137 - AT - Income Tax

Tribunal cancels penalty under IT Act for genuine income estimate, emphasizing reasonableness of advance tax estimates

PREM NATH DIESEL PVT. LTD. Versus INSPECTING ASSISTANT COMMISSIONER.

The Tribunal ruled in favor of the appellant, canceling the penalty imposed under section 273 of the IT Act for the assessment year 1980-81. The decision ... - Issues:1. Levy of penalty under section 273 of the IT Act, 1961 for the assessment year 1980-81.Detailed Analysis:The appellant company, dealing in products of M/s. General Motors of USA, appealed against the penalty of Rs. 25,000 imposed by the CIT(A) under section 273 of the IT Act, 1961. The appellant submitted revised income estimates based on sales figures up to March 10, 1980, with a gross profit rate of 20%, considering variations due to unexpected increases in sales post-March 10, 1980, and additional commission income received. The appellant argued that the estimate of Rs. 10 lakhs was accurate, citing reliance on the g.p. rate of the preceding year and the judgment of the Calcutta High Court in a similar case (CIT vs. Birla Cotton Spinning and Weaving Mills Ltd.).The Departmental Representative contended that the penalty was justified, alleging that the appellant deliberately underestimated income to defer advance tax payment, citing wide variations in monthly sales figures, historical g.p. rates, and delayed tax filings as evidence of intentional tax avoidance. The assessing authority and CIT(A) upheld the penalty, emphasizing the appellant's history of non-compliance, including a previous penalty in the preceding assessment year.The Tribunal considered both parties' arguments and reviewed the relevant facts. It noted that the estimate of current income for advance tax purposes should be based on the assessee's bona fide estimate at the time of filing. The Tribunal analyzed sales figures and profit rates, concluding that the appellant's estimate of Rs. 10 lakhs was reasonable given the circumstances, such as unexpected sales spikes and additional income received post-estimate submission. The Tribunal referenced a detailed reconciliation of estimated and assessed income to support its decision, emphasizing that slight discrepancies in estimates do not warrant penalties under section 273 of the IT Act.Ultimately, the Tribunal ruled in favor of the appellant, canceling the penalty imposed by the CIT(A) and allowing the appeal based on the genuine nature of the appellant's income estimate and the absence of deliberate tax evasion.This judgment highlights the importance of bona fide income estimates for advance tax purposes, considering the circumstances and reasonableness of the assessee's calculations to determine the applicability of penalties under tax laws.