Income-tax---

----Reference---Advance tax---Estimate of advance tax---Failure to file correct estimate within prescribed time---Burden of proof---Tribunal holding that incorrect estimate filed as marginal increase in turnover not taken into account---Conclusion of Tribunal cannot be characterized as perverse---No question of law arose for reference---Indian Income Tax Act, 1961, Ss.209-A, 212, 256(2), 273(2)(aa) & 273-A.

For attracting penal action under section 273-A of the Income Tax Act, 1961, it has to be shown that the assessee has furnished under subsection (4) of section 209-A or under subsection (3-A) of section 212 the estimate of advance tax payable which he had reason to believe to be untrue. Therefore, materials must be brought on record to show that the estimate of advance tax payable filed was known to be untrue by the assessee or it had reason to believe that it was untrue.

The use of the expression "estimate" is suggestive of the possibility of some amount of inaccuracy and uncertainty. But law postulates an honest estimate. Unless it is proved that the low estimate was the outcome of a design and was not bona fide, penalty cannot be imposed. The initial burden is on the assessee to show that he did not know or had no reason to believe the estimate to be untrue. Since the question pertains to knowledge and/or belief of the assessee, he is the best person to throw light on it. Where the assessee gives a specific explanation indicating reasons for which it thought the estimate of advance tax payable to be true and had knowledge that it was true or that it had reason to believe that it is true, the onus shifts to the Revenue. In such a case the burden will be on the Revenue to show as to why a finding is to be recorded that the assessee knew or had reason to believe that the estimate is untrue.

For the assessment year 1980-81, the assessee did not file a statement or an estimate of its income as required under section 209-A of the Income Tax Act, 1961, within the prescribed time. The Income Tax Officer issued a notice under section 210 of the Act demanding a certain amount as advance tax. After receipt of the notice, the assessee filed an estimate of income as also the advance tax payable. The Income Tax Officer initiated proceedings under section 273(2)(aa) of the Act on the ground that the assessee had furnished under subsection (4) of section 209-A/subsection (3-A) of section 212 an estimate of advance tax payable by it which it knew or had reason to believe to be untrue. The assessee contended that the estimate was filed disregarding the slight increase in the turnover, that since details were not available regarding the income earned from commission agency business there was variation in the income, that in the past there was never such high income and the assessee could not have contemplated such high income and that, therefore, there was no reason to believe that the estimate was untrue: The Income Tax Officer rejected the contentions of the assessee and imposed penalty on the assessee.

The Commissioner of Income Tax (Appeals) dismissed the appeal filed by the assessee. The Tribunal cancelled the penalty on the ground that there was only a small increase in the turnover. The Department filed an application under section 256(1) for referring a question, which was dismissed by the Tribunal. On an application under section 256(2):

Held, that the Tribunal had arrived at a factual conclusion by considering germane materials and its conclusion could not be characterized as perverse. Therefore, no question of law arose from the order of the Tribunal.

A.K. Ray for the Commissioner.

Arjun Agrawalla and S.C. Lal for the Assessee.

JUDGMENT

A. PASAYAT, J.---In this application under section 256(2) of the income Tax Act, 1961 (for short, "the Act"), the Commissioner of Income-tax, Orissa, seeks a direction to the Income-tax Appellate Tribunal, Cuttak Bench, Cuttack (in short, "the Tribunal"), to draw up a statement of case and refer the following question which, according to him is a question of law:

"Whether, on the facts and in the circumstances of the case, the Tribunal has acted judiciously and in conformity with the provisions of section 209-A read with section 273(2)(aa) of the Income Tax Act, 1961, and, whether the cancellation of penalty of Rs.16,860 is legally justified?"

The background facts as called out from the various orders are as follows:

Messrs. Orissa Flour Mills (Pvt.) Ltd. (hereinafter referred to as "the assessee"), is assessed to tax since a long time. For the assessment year 1980?81, corresponding to the accounting period, which ended on October 19, 1979, the assessee did not file a statement or estimate of its income as required under section 209-A of the Act within the prescribed time. Therefore, a notice under section 210 of the Act was issued on October 11, 1979, by the Income Tax Officer, Ward,. 'A', Sambalpur, demanding an amount of Rs.47,436 by way of advance tax. After receipt of this notice, the assessee filed an estimate on December 15, 1979, showing an estimated income of Rs.2 lakhs and an amount of Rs.1,18,250 to be advance tax payable. The return was filed on November 29,1990, wherein an income of Rs.5,98,040 was disclosed. The assessment was completed on Rs.6 14 560 which was reduced by Rs.12,986 subject to further allowance of depreciation by the Commissioner of Income-tax (Appeals), Orissa' A proceeding was initiated under section 273(2)(aa) on the premise that the assessee had furnished under subsection (4) of section 209?A/subsection (3-A) of section 212 an estimate of advance tax payable by it which it knew or had reason to believe to be untrue. The assessee filed its reply, inter alia, taking the stand that, considering the slight increase of turnover and on consideration of the income earned during the previous year, the assessee had filed the estimate. It was also indicated that the income relating to commission agency business was earned for which details were not available and, therefore, there was variation. It was specifically indicated that, in the past, there was never such large income and the assessee could not have contemplated such high income. Therefore, it was pleaded that there was no reason to believe that the estimate was untrue. The contentions were not accepted by the Income Tax Officer, Ward 'A', Sambalpur, and a penalty of Rs.16,860 was imposed which, according to him, was the minimum imposable. The assessee's appeal before the Commissioner of Income Tax (Appeals) was dismissed, since the Commissioner of Income-tax (Appeals) did not accept the contentions of the assessee. In further appeal before the Tribunal, the turnover of various years and corresponding incomes were submitted in detail. It was pleaded that considering the slight increase in turnover and the very fact that the assessee itself had submitted the estimates showing the estimated income of Rs.2 lakhs, its conduct was bona fide. The Revenue's stand, on the other hand, was that merely because the turnover had increased marginally, it is not sufficient for the assessee to escape from the responsibility of filing a correct estimate. It was alleged that the estimate was filed after the closure of the accounting period in question. Therefore, the assessee was in the know of the actual income or an amount, which would be in close proximity to the actual income. The Tribunal, considering the turnover aspect, held that the assessee has made out a case for cancellation of penalty. It is relevant to indicate at this juncture that penalty had been imposed for two years. The Tribunal held the penalty imposed for the subsequent year, i.e. 1981-82, but cancelled the penalty considering the small increase in the turnover and the income for which the estimate was filed.

An application for reference under section 256(1) of the Act was filed; but the same was rejected on the ground that no question of law arose out of the order of the Tribunal.

Mr. Ray, learned counsel for the Revenue, submits that the abrupt conclusion of the Tribunal without taking note of the reasoning?s indicated by the Income Tax Officer and the Commissioner of Income-tax (Appeals) shows that the Tribunal had not considered the case in its proper perspective and had come to an abrupt conclusion. It has relied upon irrelevant materials leaving out of consideration relevant materials. Mr. Agrawalla, learned counsel for the assessee, on the other hand, contended that the details placed were elaborately discussed by the Tribunal and the conclusion arrived at by the Tribunal is a finding of fact and, therefore, no question of law arises out of the Tribunal's order.

For attracting penal action under section 273-A, it has to be shown that the assessee has furnished under subsection (4) of section 209-A or under subsection (3-A) of section 212, the estimate of advance tax payable which it had reason to believe to be untrue. Therefore, materials must be brought on record to show that the estimate of advance tax payable filed was known by the assessee to be untrue or that he had reason to believe that it was untrue.

The use of the expression "estimate" is suggestive of the possibility of some amount of inaccuracy and uncertainty. But law postulates an honest estimate. Unless it is proved that the low estimate was the outcome of a design and was not bona fide, penalty cannot be imposed. The initial burden is on the assessee to show that he did not know or had no reason to believe the estimate to be untrue. Since the question pertains to knowledge and/or belief of the assessee, he is the best person to throw light on it. Where the assessee gives a specific explanation indicating reasons for which it thought the estimate of advance tax payable to be true and had knowledge that it was true or that it had reason to believe that it is true, the onus shifts to the Revenue. In such a case, the burden will be on the Revenue to show as to why a finding is to be recorded that the assessee knew or had reasons to believe that the estimate is untrue. The explanation of the assessee right from the beginning was that for the previous period on almost identical turnover the income assessed was much less. In fact, by the notice of demand under section 210 issued by the Department to the assessee, the advance tax payable was estimated at Rs.47,436 on a total income of Rs.82,140. The Tribunal took note of the fact that, in the immediately preceding year, i.e. 1979-80, the turnover was in the neighborhood of Rs.1.5 crores whereas it was about Rs.1.82 crores for the year under consideration. This seems to have weighed with the Tribunal. The variation in the turnover of previous year and the year under consideration has been considered to be relevant by the Tribunal. Before the Tribunal, the turnovers with details relating to total tonnage of output were placed. Though the Tribunal has not very elaborately dealt with these aspects, yet it has specifically referred to the turnover aspect and the comparative incomes of previous years. We are, therefore, of the considered opinion that the conclusion of the Tribunal cannot be characterized to be perverse so as to give rise to a question of law. Since the Tribunal has arrived at its finding regarding bona fide plea of the assessee by consideration of germane materials, and has arrived at a factual conclusion, no question of law arises out of the order of the Tribunal.

The reference application is rejected. No costs.

D.M. PATNAIK, J.---I agree.

M.BA,/200/T.F. ????????????????????????????????????????????????????????????????????????????????? Application rejected