SABYASACHI MUKHARJI, J. - (1.) THIS reference arises out of the orders for penalties made for the asst. yrs. 1959-60 and 1960-61. The assessee, United Asian Traders Ltd., is a company whose accounting year is the financial year ending 31st of March. For the asst. yr. 1959-60 the ITO served a notice on the assessee under s. 18A(1) of the Indian IT Act, 1922, demanding advance tax of Rs. 18,372 some time in the beginning of the month of June, 1958. On or about 15th June, 1958, the assessee filed an estimate under s. 18A(2) of the Act showing nil income for the accounting year 1958-59 and also showing the advance tax payable as nil. The assessee's income-tax return was filed on the 30th November, 1959, disclosing a total income of Rs. 10,763. The assessment for that year was completed on the 29th of December, 1961, determining the assessee's total income at Rs. 17,059. For the asst. yr. 1960-61 a notice of demand for advance tax for a sum of Rs. 7,568 was served on the assessee on the 27th May, 1959. On the 8th July, 1959, the assessee filed an estimate under s. 18A(2) of the said Act showing its income during the accounting year 1959-60 as nil and the advance tax payable as nil. The income-tax return for this year was filed on the 19th May, 1961, disclosing a total income of Rs. 10,567. The assessment for this year was completed on a total income of Rs. 12,974. The ITO, thereafter, issued notices on the assessee under s. 18A(9)/28(1)(c) of the Indian IT Act, 1922, and, after giving the assessee an opportunity, imposed penalties of Rs. 2,100 and Rs. 1,400, respectively, for the years 1959-60 and 1960-61. In the order of the ITO for the year 1959- 60 he had stated : "I have seen the ledger of the assessee and I find that he was throughout the year in the knowledge of the fact that he would receive at least Rs. 5,420 by 31st March, 1959, on account of refunds representing price of excess goods supplied to foreign buyers." Similar observations appear in the order made for the year 1960-61.
(2.) THE assessee preferred appeals before the AAC. It was contended before the AAC that the assessee's business was dealing in jute and hemp, and the fluctuation in prices of these commodities being very heavy, it was not possible to predict what would be profit or loss of the business at the end of the year. It was submitted that on the dates, namely, June, 1958, and July, 1959, when the the assessee had submitted the estimate under s. 18A(2) of the Act, the assessee's account showed business losses and the assessee had no reason-to expect that there would be a profit at the end of the year for either of these two years. THErefore, it was contended that there was no reason for the ITO to be satisfied that the assessee had furnished the estimates which it knew or had reason to believe to be untrue. THE AAC was unable to accept the contentions of the assessee. In the order for the year 1959-60, the AAC observed as follows : "In the course of the appeal proceedings in response to a specific question it was submitted that the basis on which this estimate was submitted on 16th June, 1958, was not known or was not available. A statement of the purchase and sale transactions in jute and hemp was submitted. According to this statement the jute business showed a loss of about Rs. 1,863 up to 15th June, 1958. THE hemp business showed a loss of about Rs. 12,000 on 15th June, 1958." Similar observations appear in the order for the asst. yr. 1960- 61. The AAC further was of the view that as the assessee did not file any revised estimate under the proviso to s. 18A(2) at any time upto 15th of March, 1959, or 15th of March, 1960, when the assessee would have known the probable results of its trading for the respective accounting years showed that the assessee had no genuine desire to file a correct estimate of its profits for either of these two accounting years. The AAC upheld the order of the ITO. There was a further appeal before the Tribunal where it was contended that the assessee was entitled to file its estimates of income at any time under s. 18A(2) of the Indian IT Act, 1922. There was no obligation on the assessee to wait till the end of the accounting year before filing its estimate under that sub- section. The proviso only gave the assessee an option to file a revised return at any time before the 15th of March of the next year. As, in this case, the assessee made estimates of its business results in the months of June and July and according to the state of accounts at that time, the assessee had reasonable grounds for estimating the trading results to be losses for each of these years, it was contended that the assessee could have no reason to believe that its estimates were not true or correct. It was further contended that in the assessee's business of export in jute and hemp to foreign buyers credit and debit notes were received by the assessee in respect of these shipments. In the first year it appears that the assessee received credit notes to the extent of Rs. 13,410 and debit notes of Rs. 3,647 after 31st of March, 1959, resulting in a profit of about Rs. 10,000. It was urged that this explained the assessee's returned income of Rs. 10,763. It was further urged that if the balance of these credit and debit notes received after the end of the year was not brought into account, the assessee's trading results would have been a loss and the assessee's estimate would have been confirmed. In respect of the second year, the balance of credit notes over the debit notes received after 31st of March, 1960, was brought into account for the year ending on that date amounting to Rs. 26,400 and it was explained that if this amount was left out of the assessee's trading for that year that would have disclosed a loss and the estimate would have been correct. The Tribunal was unable to accept these contentions of the assessee. The Tribunal was of the opinion that, if the assessee's contention was that the nature of the business it carried on was so uncertain that it was not possible to predict the ultimate trading results at any point of time, then it was not possible for the assessee to make an estimate of the profit or loss for the whole year bona fide right at the beginning of the accounting year. In those circumstances, it could not be said, according to the Tribunal, that the assessee had reason to believe such estimates to be correct and true. So far as the credit and debit notes were concerned the Tribunal held that the assessee must have been in a position to know by the 15th of March of the sub-sequent year what amount of credit notes and debit notes it was going to receive for the year ending on the 31st of March. The actual amount due on such notes, according to the Tribunal, might have been received sub-sequently but the assessee must have had information as to the amount of such notes which he would receive for that year. In spite of this, the assessee did not file any revised return by the 15th of March. Taking these facts into consideration the Tribunal upheld the orders imposing penalties passed in this case.
(3.) THE following question has been referred to this Court under s. 66(1) of the Indian IT Act, 1922 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in confirming the penalties imposed under s. 18A(9)28(1)(c) of the Indian IT Act, 1922, on the assessee in respect of the asst. yrs. 1959-60 and 1960-61 ?" On behalf of the assessee learned counsel, Mr. S. K. Banerjee, contended before us that s. 18A (9) of the Indian IT Act, 1922, is in the nature of a penal provision and the Revenue has to establish the conditions laid down therein before invoking the provisions of the section. The burden lies upon the Revenue to prove that the conditions laid down therein were satisfied before an order could be made. The learned counsel relied on the decision in the case of CIT vs. Gangadhar Banerjee and Co. (Private) Ltd. (1965) 57 ITR 176 (SC), and the decision of this Court in the case of CIT vs. Anwar Ali (1967) 65 ITR 95 (Cal). Mr. Banerjee then submitted that, in view of the fact that these credit and debit notes were received after the 31st of March, it was not possible to include in the estimates that were originally filed the amount received by his client by these credit notes. According to him, without these credit notes the estimates made by his client were proper and correct. He further submitted that the assessee had no obligation to file a revised return and failure to file a revised estimate would not establish that at the time when the original estimates were filed either the assessee knew that the estimates were false or that he had reason to believe that the estimates were not true. Reliance was placed by the learned counsel on the decision in the case of P. V. Kurian vs. ITO, Ernakulam (1961) 43 ITR 432 (Ker.) and the decision in the case of P. Arunachala Mudaliar vs. CIT (1963) 50 ITR 36 (Mad).;