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Judgment
Singhvi, J.
In this appeal filed u/s 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act) the appellant has sought determination of the
following questions of law :
Whether, on the facts and in the circumstances of the case, Annexures P-1 to P-3 are legally sustainable?
Whether, on the facts and in the circumstances of the case, the order of the Appellate Tribunal upholding the imposition of penalty, especially
when the replies had been filed by the assessee-appellant is legally sustainable ?
Whether, on the facts and in the circumstances of the case, the order of the Appellate Tribunal in upholding the imposition of penalty even when
the issue of surrender of import entitlements being included in the estimate of advance tax was not a confirmed position of law, is legally sustainable
?
Whether, on the facts and in the circumstances of the case, the order Annexure P-3 sustaining the imposition of penalty when the revenue had
failed to discharge the onus of proof as imposed on it by law, is legally sustainable ?
Whether, on the facts and in the circumstances of the case, the confirmation of the imposition of penalty is legally sustainable in spite of the
specific mandate provided by the court in Commissioner of Income Tax Vs. Pratap Chand Maheshwari, ?
Whether, on the facts and in the circumstances of the case, the sustaining of the imposition of penalty on the estimate of advance tax filed by the
assessee while not following the mandatory provisions of section 174(1) of the Income Tax Act, 1961 is legally sustainable ?
The facts necessary for deciding the appeal are that the appellant-assessee initially filed an estimate of advance tax on 11-6-1981 showing a
total income of Rs. 2,17,820. On 15-12-1981, it filed a revised estimate in Form No. 29 showing an income of Rs. 44,00,000 and paid tax
amounting to Rs. 27,06,000. The return of income was filed on 29-6-1982 in which the assessee declared a total income of Rs. 58,26,380. The
assessment was completed u/s 154 of the Act on 15-4-1986 at an income of Rs. 1,03,12,120, but in pursuance of order dated 22-8-1991
passed by the Tribunal, it was worked out at Rs. 1,02,23,174. In the meanwhile, the assessing officer initiated penalty proceedings u/s 273(2)(aa)
of the Act and vide order dated 22-1-1991, he imposed penalty of Rs. 4,44,100. The Commissioner (Appeals), Patiala, partly accepted the
appeal filed against that order and reduced the amount of penalty to Rs. 2,22,050, by making the following observations:
I have carefully considered the arguments for the appellant and find some force in these. Before the learned assessing officer, the appellant did not
file any reply in response to show-cause notice. At the first appeal stage before me, the learned counsel for the appellant confined his arguments
only to the appellants bona fide belief at the time of filing the estimate of advance tax that profit on import entitlements amounting to Rs. 31,29,819
was not taxable as mentioned in the appellants written submissions dated 11-3-1992. It is, however, seen that penalty would be leviable even if the
amount of Rs. 31,29,819 is excluded from the assessed income. In fact, penalty would be leviable even if the amount of Rs. 31,29,819 is excluded
from the assessed income. In fact, penalty would be leviable even on the basis of returned income which did not include the aforesaid amount of
Rs. 31,29,819 as would be clear from the following details :
Rs.
Returned income 58,26,380
income tax payable on returned income 34,95,828
Surcharge at the rate as 2.5 per cent 87,395
Total tax payable 35,83,223
83.33 per cent of the tax payable 29,85,900
Less: Advance tax paid 27,06,000
Deficiency 2,27,900
It is seen that the appellants accounting period for the year under consideration ended on 3-6-1981 and the estimate of advance tax in question
was filed by the appellant on 15-12-1981, i.e., 5 months after the close of the accounting period. The appellant must, therefore, have been aware
of its income for this year when it filed the estimate of advance tax on 15-12-1981. No reason has been given for the appellant as to why the
income estimated in the estimate of advance tax is much less than even the income returned, and the circumstances show that the appellant must
have been aware of its true income when the estimate of advance tax was filed, the accounting year of the appellant having ended 51/2 months
before the filing of the estimate of advance tax. The rule of evidence in Income Tax proceeding is preponderance of probability and in view of the
facts mentioned above, it looks highly probable that the appellant knew or had reason to believe that the estimate of advance tax filed by it on 15-
12-1981 was untrue. The penalty u/s 273(2)(aa) is, therefore, held to the exigible, on the facts and in the circumstances of the instant case.
Regarding calculation of penalty and the appellants contention that the penalty should be imposed at the minimum rate after excluding the amount of
Rs. 31,29,819 from income assessed. If find that the calculation of penalty is statutorily prescribed and has to be adhered to. Once penalty is held
to be exigible, it has to be calculated with reference to assessed tax, and no discretion is given to any authority to alter the figure of assessed tax by
excluding the reform, the tax payable on items of income, the taxability of which could not be envisaged by an assessee at the time of filing the
estimate of advance tax. If such items of income are found included in the assessed income, then it could, at best, be a mitigating circumstance,
keeping in view which, minimum penalty may be imposed, as in the matter of calculation of penalty, the only discretion vested in assessing/appellate
authorities is to impose penalty ranging from 10 per cent to 150 per cent. Therefore, the appellants plea that tax payable on the aforesaid income
of Rs. 31,29,819 should be excluded from the assessed tax for the purpose of calculation of the impugned penalty, cannot be acceded to.
However, this is indeed a mitigating circumstance and I am of the view that in view of this mitigating circumstance, only minimum penalty at the rate
of 10 per cent should have been imposed. The penalty of Rs. 4,44, 100 imposed by the learned assessing officer at the rate of 20 per cent is,
accordingly, reduced to minimum penalty leviable at the rate of 10 per cent, i.e., Rs. 2,22,050."" (Emphasis here Italisized in print supplied)
The second appeal filed by the appellant was dismissed by the Tribunal by assigning the following reasons :
After considering the rival submissions, we are of the view that there is no merit whatsoever in the arguments advanced by the counsel for the
appellant on the question of onus. As rightly contended by the learned Departmental Representative, onus shifts to the revenue only after relevant
information is placed by the assessee on record. In the present case, there was a short fall of Rs. 2,79,900 vis-a-vis the estimate filed and returned
income itself which excluded the income on account of import entitlements. Further, as rightly noted by the Commissioner (Appeals), the previous
year of the assessee ended on 30-6-1981 and the estimate was filed in December 1981 showing estimated income of Rs. 44 lakhs and in
response to specific query from the Bench, the learned counsel could not indicate as to how the aforesaid figure had been worked out. It may be
how the aforesaid figure had been worked out. It may be appreciated that this is the case of a Private Limited Company whose accounts are
audited and the report of the auditor is dated 16-4-1982. The net profit as per profit and loss account was worked out a figure exceeding a crore
of rupees and his not possible to accept that in December 1981 when the estimate was filed, the assessee had no inkling as to what was its
estimated income. A perusal of the order passed by the Tribunal in quantum appeal shows that the assessee conceded that the sum on account of
import entitlements was taxable and the decisions in the past had been against it. The learned counsel did not place on record the earliest judgment
of the Tribunal which had taken a view against it on the point at issue. In the final analysis, we up hold the action of the Commissioner (Appeals) in
confirming the penalty u/s 273(2)(aa) on the assessee.
Shri A.K. Mittal referred to the provisions of section 28(iii)(a) to show that the profits of import entitlements were made exigible with
retrospective effect from 1-4-1962 by the Finance Act, 1990 and argued that the non-inclusion of Rs. 31,29,819 representing the profits on
import entitlements cannot be treated as an act of deliberately furnishing untrue estimate of advance tax so as to attract penalty u/s 273(2)(aa). The
learned counsel then submitted that the view taken by the Allahabad High Court in Swadeshi Cotton Mills Co. Ltd. Vs. Commissioner of Income
Tax, that the amount of profits on import entitlements is exigible as income from business was the subject-matter of SLP No. 1049 of 1980 in
which notice had been issued by the Supreme Court and, therefore, the petitioner had not included the profits on import entitlements in the estimate
of advance tax. The learned counsel further argued that the initial statement of advance tax filed on 11-6-1981 showing an income of Rs. 2,17,720
was based on the income of previous year and the mere fact that at a later point of time the revised estimate of advance tax showing in income of
Rs. 44,00,000 had been filed cannot lead to an inference that the appellant had deliberately furnished an incorrect estimate of advance tax. Shri
mittal also pointed out that the accounts of the appellant had been audited on 16-4-1982 and submitted that it cannot be accused of having
concealed the income. In support of his arguments, Shri Mittal relied on the decisions of this court in Additional Commissioner of Income Tax Vs.
Bipan Lal Kuthiala, and Commissioner of Income Tax Vs. Pratap Chand Maheshwari, .
Shri R.P. Sawhney, the learned senior counsel appearing for the respondents, controverted the submissions of Shri Mittal and argued that none
of the questions sought by the appellant can be treated as a substantial question of law requiring determination by this court. Shri Sawhney pointed
out that the lack of bona fides on the part of the appellant is established from the fact that as on the date of the filing of revised estimate of advance
tax, the appellant was aware of its total income and yet it had filed an incorrect return of income by suppressing the profit of Rs. 31,29,819 on
import entitlements and the business income of Rs. 14 lakhs (approximately). The learned counsel argued that the concurrent findings recorded by
the assessing officer, the Commissioner (Appeals) and the Tribunal that the appellant had filed incorrect estimate of advance tax do not give rise to
any substantial question of law. He further argued that the profit on the import entitlements could not have been excluded from the estimate of
advance tax because the appellant was conscious about the status of such profits.
We have considered the respective submissions. In our opinion, the questions sought by the appellant cannot be treated as substantial questions
requiring determination by this court u/s 260A of the Act. Section 273(2)(aa), read with sub-section (1A) thereof lays down that if the assessing
officer, in the course of any proceedings in connection with the regular assessment for the assessment year commencing on 1-4-1970, or any
subsequent year, is satisfied that any assessee has furnished under sub-section (4) of section 209A or under sub-section (3A) of section 212, an
estimate of the advance tax payable by him which he knew or had reason to believe to be untrue, he may direct that such person shall, in addition
to the amount of tax, pay by way of penalty a sum which shall not be less than 10 per cent, but shall not exceed 1 times the amount by which the
tax is actually paid during the financial year immediately preceding the assessment year under the provisions of Chapter XVII-C falls short of 75
percent of the assessed tax as defined in sub-section (5) of section 215. The crucial expression used in clause (aa) of sub-section (2)of section 273
is which he knew or had reason to believe to be untrue. Therefore, what is to be seen is as to whether the appellant had knowingly furnished untrue
estimate of advance tax or had reason to believe that estimate furnished by it was untrue. A look at the order passed by the assessing officer shows
that after issuing notice to the appellant u/s 273(2)(aa) to which it did not submit reply, the assessing officer passed the order of penalty, on the
premise that it had knowingly filed an untrue estimate of advance tax. The Commissioner (Appeals) considered the written submissions dated 16-
1-1992 and 11-3-1992 filed on its behalf and held that the appellant had knowingly filed an untrue statement of income and, therefore, it was liable
to suffer penalty. He, however, reduced the amount of penalty by 50 per cent. The Tribunal confirmed the order of the Commissioner (Appeals)
by observing that the counsel appearing on behalf of the appellant could not indicate as to how the figure of Rs. 44 lakhs shown in the return of
estimated income filed in December, 1981 had been worked out. It further observed that as per profit and loss account, the net profit was worked
out at a figure of exceeding Rs. one crore and, therefore, it was not possible to accept that in December, the appellant had no inkling about its
estimated income. The Tribunal also took note of the fact that in the quantum appeal, the representative of the appellant had conceded that the
profit on import entitlements was taxable.
In our opinion, the concurrent finding recorded by the Commissioner (Appeals) and the Tribunal do not suffer from any legal error and the
orders passed by them do not give rise to any substantial question of law. At the cost of repetition, we deem it necessary, to mention that as on the
date of filing of the revised estimate of income, i.e., 15-12-1981, a period of more than 5 months had elapsed from the end of accounting year and
as on that day, the appellant was aware of its true income. Notwithstanding this, it chose to file the estimate of advance tax suppressing an income
of Rs. 14,00,000. Therefore, the conclusion recorded by the assessing officer, the Commissioner (Appeals) and the Tribunal about the deliberate
filing of incorrect estimate of advance tax cannot be termed as perverse giving rise to a question of law. We are further of the view that non-
inclusion of the profits on import entitlements was a deliberate act of not filing true estimate of income with the object of avoiding payment of
advance tax and the appellant cannot rely upon the notice issued by the Supreme Court in the SLP filed against the judgment of the Allahabad High
Court in the case of Swadeshi Cotton Mills Co. Ltd. (supra) to justify its action, more so because no evidence was produced by it before the
assessing officer to show that it was relying upon the order passed by the Supreme Court for not including the profits on import entitlements in the
estimate of advance tax.
The decisions relied upon by Shri Mittal do not have any bearing on the facts of this case in those cases, this court had found that the assessee
was not guilty of deliberately filing incorrect returns and, therefore, there was no justification to impose penalty. As against this, in the present case,
the concurrent findings recorded by the Commissioner (Appeals) and the Tribunal that the appellant had filed estimate of advance tax fully knowing
that it was untrue. Therefore, we do not find any valid ground to entertain the appellant prayer for determination of question of law framed by it.
For the reasons mentioned above, the appeal is dismissed.