Ajit K.Sengupta, J. - (1.) At the instance of the Commissioner of Income-tax, West Bengal-IX, the following questions of law have been referred to this court under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1969-70 : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal had ignored relevant materials and/or had relied on irrelevant materials in holding that the assessee did not know or had no reason to believe that the estimate of the advance tax furnished by it was untrue ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal misdirected itself in law in holding that no penalty could be imposed on the assessee under Section 273(a) of the Income-tax Act, 1961 ?"
(2.) The facts relating to this reference are that the Income-tax Officer issued notice under Section 210 of the 1961 Act calling upon the assessee to pay advance tax of Rs. 2,55,920. The assessee, however, filed its own estimate on May 24, 1968, as permitted under Section 212 of the 1961 Act, wherein the total income estimated by the assessee was shown at Rs. 1,83,000 and the advance tax payable worked out to Rs. 35,750. The assessee filed its return of income for the year under appeal showing a loss of Rs. 4,25,636. The Income-tax Officer, however, completed the assessment under Section 143(3) of the 1961 Act on a total income of Rs. 4,52,817 which was subsequently reduced to Rs. 2,02,450 in appeals preferred by the assessee before the Appellate Assistant Commissioner as well as before the Tribunal. The tax payable as per the finally assessed income worked out to Rs. 1,11,348.
(3.) To the notice issued by the Income-tax Officer to show cause why penalty should not be imposed under Section 273 (a) of the 1961 Act, the assessee stated in its letter dated 15/19 October, 1973, that the demand raised by the Income-tax Officer under Section 210 of the 1961 Act was based on the total income of Rs. 5,88,737 for the assessment year 1963-64 which was reduced in appeal preferred by the assessee before the Appellate Assistant Commissioner. It was further stated that as the assessee was anticipating carry forward of losses amounting to Rs. 5,16,325 in respect of the assessment years 1967-68 and 1968-69, it filed its return of income for the year under appeal showing a loss of Rs. 4,25,436. However, since the assessment for the assessment years 1967-6S and 1968-69 were completed after the assessee had filed his estimate on May 24, 1968, discrepancy arose between the estimate submitted by the assessee and the total income finally determined by the Income-tax Officer for the year under appeal. Relying on the decision of the Supreme Court in the case of Hindustan Steel Ltd. [1972] 83 ITR 26, the assessee urged that the penalty proceedings initiated by the Income-tax Officer should be dropped. The Income-tax Officer, however, was not satisfied with the explanation submitted by the assessee and imposed a penalty of Rs. 35,000 under Section 273(a) of the 1961 Act.;