TaxTMI 
TaxTMI 
2005 (1) TMI 79
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.... the assessee's income on account of cessation of liability under section 41(1) of the Income-tax Act?" The assessee is engaged in the manufacture of cotton. It filed the estimate of advance tax for the assessment year 1977-78 on July 3, 1976, showing the tax liability at Rs. 6,050. Tax deducted at source was Rs. 1,090. Later on, it filed return of income declaring a total income of Rs. 88,800. The Assessing Officer made addition of Rs. 5,80,078 and determined the tax liability of the assessee at Rs. 1,62,738. For the assessment year 1978-79, the assessee filed the estimate of advance tax on November 11, 1977, at an income of Rs. 50,000. Advance tax deducted at source was Rs. 2,750. In the return of income, the assessee declared its incom....
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....arly, in 'Palle Khata' where the assessee has unsupported amounts as credits, the natural result is an addition. To say that assessee could not foresee it is just like trying to avoid the inevitable. The addition under section 41(1) is such which was made by the Income-tax Officer and upheld till the level of the Income-tax Appellate Tribunal. The remission of liability was income of the assessee and there was no other alternative possible. Now if the assessee wants to make issues where none exists, it is not any body else's doing but the assessee's own. What I feel is that it was nothing but a device used by the assessee to postpone its liability. There is no denying the fact that the assessee did furnish an estimate of advance tax payable....
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....ected to take into account these amounts while making the estimate of advance tax. Therefore, merely because the assessee did not include the sum of Rs. 5,80,800 in the estimate of advance tax for the year 1977-78 and the sum of Rs. 1,30,393 in the estimate of advance tax for the year 1978-79, it cannot be said that the assessee filed an untrue estimate knowingly and deliberately. Therefore, I hold that no penalty under section 273(a) was imposable with reference to the addition of Rs. 5,80,800 made in the year 1977-78 and with reference to the addition of Rs. 1,30,393 made in the year 1978-79. Reliance for this purpose is placed on the decision of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26. Th....
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....sisted. We, therefore, find that the Commissioner of Income-tax (Appeals) was correct in taking the view that the nature of the addition did not warrant the levy of penalty because at the time of filing of the estimate of advance tax, the assessee could not be said to have any knowledge that certain addition on the basis of cessation of liability could be made. Similar is the case with respect to the credit entries. If the Assessing Officer disbelieved the credits it was another matter but the assessee cannot be held liable for the addition made so far as filing of estimate of advance tax is concerned. The Commissioner of Income-tax (Appeals) has upheld the levy of penalty and has directed the Assessing Officer to recompute it after giving ....