Income Tax Appellate Tribunal - Jaipur
Assistant Commissioner Of Income-Tax vs Modi Engineers on 8 March, 1995
Equivalent citations: [1995]54ITD478(JP)
ORDER
M.A.A. Khan, Judicial Member
1. In this case, the Assessing Officer (AO) initiated penalty proceedings for assessee's default of failure to file the estimate of advance tax payable punishable under Section 273(2)(b) of the Income-tax Act, 1961 ('the Act'). In the course of the proceedings, the assessee proved that he had filed such estimate on 13-12-1985. But the Assessing Officer noted that though the estimate had been so filed, yet the assessee had not paid the advance tax. He, therefore,held the assessee a defaulter for the purposes of Section 273(2)(b) of the Act.
2. In the course of the penalty proceedings, the Assessing Officer further noted that the estimate of advance tax payable by the assessee was untrue. He, therefore, called upon the assessee by his letter dated 3-3-1989 to show cause as to why penalty for default punishable under Section 273(2)(a) be not levied upon him. By his reply dated 6-3-1989, the assessee explained that the estimate had been filed by him well within time but the reason for not paying the advance tax was mentioned by him in his reply. In his earlier reply, the assessee had explained that by reason of the challan having been misplaced, he could not pay the advance tax of Rs. 8,050 but when that mistake came to his notice at the time of filing the return he paid the tax under Section 140A at Rs. 10,202 on 4-6-1986. The Assessing Officer did not feel satisfied with this explanation and he held the assessee defaulter for Section 273(2)(a) as well. Thus the Assessing Officer found the assessee defaulter for both the provisions of Section 273, namely Section 273(2)(a) as well as Section 273(2)(b) of the Act. The Assessing Officer levied a penalty of Rs. 10,000 accordingly.
3. In appeal, the ld. CIT(A) held that since the assessee had filed an estimate of advance tax payable, he was not a defaulter for the purposes of levying penalty under Section 273(2)(b). He further held that since the proceedings were not initiated for assessee's default punishable under Section 273(2)(a), he was not to be visited with penalty under that provision either. The ld. CIT(A) thus cancelled the penalty and allowed assessee's appeal.
4. The ld. D/R submitted that the defect, if any, either in the notice issued under Section 274 or in the proceedings held in this case, was a curable irregularity and since due notice of the actual default committed by the assessee was given to him before levying the penalty, such defect stood cured. He further submitted that since the assessee had undisputedly not paid the amount of advance tax payable by him as per provisions of Section 209A a default punishable under Section 273(2)(b) as well as under Section 273(2)(a), was committed. He, therefore, urged for restoration of the penalty.
5. The ld. counsel for the assessee submitted that in the instant case no default, either under Section 273(2)(a) or under Section 273(2)(b) could be said to have been committed by the assessee inasmuch as the assessee had filed an estimate of advance tax payable and it was not proved that such estimate was untrue. Mr. Mertia further submitted that default in paying the estimated advance tax could be punishable under Section 218 but not under Section 273(2)(a) or 273(2)(b) of the Act. In this behalf, Mr. Mertia relied upon the Madras High Court decision in CIT v. Smt. Vijayanthimala [l977] 108ITR 882 and Gujarat High Court decision in CIT v. B.P. Mehta [ 1993] 199 ITR 654. We find ourselves in agreement with Mr. Mertia.
6. Section 207 of the Act casts an obligation to pay advance tax in respect to the total income of the assessee which would be chargeable to tax for the current year. Section 208 lays down the conditions of the liability to pay advance tax and Section 209 tells the mode and manner to compute such tax. Section 209A, which has since been omitted by Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1-4-19818 dealt with the computation and payment of advance tax by the assessee. The relevant part of that section as is material for our purpose, ran as under, at the relevant time:
209A. Every person shall in each financial year, on or before the date on which the first or where he has not previously been assessed by way of regular assessment under this Act, on or before the date on which the last instalment, of advance tax is due in his case under subsection (1) of Section 211, if his current income is likely to exceed the amount specified in Sub -section (2) of Section 208, send to the ITO
(a) where he has been previously assessed by way of regular assessment under this Act, a statement of advance tax payable by him computed in the manner laid down in Clause (a) or as the case may be, Sub-Clause (i) of Clause (d) of Sub -section (1) of Section 209 or
(b) where he has not previously been assessed by way of regular assessment under this Act, an estimate of
(i) the current, income, and
(ii) the advance tax payable by him on the current income calculated in the manner laid down in Section 209, and shall pay such amount of advance tax
(i) in a case falling under Clause (a), as accords with the statement in equal instalments on the dates applicable in his case under Section 211; and
(ii) in a case falling under Clause (b), as accords with the estimate in equal instalments on such of the dates applicable in his case as have not expired, or in one sum if only the last of such dates has not expired:
7. It may be seen that the obligation casts on an assessee, who had not been previously assessed by way of regular assessment under the Act, was to send to the ITO an estimate of (i) his current income and (ii) the advance tax payable by him on the current income. The further requirement was to pay the amount of advance tax payable. This last obligation is clearly borne out from the heading given to this section as also from the clause "and shall pay such amount of advance tax" used below the two categories of the assessees enumerated under Clause (b) of Sub -section (1) of Section 209A. The obligation to pay the amount of advance tax is very much explicit from the language of this section. Otherwise also it makes no sense that obligation to file the estimate of advance tax payable only without further obligation of paying the amount of such advance tax was cast upon the assessee by the Legislature. Liability to pay the amount of advance tax along with the filing of the estimate of the current income and the advance tax payable clearly flows not only from the heading given to this section but also from the express language used therein. Such an interpretation advances the smooth functioning of this provision otherwise the very purpose of enacting that provision would get frustrated. In this behalf we approve of the approach adopted by the Assessing Officer.
8. The argument of Mr. Mertia that the non-payment of advance tax is punishable under Section 218 and not under Section 273 appears to be totally misconceived. The relevant parts of the two provisions, as are material for deciding this appeal, ran as under at the relevant time :
218.: If any assessee does not pay on the date specified in Sub -section (1) of Section 211, any instalment of advance tax that he is required to pay by Section 210 and does not on or before the date on which any such instalment as is not paid becomes due, send to the Assessing Officer an intimation under Sub -section (5) of Section 210 or does not pay on the basis of his estimate of his current income the advance tax payable him under Sub -section (6) of Section 210, he shall be deemed to be an assessee in default in respect of such instalment or instalments.
273(2). If the Assessing Officer in the course of any proceedings in connection with the regular assessment for the assessment year commencing on the 1st day of April, 1970, or any subsequent assessment year is satisfied that any assessee
(a) has furnished under Section 2(1) or Sub -section (3) or (5) of Section 209A, or under Section 212(2)(1) an estimate of the advance tax payable by him which he knew or had reason to believe to the untrue, or (aa)** ** **
(b) has failed to furnish an estimate of advance tax payable by him in accordance with the provisions of Sub -section (4) of Section 209A or under Section 212(3A).
9. It may be noted that Section 218, deals with the situation when an assessee is deemed to be in default. It speaks of those assessees who have been assessed to tax by way of regular assessment, but have not paid the instalment of advance tax despite Assessing Officer's notice under Section 210 or have failed to pay the advance tax as per their estimates of current income despite such notice. The default contemplated in this section is related to the non-compliance of Assessing Officer's order passed under Section 210(3) or 210(4) of the Act. The default contemplated is specifically punishable under Section 221 of the Act.
10. The provisions contained in either Section 273(2)(a) or (b) on the contrary, do not necessitate the issue of any order of Assessing Officer under Section 210 for their application. They intend to punish an assessee who has either totally failed to furnish the estimate of the advance tax payable or if he has furnished one the same is found untrue to his knowledge. This Section 218 and Section 273(2)(a) and (b) materially differ in their purposes and field of operation.
11. At this stage, we would like to deal with another requirement for imposing the penalties enumerated under Chapter XXI of the Act. Section 274 lays down the procedure for levying such penalties. Sub-section (1) of Section 274 which is relevant for our purpose, runs as under:-
Section 274(1). No order imposing a penalty under this Chapter shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard.
It may be noted that Section 274(1) does not speak of the requirement of issuing any notice as condition precedent for initiating penalty proceedings under Chapter XXI. What is required for valid imposition of the penalties under Chapter XXI is to hear the assessee, or to give him proper opportunity of being heard before the penalty is actually imposed. Since no statutory notice is to make the basis of levy of penalty under Chapter XXI there would arise no question of changing the basis in the course of hearing of the proceedings. If in a given case, an Assessing Officer has issued a notice to the assessee to answer a particular charge and the Assessing Officer has also initiated penalty proceedings on the basis mentioned in the notice given by him to the assessee, he may change that very basis to another and impose penalty accordingly provided that he has heard the assessee or has given to him a proper opportunity of being heard on the changed basis, before imposing penalty upon the assessee. The provisions of Section 274 in fact make safeguard against the violation of the principle of natural justice which required that no person should be condemned without hearing. This provision thus advances the spirit of Article 21 of the Constitution of India. It should not be interpreted as laying down the requirement of issue of any statutory notice as condition precedent for the very initiation of penalty proceedings under the Act.
12. Further if any mistake defect or omission has been committed in relation to the furnishing of a return of income, making an assessment, issuing a notice or summons or taking the proceedings but the return of income furnished assessment made, notice or summons issued, or proceedings taken are in substance and effect in conformity with or according to the intent or purpose of the Act, such mistake, defect or omission would not invalidate the return of income, assessment notice or summons or the proceedings. Section 292B regard such mistakes, defects or omission as being of procedural natural amounting to curable irregularity only. Any mistake defect or omission, relating to the furnishing of the return, making assessment, issuance of notice or summons and taking of proceedings, which is curable under Section 292B does not vitiate the return, assessment, notice or summons or other proceedings. But the true nature and character of the mistake, defect or omission shall have to be considered with reference to the effect or consequences from the mistakes, defects or omissions upon the decision of the issue involved in a given case.
13. Now coming to the merits of the case, we find that the assessee admittedly is a person who had not hitherto been assessed to tax by way of regular assessment. In view of that factual position, the provisions of Section 209A(l)(b) were applicable. Further since he had furnished an estimate of advance tax, though not paid such tax, the provisions of Section 273(2)(b) were not applicable to his case. The view of the Assessing Officer that since the assessee had not paid advance tax and hence he was a defaulter for the purposes of Section 273(2)(b) was obviously wrong.
14. The main requirement for attracting the provisions of Section 273(2)(b) is the failure of an assessee to furnish the estimate of advance tax payable. The further requirement of paying advance tax flows from the language of Section 209A(l)(b) which has not been referred to in Section 273(2)(b), though the same has been used in the language of Section 273(2)(a). What had not been intended by the Legislature in making assessee's default punishable under Section 273(2)(b) should not be imported in its language for the purpose of levying penalty. In fact, the non-payment of advance tax is ordinarily a natural consequence of the failure to furnish the estimate of advance tax. In a given case, an assessee may be found to have paid advance tax without furnishing the estimate thereof. In that situation the default may be punishable, if at all, under Section 273(2)(a) and not under Section 273(2)(b). For in the act of making payment of advance tax an assessee may be deemed to have furnished the required estimate of advance tax at the figure of the actual amount paid by him by way of advance tax. The tax so paid may be short of his liability and in that case it may be inferred that the estimate made by him of his liability under Section 209A(l) was incorrect and untrue to his knowledge. His default of making short payment of his advance tax liability may thus be punishable under Section 273(2)(a). In the administration of the provisions contained in Section 273(2) it should be kept in mind that purpose is to enforce the payment of correct amount of advance tax payable by an assessee and not to necessarily punish him.
15. Now to coming to the merits to the imposition of penalty under Section 273(2)(a), the mere fact that the assessee did not pay the advance tax along with the furnishing of the estimate of advance tax payable without further proof of a mala fide intention or dishonest conduct on the part of the assessee should not result in penalty under this provision. The case of the assessee was that the challan meant for making payment of advance tax had been misplaced at the time of furnishing the estimate of such tax, but as soon as the assessee came to know of the likely consequences, he deposited the tax under Section 140A of the Act. This conduct of the assessee has not been controverted by the revenue. The Assessing Officer has placed no material on record to show that the assessee had deliberately acted in defiance of his statutory obligations under the Act. He has not even mentioned in his order as to how the estimate filed by the assessee was untrue to his knowledge. He did not mention the figures of estimated current income, the returned income and the finally assessed income of the assessee. Under such circumstances the ratio of the decisions of the Madras and Gujarat High Courts in the cases relied upon by the assessee applied to the benefit of the assessee.
16. In the Madras case, which was a case for penalty under Section 221, the Madras High Court held that simply because an assessee has incurred the liability to pay penalty, it is not obligatory on the part of the officer to levy-a penalty, whether a penalty should be levied or not and if so what should be the quantum of the penalty will depend on the facts and circumstances of each case which will primarily concern whether the default wilful or merely accidental.
17. Likewise, in the Gujarat case which was a case for default punishable under Section 273(2)(c), the Gujarat High Court held that 'liability for penalty under Section 273(2)(c) is incurred by the assessee only when the assessee fails to furnish an estimate of advance tax payable by him in accordance with the provisions of Section 212(3 A). Section 273(2)(c) does not deal with the liability which may arise because of failure of the assessee to pay such amount of advance tax as accords with his estimate of advance tax'. That is also a point which we have highlighted at an earlier part of this order. Both these cases fully support our view-point and, therefore, we hold that imposition of any penalty either under Section 273(2)(a) or 273(2)(b) in this case was not justified and has rightly been cancelled.
18. Before we close, we would like to add that since the Assessing Officer had specifically required the assessee to answer the default punishable under Section 273(2)(a) and had, thereafter given him proper opportunity of being heard, before levying the penalty not irregularity in the proceedings was committed by him. The learned CIT (A) has taken a wrong view of the legal position of the point. But in view of what has been discussed above, we uphold the order under appeal on merits of the case, though for other reasons.
19. In the result, the appeal is dismissed.