1995-VIL-197-ITAT-AHM

Equivalent Citation: [1996] 218 ITR (A. T.) 39, ITD 056, 037,

Income Tax Appellate Tribunal AHMEDABAD

Date: 31.10.1995

PRABHAT OIL TRADERS.

Vs

INCOME-TAX OFFICER.

BENCH

THIRD MEMBER ORDER UNDER SECTION 255(4) OF THE I.T. ACT 1961

JUDGMENT

Per Shri A. Satyanarayana, Vice President --- This appeal has come before me for my opinion as a Third Member under section 255(4) of the I.T. Act, as there was a difference of opinion on the following point between the Members of the Tribunal who heard the appeal :

"Whether the assessee is liable for penalties levied under sections 271(1)(c) and 273(2)(aa) in view of the addition of Rs, 1,28,100 made under section 69 of the I.T. Act, 1961 and for which a separate reference under section 255(4) has been made to the Hon'ble President I.T.A.T., being ITA No. 4710/Ahd/89?"

2. This appeal filed by the assessee is against the order of the CIT(A) dated 16-3-1989 for the assessment year 1983-84.

3. The assessee is a partnership doing whole-sale business in groundnut oil, vegetable oil, soyabeen, grease, yarn and wheat etc. Return of income was filed on 4-7-1983 showing total income of Rs. 54,915. The assessment was completed under section 143(3) by an assessment order dated 6-1-1986. In the said assessment order an addition of Rs. 1,28,100 was made towards alleged purchase of 600 tins of oil and profit on the same on the ground that they were sold outside the books of account. Certain disallowances were also made aggregating to Rs. 12,055. Assessable income was determined at Rs. 1,96,526. Credit was given for the advance tax paid of Rs. 11,001. In the said assessment order it was mentioned "initiate penalty proceedings under section 273(a) for short payment of advance tax". However, in the notice under section 274 read with section 273 of the I.T. Act, 1961 dated 6-1-1986 issued by the Assessing Officer, the following charges were made against the assessee :---

"Whereas in the course of proceedings before me for the assessment year 1983-84 .... it appears to me that you have ......

furnished under sub-section (2)/(3) of section 18A of the Indian Income-tax Act, 1922 or under section 212 of the I.T. Act, 1961, estimate(s) of advance tax payable by you for the asst. year 1983-84 which you knew or had reason to believe to be untrue.

Without reasonable cause failed to furnish an estimate of advance tax payable by you in accordance with the provisions of sub-section (3) of section 18A of the Indian Income-tax Act, 1922 or of section 212(3) of the Income-tax Act, 1961 in respect of the assessment year 1983-84."

4. In response to the said penalty notice, the assessee has furnished the following reasons :---

"The income as per our books of account as returned was Rs. 59,181 and advance tax of Rs. 11,001 was paid by us. As your goodself made the disputed additions of Rs. 1,37,501 the advance tax paid by us fall short of the resultant demand on assessed income. In the circumstances, we could not be held having defaulted in making proper payment and filing incorrect estimate of income. The notice may be cancelled."

5. The Assessing Officer did not agree with the explanation of the assessee. According to him, for the levy of penalty under section 273(a) only assessed tax is to be considered. He opined that the addition in the returned income was based on documents and evidence found during the course of search operation under section 132 on 20-1-1984 and that the addition was not on flimsy ground and that the addition had been discussed in the assessment order and after making proper investigation that addition was made. Accordingly, he observed that he was satisfied that the assessee had committed a default under section 273(a). He levied a penalty of Rs. 2,000. The working for the penalty is given in the penalty order as under :

"Penalty Working :

Tax on assessed income of Rs.

Rs. 1,96,526 36,486

75% of the above tax comes to 27,368

Less: Advance tax paid 11,000

----------------------

10% of the default Rs. 1637 16,370

150% of the default Rs. 24,550"

However, the Assessing Officer in the penalty order passed on 10-3-1986 had noted as "order under section 273(2)(aa) of the I.T. Act". Aggrieved by the said penalty, the assessee preferred an appeal before the CIT(A).

6. On appeal, the CIT(A) held that the addition made by the Assessing Officer was confirmed by him in the appellate order dated 16-3-1989, that he found that the assessee had shown untrue income and that "the estimate had been made an untrue one. In this view of the matter, he confirmed the penalty. Dissatisfied with the order of the CIT(A), the assessee preferred the appeal before the Tribunal.

7. The learned Judicial Member observed that he had held in the assessee's quantum appeal that the Assessing Officer erred in making an addition of Rs. 1,28,100 and had deleted the addition so made. He further observed that since the Assessing Officer initiated and levied penalty under section 273(2)(aa) on account of this addition, the penalty was not exigible. He, therefore, cancelled the same. However, the learned Accountant Member observed that the assessee was well aware of the purchase to the tune of Rs. 1,28,100 at the time of filing of the estimate of advance tax and accordingly, levy of penalty under section 273(2)(aa) was fully justified.

8. At the time of hearing of the appeal before me, the assessee's counsel filed photostat copies of notice under section 274 read with section 273 of the I.T. Act, 1961 dated 6-1-1986 and urged that the addition of Rs. 1,28,100 and disallowance of Rs. 12,055 were not anticipated at the time of filing of the estimate for Rs. 1,00,000 and that the assessee cannot be held to have filed untrue estimate. Addition has been made under the deeming provision viz. section 69 of the I.T. Act, 1961. Deemed income is not supposed to be shown in the estimate of advance tax.

9. The Departmental Representative contended that the assessee had full knowledge of the purchase bills and so it cannot plead that it had no knowledge. The assessee should have filed correct estimate.

10. I have considered the rival contentions of the parties and perused the papers filed before me. The Assessing Officer in the assessment order passed under section 143(3) on 6-1-1986 his recorded his satisfaction for initiating the penalty proceedings under section 273(a) "for short payment of advance tax". The relevant section 273(2) reads as under :---

"Section 273(2) :

If the Income-tax Officer, in the course of any proceedings in connection with the regular assessment for the assessment year commencing on the 1st day of April, 1970 or any subsequent assessment year, is satisfied that any assessee---

(a) has furnished under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (5) of section 209A, or under sub-section (1) or sub-section (2) of section 212, an estimate of the advance tax payable by him which he knew or had reason to believe to be untrue, or

(aa) has furnished under sub-section (4) of section 209A or under sub-section (3A) of section 212 an estimate of advance tax payable by him which he knew or had reason to believe to be untrue."

From the above, it would be seen that no penalty is leviable for short payment of advance tax. The Assessing Officer has not recorded his satisfaction that the assessee has filed estimate of advance tax which it knew or had reason to believe to be untrue. In the present case, the assessee has not filed any estimate of advance tax under section 212(3A). Hence, the Assessing Officer cannot charge the assessee that it had filed untrue estimate under section 212(3A). Yet the Assessing Officer has given the heading for his penalty order dated 10-3-1986 as "order under section 273(2)(aa) of the I.T. Act, 1961". However, in the body of the penalty order, he categorically mentioned that the assessee had committed a default under section 273(a) of the I.T. Act, 1961. So it has to be taken that the Assessing Officer has levied the penalty only under section 273(a). As held by the Hon'ble Calcutta High Court in the case of CIT v. Birla Cotton Spg. & Wvg. Mills Ltd. [1985] 155 ITR 448, mere disparity between the estimate submitted by the assessee and the income he himself returned or the ITO finally determined in the assessment by itself would not justify the imposition of penalty under section 273 of the I.T. Act, 1961. In the present case, the assessee has filed the estimate of advance tax estimating the income at Rs. 1,00,000 while the return of income was filed only for Rs. 54,915. But the assessment came to be made on an assessable income of Rs. 1,96,526. Addition of Rs. 1,28,100 has been deleted by me in my Third Member decision dated 31-8-1995. Hence no penalty under section 273(a) is leviable in the facts and circumstances of the case. I agree with the opinion of the Learned Judicial Member.

11. The matter will now go before the Regular Bench for disposal of the appeal in accordance with the opinion of the majority.

ORDER UNDER SECTION 255(4) OF THE I.T. ACT, 1961

Per Jordan Kachchap (JM)---In accordance with the order passed by the Third Member dated 31-8-1995 and in conformity with the majority view this appeal is allowed.

 

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