JUDGEMENT
P.J. Goradia, Accountant Member -
(1.)IN this appeal directed against the order dated 7-10-1985 passed by the Commissioner of INcome-tax (Appeals)-V New Delhi the ground raised is as under :
Whether on the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the penalty imposed Under Section 273 amounting to Rs. 2,92,959.
(2.)The assessee is a registered partnership firm regularly assessed to tax. The relevant facts with regard to initiation of penalty proceedings, material gathered by the assessing officer for the purpose of levy of penalty and quantum thereof can better be appreciated on reading the whole penalty order passed by the Inspecting Assistant Commissioner (Assessment) and, therefore, the same is reproduced :-
M/s. Jhallani and Co. filed an estimate in form No. 29 for assessment year 1983-84 on 10-6-1982, estimating the income at Rs. 10,000 and tax payable according to this income at Nil. The assessee filed the return on 18-4-1984 showing total income of Rs. 12,70,740. The assessment in this case was completed vide order dated 31-12-1984 at total income of Rs. .15,37,923. During the course of the assessment proceedings it was noticed that the assessee had filed wrong estimate and the assessee was asked to explain as to why interest Under Section 215/217 and penalty Under Section 273 should not be levied vide order sheet entry dated 4-12-1984. The representative of the assessee attended on 6-12-1984 but no reply was filed. The matter was discussed in the assessment order and show-cause notice for penalty was issued to the assessee which was served on the assessee on 8-1-1985 as per acknowledgement on record. The case was fixed for hearing on 22-1-1985 but nobody attended nor any reply has been furnished, so penalty proceedings are decided on merits.
The assessee is having the business of commission agency and commission is received from M/s. Gedore Tools (India) Pvt. Ltd. on the orders booked by the assessee for M/s. Gedore Tools (India) Pvt. Ltd. The rate of commission is fixed by Company Law Board. There was some dispute regarding commission payable to the assessee but these things were sorted out because of the final order of the Company Law Board passed in October, 1980. Thus at the time of filing the advance tax estimate for assessment year 1983-84, the rate of commission to be allowed to the assessee by M/s. Gedore Tools (India) Pvt. Ltd. was already finalised. The accounting year of the assessee ends on 30-6-1982 and it has been stated that the assessee maintains a record where all the sales on which the commission is receivable by the assessee is recorded. This register was produced before me for assessment year 1982-83 but for asst. year 1983-84 the assessee has not produced this register. It was confirmed that such a register is maintained vide order-sheet entry dated 6-12-1984. In view of this and in view of the fact that previous year of the assessee ended on 30-6-1982 whereas the estimate has been filed on 10-6-1982 i.e. within 20 days of the close of the year, the assessee could very easily have estimated the amount of commission receivable for the previous year corresponding to assessment year 1983-84. In earlier years the assessee had taken the plea that the correct estimate of income could not be made because the rates of commission were not finalised by Company Law Board and there was a dispute on these points. However, even this factor is absent for assessment year 1983-84. Moreover, the assessee has chosen to file an estimate under Form No. 29 rather than statement of income under Form No. 28A. So, it can be inferred that assessee has consciously estimated the income at Rs. 10,000. In view of the above facts, I hold that the assessee had deliberately filed false estimate of advance tax and it is a fit case for levy of penalty Under Section 273 which is computed as follows :-
JUDGEMENT_2323_TLIT0_19890.htm
Considering the above facts that the assessee was in a position to estimate this income accurately and the assessee did not file correct estimate of advance tax and considering the huge quantum involved and considering the facts that the payment which should have been made as advance tax has not been made till today. I consider it a fit case for levy of penalty @ 100 per cent of the difference amounting to Rs. 2,92,959.
In appeal the assessee challenged the validity of the penalty notice issued on 30-12-1984 on the basis that the penalty proceedings did not specify the default under a particular sub-section of Section 273. The Inspecting Assistant Commissioner (Assessment) who was also present at the time of learning, had submitted orally and also in writing that in assessment order the default committed by the assessee had been clearly stated. Therefore, the notice read together with the assessment order clearly brought out the specific charge. The assessee relied upon decision in the case of N.N. Subramania Iyer v. Union of India [1974] 97 ITR 228 (Ker.) in support of the contention that since the penalty notice was invalid, the proceedings initiated were illegal. This case was distinguished by the Inspecting Assistant Commissioner on the basis that the said case dealt with levy of penalty under Section 18(1) of the Wealth-tax Act and it was not clear from the judgment as to whether specific reasons and details were given in the wealth-tax assessment order for initiating penalty proceeding's and, therefore, the Hon'ble High Court had quashed the penalty proceedings in the absence of any specific remarks in the order. Besides unlike the provisions under the wealth-tax where the penalty is leviable for unrelated defaults, i.e., distinct defaults, the defaults contemplated under Section 273 of the Income-tax Act were inter-related to the advance tax estimate and hence, distinguishable. Again during the course of assessment proceedings also the assessee was asked as to why penalty under Section 273 should not be levied and this is clearly borne out by the record.
(3.)THE CIT (Appeals) in paragraph 11 stated that since on facts penalty order was cancelled it was not necessary to go into the legality of the notice issued under Section 273. Beside in the present case probably the assessee could have made out the nature of default by reference to the assessment order taut such escapes may not always be available to the Assessing Officer.
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