P.K. Ammini, Judicial Member -
(1.) THIS departmental appeal is against the cancellation of levy of penalty under Section 273(2)(a) of the Income-tax Act, 1961. We are concerned with the assessment year 1982-83. The assessee, an individual, is a regular assessee under the provisions of the Income-tax Act, 1961. He filed a statement of advance tax in Form No. 28A on 15-9-1981 in which the income and tax payable were estimated at Rs. 62,070 and Rs. 21,159 respectively. Based on this statement, the assessee paid instalments of advance tax due in September and December 1981. The last instalment of advance tax was due on 15-3-1982. On that date, the assessee filed an estimate in Form No. 29 showing his income at Rs. 2,26,000 and balance advance tax payable at Rs. 1,21,084. The advance tax due was not paid in March 1982. The assessment was made on 21-3-1985 on a total income of Rs. 4,94,800. The Income-tax Officer initiated penalty proceedings under Section 273(2)(a) on the ground that the assessee had not paid the advance tax properly and the estimate of advance tax was not correct. He had not explained the reason for the variation in the advance tax paid and payable nor had he explained the non-payment of tax as computed in the estimate filed on 15-3-1982. According to him, the estimate filed on 15-3-1982 has no validity insofar as the tax computed thereon was not paid and mere filing of an estimate without payment of tax does not amount to valid compliance of the provisions of the Act. The Income-tax Officer further held that the assessee has filed return of income on 30-12-1983 showing taxable income at Rs. 4,73,650 and tax payable thereon was Rs. 2,90,751. Therefore, the earlier estimates filed showing a lower income should be construed to be under estimates and thereby the assessee under estimated the advance tax payable. It is the case of the Income-tax Officer that as per Section 212(3A), the assessee can be said to have discharged his statutory obligation only by filing an estimate and paying tax as required under Section 211. In the above circumstances, he held that he was satisfied that the assessee had filed an under estate of advance tax showing less tax than what he was to pay. He also treated the second estimate as invalid and hence no estimate of advance tax thereon. Thus, he imposed a penalty of Rs. 15,441 under Section 273(2)(a) of the Act.
(2.) On appeal before the CIT (Appeals), the assessee raised a contention that he filed an estimate in Form No. 29 in accordance with the provisions of Section 209A(4) estimating the income at Rs. 2,39,000 and the balance tax payable at Rs. 1,21,084 after adjusting the advance tax already paid. Hence, no penalty under Section 273(2)(a) of the Act would arise. The CIT (Appeals) held that the penalty under Section 273(2)(a) would arise only when the Income-tax Officer concludes that the statement filed under Section 209A(1) or 209A(2) or 209A(3) or 209A(5) was false and untrue. In the present case, the assessee was governed under Section 209Aof the Act. He was regularly assessed to tax. The last completed assessment was for the assessment year 1980-81 on a total income of Rs. 62,070. Under Section 209A(1), the assessee adopted that figure and paid the tax. Hence, there was no liability under Sub-section 2, 3 or 5 of Section 209A. Since the assessee has complied with the provisions of Section 209A(1) fully, there can be no default much less a charge that he had estimated the advance tax payable by him at an unreasonably low figure. If the mention of 273(2)(a) was an error, the penalty cannot be sustained even under Section 273(2)(aa) of the Act. Thus, the CIT (A) cancelled the penalty.
The CIT (Appeals) noticed that apart from the individual business, the assessee had interest in various partnerships. Individual business consisted of effecting supplies to the Electricity Board. He had also accepted the contention of the assessee that collection from the Electricity Board in the year ended March 1982 more particularly in March 1982 exceeded all calculations of the assessee. Thus, he could not envisage that the Electricity Board will give the collection beyond his imagination. In view to the above, the CIT (Appeals) cancelled the levy of penalty. Hence, the revenue is in further appeal.
(3.) WE have heard rival submissions and perused the materials on records. In this case, the assessee was previously assessed to income-tax. In our considered opinion if the assessee was previously assessed to income-tax, he was to compute the advance tax payable on the basis of the total income of the latest previous year in respect of which he has been assessed by way of regular assessment as contemplated under Section 209A(1)(a) of the Income-tax Act. In this case, the assessee was assessed latest for the assessment year 1980-81 on a total income of Rs. 62,070. He adopted this figure in his estimate and paid the instalments of the advance tax fell due on 15-9-1981 and 15-12-1981. There was no dispute over this fact. But the Income-tax Officer invoked the provisions of Section 273(2)(a) and imposed penalty.
Section 273(2)(a) reads as follows :
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.
In our considered opinion, the assessee will not come under the provisions of Section 273(2)(a) of the Act. The assessee need compute the advance tax under Section 209A(1)(a) of the Act, which reads as follows:
209A(1) Every person shall, in each financial year, on or before the date on which the first instalment, or where he has not previously been assessed by way of regular assessment under this Act, on or before the date on which the 1st instalment of advance tax is due in his case under Sub-section(1) of Section 211, if his current income is likely to exceed the amount specified in Sub-section (2) of Section 208, send to the Income-tax Officer-
(a) where he has been previously assessed by way of regular assessment under this Act, a statement of advance tax payable by him computed in the manner laid down in Clause (a) or, as the case may be, sub-Clause (i) of Clause (d) of Sub-section(1) of Section 209.
Since the assessee has been assessed previously, the assessee need file an estimate of advance tax on the basis of the income assessed in the preceding assessment year. In this case, the preceding assessment year is 1980-81. In that year the assessed income was Rs. 62,070. He has also paid advance tax on that basis. Hence, we hold that the CIT (Appeals) was justified in deleting the penalty under Section 273(2)(a) of the Act. The learned departmental representative filed an additional ground which reads as follows:
The learned CIT(A) erred in cancelling the penalty after having held that the mention of Sub-section (a) under Section 273(2) was to be viewed as a wrong statement of the section by the ITO and it has to be inferred that what he meant was Sub-section (aa). He failed to note that the revised estimate filed in Form No. 29 on 5-3-1982 under Section 209A(4) was false. The TDS Certificates filed clearly show that the major bulk of the contract amounts were received by the assessee as early as in December 1981 and that there was no contract amounts received in March 1982.
The additional ground is admitted. The contention of the revenue is that misquoting of section will not affect the merits of the case. In our view, this is not a case of mis-quoting of section or sub-section. This is a case in which in the course of assessment proceedings, the Income-tax Officer has reached the satisfaction only for imposing penalty under Section 273(2)(a) but not under Section 273(2)(aa) of the Income-tax Act as will be clear from the assessment order itself. There can be a mis-quoting of the section in the order imposing penalty. Such mis-quoting of section is indefensible if it had occurred at the stage of reaching the satisfaction to impose penalty, as such satisfaction must be in relation to the particular default that was committed and the particular provision under which the default was to be penalised. On a perusal of the assessment order there can be no two opinion that the satisfaction was reached by the Income-tax Officer only in respect of an offence inviting penalty under Section 273(2)(a) of the Income-tax Act.
Therefore, we hold that the revenue's contention that this was only a mere mis-quoting of the section in the penalty order cannot be accepted. Further, the notice issued to the assessee states the offence as follows:
furnished under Sub-section (2)/(3) of Section 18-A of the Indian Income-tax Act, 1922, or under Section 212 of the Income-tax Act, 1961, estimate(s) of advance tax payable by you for the assessment year 1982-83 which your know or had reason to believe to be untrue.
Sub-section (2)/(3) of Section 18-A of the Indian Income-tax Act, 1922 referred to in the notice is not applicable at all to this case as the case of the assessee is governed by 1961 Act. Nor there was any order by the Income-tax Officer calling upon the assessee to pay advance tax under Section 210 and, therefore, the question of estimate under Section 212 as mentioned in the notice cannot obviously arise. Therefore, no offence was made out against the assessee in the notice issued pursuant to the satisfaction reached by the Income-tax Officer in the course of the assessment proceedings in relation to an offence under Section 273(2)(a) of the Income-tax Act, 1961. Thus, the notice itself suffers from incurable defect as the default mentioned therein was not at all applicable to the assessee. Unless the person to be realised is informed of the nature of the default committed by him and explanation sought for from him on that ground, order levying the penalty cannot be sustained. In this view of the matter also, we hold that the penalty levied under Section 273(2)(a) cannot be sustained nor can it be converted into a penalty levied under Section 273(2)(aa) of the Income-tax Act, 1961. Thus, we uphold the order of the CIT (Appeals).;