UNITED ASIAN TRADERS LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(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 :

(3.) THE following question has been referred to this Court under s. 66(1) of the Indian IT Act, 1922 :