Advance-tax estimate penalty fails where honest estimation is shown and no knowledge of falsity is proved.

Penalty under section 273(a) requires proof that the advance-tax estimate was untrue to the assessee's knowledge or belief; mere inaccuracy is not enough. An honest attempt to estimate income, supported by available records and a reasonable averaging method adopted before year-end figures were available, does not by itself establish contumacious conduct. Prior underestimation may be relevant in a proper case, but it cannot alone prove liability for the current year. On the stated facts, the estimate was not shown to be knowingly false, so the penalty was not sustainable.

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Issues: Whether penalty under section 273(a) of the Income-tax Act, 1961 was leviable for furnishing an estimate of advance tax alleged to be untrue to the knowledge or belief of the assessee.

Analysis: The estimate of advance tax need not be mathematically exact. The relevant enquiry is whether the assessee made an honest endeavour to estimate income and whether the estimate can be shown to be untrue to its knowledge or belief. The assessee had maintained a gross profit register for its units and adopted an averaging method for the last two months because the estimate had to be filed before the year-end figures were available. No positive material was brought to show contumacious conduct. Past underestimation, though relevant for quantum in a proper case, could not by itself establish liability for the present year.

Conclusion: The estimate was not proved to be untrue to the knowledge or belief of the assessee, and the penalty under section 273(a) was not sustainable.

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