COMMISSIONER OF INCOME TAX vs R.G. GOVAN and CO.

Pasayat, CJ.

At the instance of the revenue, the following question has been referred u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as ''Act'') for opinion of this court by the Tribunal, Delhi Bench ''D'' (''Tribunal'').

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that a penalty u/s 273(a) was not livable on the assessed for the assessment year 1961-62 ?"

The background facts necessary for disposal of the reference are essentially as follow :

The assessed is a private limited company which at the relevant point of time was doing business as contractors for unloading of food grains from ships at Bombay Port and transport of the grains from the port to various Government Depots. For the assessment year 1961-62, relating to the accounting period ending 30-6-1960, a notice of demand u/s 18A of the Indian Income Tax Act, 1922 was issued requiring the assessed to pay Rs. 2,42,842 as advance tax. On 15-9-1960, the assessed filed an estimate declaring a loss and estimated its advance tax liability at nil. According to the profit and loss account of the company for the year ending 30-6-1960, it had incurred a loss of Rs. 3,83,740. A return of income was filed showing loss of Rs. 3,81,311. Ultimately the assessment was completed on a total income of Rs. 2,47,953. This included addition of an amount of Rs. 2,37,699 relating to bogus losses in grains; Rs. 1,58,468 on account of bills in respect of difference in the mileage and Rs. 92,928 on account of losses payable to the Regional Director of Food. On appeal against the order of assessment, the Appellate Assistant Commissioner reduced the total income to Rs. 1,99,498. Meanwhile proceedings were initiated u/s 273(a) for understating the income and advance tax payable by the assessed u/s 18A. After hearing the assessee, penalty of Rs- 10,000 was levied. The imposition of penalty was confirmed by the Appellate Assistant Commissioner. Matter was taken by the assessed before the Tribunal. Its stand, inter alia, was that the estimate by it was in accordance with the books of account and even after making allowance for the loss in grain and other commodities which was ultimately accepted by the assessed as wrongly claimed, there would have been a loss. So far as the addition of Rs. 1,58,468 made by the Income Tax Officer for difference in mileage is concerned, that could be a subject-matter of honest difference of opinion between the assessed and the department, and similarly out of the losses payable to the Regional Director of Food, a sum of Rs. 24,388 was clearly allowable and, Therefore, there was no occasion for saying that the assessed had deliberately furnished a false estimate. The Tribunal came to hold that the penalty under the circumstances of the case should not have been levied for the estimates submitted by the assessed were in conformity with the books of account maintained by it and that addition in respect of bogus purchases alternately accepted by the assessed did not convert the loss into profit by itself. So far as the other additions are concerned, there was scope fur a difference of opinion between the assessed and the department and that would not make the estimate the outcome of any deliberate action. Therefore, the penalty was deleted. On being moved by the revenue, reference as stated has been made.

The learned counsel for the revenue submitted that the factual position highlighted by the Income Tax Officer in its penalty order clearly established a deliberate attempt to under-state the income for the purpose of filing an estimate and paying the admitted tax. It was, Therefore, submitted that the imposition of penalty had been rightly done and the Tribunal was not justified in deleting the same.

In spite of notice the assessed has not entered appearance.

Section 273(a), as it stood at the relevant time, contemplated default of'' furnishing an estimate of advance tax payable, which the assessed knew or had reasons to believe to be untrue. Burden of proving these aspects is on the department. An estimate can never be accurate. Whether the assessed had knowingly filed a wrong estimate has to be ascertained on the facts and circumstances of each case. It is for the revenue to show that the materials on which the estimate is based are of materials or are of such nature that no estimate could be based on such materials. It is only then that adverse inference can be drawn by the department. From the mere fact that there was disparity between the estimate submitted by, the assessed and the income returned and/or assessed no adverse inference can be drawn. Whether the estimate made by the assessed was bona fide or true to his knowledge or not is a question of fact.

The conclusions of the Tribunal are essentially factual in nature. Whether somebody could bona fide make an estimate of the income and that too on the basis of books of account maintained by it is purely a question of fact. The Tribunal has found as a matter of fact that estimate filed by the assessed was in conformity with its books of account. Additions ultimately accepted did not convert loss into profit by itself. So far as other additions are concerned, they related to additional claims and liability to Regional Director of Food. So far as the first item is concerned, though there was no doubt about the nature of claim, there was controversy as regards the exact time when the Government accepted it. The final orders did not relate to relevant financial year. But the assessor�s understanding of the situation cannot be said to be mala fide. Similarly in case of liability to Regional Director of Food, the dispute related to the question as to which assessment year it relates. Here also, the Tribunal held no intentional distortion was involved. The Tribunal''s conclusion was that it cannot be said that the assessed could have foreseen the possible additions that could be made in the assessment. As stated above, conclusions are factual. That being the position, no question of law arises and, Therefore, we decline to answer the question referred.

The reference is, accordingly, returned unanswered.