TaxTMI 
TaxTMI 
TaxTMI 
1985 (1) TMI 29
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....ng an income of Rs. 11.15 lakhs on August 30, 1965. It filed another estimate on November 23, 1965, showing an estimated income of Rs. 7,00,000. It substituted these estimates by another estimate on March 9, 1965, declaring an estimated income of Rs. 6.81 lakhs which consisted of business income of Rs. 3.40 lakhs and dividend income of Rs. 3.40 lakhs. The assessee submitted the return declaring income from property at Rs. 26,754, business income of Rs. 9,80,431 and dividend income of Rs. 3,38,937. Income was assessed by the ITO for the first year under reference only enhancing the business income from Rs. 9,80,431 to Rs. 10,01,752. The ITO started penalty proceedings against the assessee under s. 273 of the Act. For the second year under reference, the assessee filed an estimate under s. 212 of the Act at Rs. 3,35,000, whereas income returned was Rs. 14,86,000. After giving effect to the appellate order, the income was finally assessed at Rs. 16,25,636. The ITO started penalty proceedings against the assessee in terms of s. 273 of the Act. The income which was finally determined was more than the income returned by the assessee. In the course of penalty proceedings, the assessee ....
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....ot included in the estimate of income. Revenue also relied on the decision of the Calcutta High Court in the case of United Asian Traders Ltd. v. CIT [1970] 77 ITR 711 and contended that the facts of that case are on all fours with the facts of the present case. The learned counsel for the assessee, on the other hand, contended that the only discrepancy that could be found was in regard to ginning factories. The assessee had to deal with agricultural products and that the variation of yield would depend upon various factors with reference to agricultural products and that no yardstick could be found in that regard and as such when the assessee had given a basis and when the AAC found that basis to be proper, his orders for the two years required no interference. It was stated that the assessee had been always paying advance tax regularly as demanded and that it had paid more advance tax than what has become payable. He stated that in the immediately preceding year advance tax paid was Rs. 15.48 lakhs and tax demanded was Rs. 9-92 lakhs resulting in refund. The Tribunal upheld the view taken by the AAC for these two years under reference. The Tribunal held that, on the facts and ci....
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....for the parties. One of the decisions heavily relied on by the Revenue is in the case of Appavoo Pillai v. CIT [1965] 57 ITR 41 (Mad). There, the assessee had several sources of income ; one of them is a bus transport business. In September, 1953, the ITO issued a demand under s. 18A(1) of the Indian I.T. Act, 1922, basing the demand on the latest completed assessment, which was that of the assessment year 1948-49. Under sub-s. (2), the assessee has the liberty of estimating his income and of paying advance tax in accordance with such estimate. In the estimate so submitted by him, he gave the estimated income as Rs. 25,000, but the total income as furnished by him came to Rs. 35,515. On assessment, however, his income was, fixed at Rs. 90,759. The ITO thereafter proceeded to apply s. 18A(9) of the 1922 Act. In the view, therefore, that the assessee's estimate of income was untrue to his knowledge, the ITO imposed the penalty in question. The assessee's explanation was that the higher figure of the assessable income arrived at by the ITO was mainly due to disallowances of depreciation to the extent of about Rs. 20,000 odd. It was also claimed that part of the addition made by the I....
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....ute and hemp, and the fluctuation in prices of these commodities being very heavy, it was not possible to predict what would be the profit or loss of the business at the end of the year. On the dates on which the assessee had submitted the estimate under s. 18A(2) of the Act, the assessee's account showed business losses and the assessee had no reason to expect that there would be a profit at the end of the year for either of these two years. Therefore, it was contended that there was no reason for the ITO to be satisfied that the assessee had furnished the estimate which it knew or had reason to believe to be untrue. The appeal to the AAC was rejected. Before the Tribunal, it was contended that the assessee was entitled to file its estimates of income at any time under s. 18A(2) of the Indian I.T. Act, 1922, and there was no obligation on the assessee to wait till the end of the accounting year before filing its estimate under that sub-section. As, in this case, the assessee made estimates of its business results in the months of June and July and, according to the state of accounts at that time, the assessee had reasonable grounds for estimating the trading results to be losses f....
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....ecause he had filed it after the expiry of the accounting year, that he had such knowledge. In the case of Ramnagar Came & Sugar Co. Ltd. v. CIT [1982] 134 ITR 609 (Cal), the assessee company carried; on the business of manufacture and sale of sugar. Its previous year for the assessment year 1971-72 ended on August 31, 1970. It paid advance tax as demanded by the ITO under s. 210 of the I.T. Act, 1961, on an income of Rs. 5.44 lakhs. The last instalment of advance tax was paid on January 15, 1971. On May 7, 1971, the books of account of the assessee company were audited and huge profits arose on the valuation of closing stock. The ITO completed the assessment under s. 144 on a total income of Rs. 26.50 lakhs which was reduced to Rs. 24 lakhs by the Tribunal. The ITO took the view that the assessee had failed to comply with the provisions of s. 212(3A) and imposed a penalty under s. 273 which was upheld by the AAC and the Tribunal. The court held that it could be reasonably said that the assessee had no idea as to the actual profits at the time when it had paid advance tax on the basis of profits earned in the immediately preceding year. Thus, there was no failure on the part of th....
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....o file an estimate under s. 212. Such an estimate cannot be made with mathematical precision. The estimate in that sense can never be accurate. Whether an assessee had knowingly filed a false estimate or he had reason to believe that the estimate is untrue has to be determined on the facts and circumstances appearing in each case. An assessee, if he is carrying on business, has to make a fair estimate of the profits expected to be earned during the relevant previous year. The estimate has to be based on objective facts. The assessee is required to take into account the normal trend of his business up to the time when he is required to file an estimate. The trend of the business by an assessee may be inaccurate or incorrect but this will not necessarily make the estimate with regard to the income an untrue one unless it can be shown that such estimate was made without any basis at all. It is for the assessee to produce materials, the materials on which he has framed his estimate. It is for the Revenue to show that the materials on which the estimate is based are no materials and no reasonable estimate could be based on, such materials. It is only then the Revenue can hold that the a....
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....st and fair estimate was made by the assessee and there was no conscious or deliberate furnishing of untrue estimate. In such a case, no penalty can be imposed. It is in this background, we have to consider whether, on the facts of this case, the Tribunal was right in holding that no penalty can be imposed for deliberately furnishing an untrue estimate. Particulars of tax demanded, tax estimated, shortfall in payment, quantum of penalties, etc., are tabulated hereunder: -------------------------------------------------------------------------------------------------------------------------------------------- 1966-67 1968-69 -------------------------------------------------------------------------------------------------------------------------------------------- Rs. Rs. Tax demand under s. 210 24,92,216 5,34,332 Tax estimated under s. 212 2,50,897 3,35,000 Tax determined under s. 143(3) 5,20,266 8,03,845 75% of tax thereon 3,90,199 6,02,883 Short fall in payment 1,39,302 1,99,332 Quantum of penalty 19,500 25,000 -------------------------------------------------------------------------------------------------------------------------------------------------- F....
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....ed the percentage of yield in different units with regard to kapas ginned and pressed for the season 1964-65 (assessment year 1965-66) with the season 1965-66 (corresponding to the assessment year 1966-67). He found that the yield with regard to quality No. 320F was higher being 34.65% in Malout Unit, 35.34% in Kesrisingapur unit, 34.90% in Fatehabad unit and 34.04% in Sabgaria unit, whereas in the immediately preceding year, with regard to the first year under reference, the yield in these units was 33.81%, 33.06% and 32.82%, respectively. He also noticed that the percentage of desi-cotton was higher during this year. He also found that the assessee had extra yield of 2,951 quintals of 320F cotton and 555 quintals of desi-cotton. He thus held that the assessee had reasonable explanation to offer with regard to the estimate of advance tax filed by it. , On those facts, the AAC held that the assessee had a basis while submitting its own estimate. He also found that it was the basis of the immediately preceding year and that the estimate was also based on the trend of the business when the assessee furnished its estimate. For the assessment year 1968-69, the difference between the ....
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....s as brought on record by the AAC. The Tribunal found that the difference in the estimated income and the income returned arose due to the profits from ginning and pressing factories, which were situated at four places-one at Punjab, another at Rajasthan and two at Haryana. The estimate for advance tax was prepared on the basis of the estimated profits of the various units. It was stated by the assessee before the ITO that the exact yield could be determined only in May/June, 1966, i.e., after the close of the accounting year. The Revenue did not verify the position as to whether before May/June, it was not possible to know the exact position. There is no evidence that in the factories at Rajasthan, Haryana and Punjab, there is a teleprinter system or telex communication so that the assessee could get information then and there. The Tribunal held that unless the verification was made, the ITO was not justified in holding that the increasing trend in yield was noticeable before furnishing the estimate. The assessee submitted the estimate based on materials of the previous years. The Tribunal also found that there was no mala fide intention in submitting the estimate of income in t....
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....mation that profit of the assessee would go up to such an extent as would warrant it to pay tax of Rs. 24,92,216. The assessee stated that results of yield could be taken from agricultural products and various other factors that would determine the position about the yield . It is not the case of the Revenue that in cases of ginning and pressing factories a normal incident was increase of profits or increase of yield. The AAC stated that the assessee did not know nor had reason to know the true position. One other point was raised by the ITO in his order that the property income was not taken into consideration in filing the estimate and, as such, the assessee consciously failed to file the true estimates. The Tribunal held that property income was never shown separately while filing estimate of advance tax and that property was part of the assets of the assessee and, in such circumstances, it cannot be stated that the assessee omitted income from property with the oblique purpose to avoid payment of advance tax. Records do not indicate that for not showing the property income separately, the assessee was penalised with respect to estimate of advance tax filed by it either in the....