- (1.) The present appeal under section 260A of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), has been filed against the order dated March 28, 1999, passed by the Income-tax Appellate Tribunal, Bench Allahabad. It relates to the assessment year 1979-80 in respect of the penalty imposed under section 273(2)(a) of the Act. The appeal has been admitted by this court, vide order dated October 3, 2006, on the following substantial questions of law: (A) Whether the Income-tax Appellate Tribunal was legally right in not quashing the penalty proceedings under section 273(2)(a) of the Act where it is admitted that no such proceedings were proposed in the draft assessment order nor any directions under section 144B of the Act were given by the Inspecting Assistant Commissioner of Income-tax in his order to the assessing authority to take such proceedings in the present case? (B) Whether having regard to the contents of the two letters dated December 1, 1978, and December 7, 1978, the finding of the Income-tax Appellate Tribunal that the appellant has not been able to specify the reason for filing the wrong estimate and also to specify the reason as to why the appellant considered the depreciation and investment allowance on the machinery which was yet to be installed for computing its income liable to advance tax is not perverse and vitiated in law? (C) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally correct in not recording independent finding and considering various material on record with respect to the reasonableness of the appellant for filing the estimate of income liable to advance tax? Briefly stated, the facts giving rise to the present appeal are as follows:
(2.) The appellant is a public limited company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacture and sale of synthetic fibers, cement, etc. Its accounting year is the calendar year. For the assessment year 1979-80, relevant to the accounting year ending on December 31, 1978, the appellant filed its return of income on November 2, 1979 declaring a total income of Rs. 7,74,88,130. The Income-tax Officer, Central Circle, XVIII, New Delhi, who was the assessing authority of the appellant, passed an order on January 4, 1982, under section 143(3) read with section 144B of the Act proposing to make variation to the returned income of more than Rs. 1,00,000 to which the appellant filed objections, vide letter dated January 7, 1982. The Inspecting Assistant Commissioner of Income-tax (Central) Range III, New Delhi, to whom the draft assessment order as also the objections were referred, after considering the matter, issued certain directions to the assessing authority for making the assessment. The assessing authority, vide order dated August 31, 1982, completed the assessment in accordance with the direction given by the Inspecting Assistant Commissioner. He determined the total income at Rs. 11,32,77,699. While passing the assessment order on August 1, 1982, the assessing authority also initiated proceedings for imposition of penalty under section 273(2)(a) of the Act. It may be mentioned here that for the purposes of payment of advance tax, a notice under section 210 of the Act was issued on June 12, 1978, requiring the appellant to pay a sum of Rs. 5,73,08,130. The appellant filed an estimate of advance tax on June 14, 1978, in which the income declared was nil and, consequently, no amount was paid towards advance tax. The estimate was revised on December 14, 1978, estimating the income at Rs. 3,83,00,000 on which the tax chargeable came to Rs. 2,21,18,000, which was paid on December 15, 1978. Against the estimate of income at Rs. 3,83,00,000 disclosed by the appellant for the purposes of payment of advance tax, it returned an income of Rs. 7,74,88,133, which was assessed at Rs. 11,32,77,699.
(3.) On these facts, the Assessing Officer came to the conclusion that the estimate of advance tax filed by the appellant was too low which it knew or had reason to believe to be untrue. A penalty notice was issued to the appellant to show cause as to why penalty should not be levied for filing wrong estimate of advance tax, which was duly replied, vide letter dated September 28, 1988. In reply, an objection was taken by the appellant that as the assessing authority had not proposed initiation of penalty proceeding under section 273(2)(a) in the draft assessment order, he cannot initiate penalty proceedings thereafter. On the merits, it was submitted that the burden of proof that the estimate of advance tax filed by the appellant was untrue to the knowledge of the appellant, lay on the Department and as there is no material on record to hold that the estimate filed by it was untrue, penalty proceedings cannot be legally, initiated. The estimate of advance tax filed on December 14, 1978, was justified on the basis of the reports, dated December 1, 1978, and December 7, 1978, received from the project department, in which it had been stated that certain machineries which had been purchased, would be installed before the close of the accounting year, entitling the appellant to claim depreciation, etc., on their value. A plea was also raised that merely because the returned income shown by the appellant was higher than the income shown by the appellant, it could not be automatically inferred that the estimate filed was untrue to the knowledge or belief of the appellant. The Assistant Commissioner of Income-tax, Central Circle, XVIII, New Delhi, who had then become the assessing authority of the appellant, rejected the objection/explanation given by the appellant and passed an order under section 273(2)(a) of the Act imposing a penalty of Rs. 15,00,000.;