Advance-tax estimates and penalty sustained where the assessee knew, or should have known, the estimates were untrue.

Penalty for furnishing advance-tax estimates that were not honestly made was upheld where the assessee, engaged in a fluctuating jute and hemp business, filed estimates early in the accounting year but later had enough information before the revised-estimate deadline to know the true position and did not revise them. The failure to file a revised estimate was treated as a relevant circumstance in assessing the assessee's state of mind when the original estimate was filed. On those materials, the court found that the estimates were known, or had reason to be believed, to be untrue, and sustained the penalties under the Indian Income-tax Act, 1922.

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Issues: Whether the Tribunal was justified in confirming the penalties imposed under section 18A(9) read with section 28(1)(c) of the Indian Income-tax Act, 1922, on the footing that the assessee had furnished advance-tax estimates which it knew or had reason to believe to be untrue.

Analysis: The assessee's business in jute and hemp was one of fluctuating results, and estimates were filed early in the accounting year when the final trading position could not be predicted with certainty. Even so, the receipt of credit and debit notes after the close of the year was a normal incident of the business, and the Tribunal found that the assessee knew, or had reason to know, the true position before the revised-estimate deadline but did not act on it. In this background, the failure to file a revised estimate was a relevant circumstance in assessing the assessee's state of mind at the time of the original estimate. The question was whether there were materials to show that the estimates were not honestly made, and the Court held that such materials existed.

Conclusion: The Tribunal was justified in upholding the penalties, and the answer to the referred question was in the affirmative in favour of the revenue.

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