Bona fide advance tax estimate based on available material defeats penalty under section 273(a) and cancels the levy.

Penalty under section 273(a) for failure to pay advance tax was held unsustainable where the assessee's estimate of income was bona fide and based on material available at the relevant time. The estimate was supported by projected income from partner firms, including one firm's communicated estimate and another firm's verified accounts, showing a reasonable factual foundation. On that basis, the penalty was cancelled and the addition for alleged default in advance tax payment was set aside.

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Issues: Whether penalty under section 273(a) of the Income-tax Act, 1961, was leviable where the assessee's estimate of advance tax was supported by material available at the relevant time.

Analysis: The assessee had estimated advance tax on the basis of the income projected from the partner firms, one of which had itself communicated an estimated income to the Income-tax Officer and the other of which was found, on verification, to have a supporting factual basis from its accounts. The estimate was held to be a bona fide estimate made on the material then available and not an estimate unsupported by any material.

Conclusion: Penalty under section 273(a) was not attracted and was cancelled.

Final Conclusion: The appeal succeeded, and the penalty imposed for failure to pay advance tax on the estimated income was set aside.

Ratio Decidendi: A penalty for failure to pay advance tax on estimated income cannot be sustained where the estimate is shown to have been made bona fide on a reasonable basis and supported by material available at the time.

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