Madras High Court
Commissioner Of Income-Tax vs Gemini Pictures Circuit (P.) Ltd. on 14 June, 1990
Equivalent citations: [1991]188ITR101(MAD)
JUDGMENT Thanikkachalam, J.
1. In accordance with the provision contained in section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), at the instance of the Revenue, the Tribunal referred the following question for our opinion :
"Whether, on the facts and in the circumstances of the case and having regard to the provisions of chapter XVII-C of the Income-tax Act, the Appellate Tribunal was correct in holding that the payment of Rs. 3,20,000 made on March 30,1968, in pursuance of an invalid estimate should be taken into account for the purpose of computing the penalty under section 273(a) of the Income-tax Act, 1961, for the assessment year 1968-69 ?"
2. The Income-tax Officer demanded advance tax of Rs. 3,38,711 for the assessment year 1968-69 under section 210 of the Income-tax Act, 1961. The assessee filed an estimate on june 14, 1967, in which he estimated the tax at Rs. 17,550. The assessee filed another estimate on march 30, 1968, estimating the tax at Rs. 6,32,500. The Income-tax Officer pointed out that the latter estimate was invalid, having been filed beyond March 15, 1968. The Income-tax Officer initiated penalty proceedings under section 274 read with section 273(a) of the Act and issued a notice. The assessee filed a reply dated February 1, 1974, stating that as per he revised estimate, the income was shown at Rs. 11,50,500, that the tax thereon amounted to Rs. 6,32,500 and that the same was paid before November 4, 1968. It was further stated that the tax as above was paid as advance tax and the same should not be ignored. The Income-tax Officer pointed out that payment of tax made in accordance with the valid estimate alone would be taken as advance tax, that the payment made on the basis of the estimate dated March 30,1968, could not be taken as advance tax and that, therefore, the valid estimate sent on June 14, 1967, was an underestimate. The Income-tax Officer computed the shortfall at Rs. 3,21,161 and imposed a penalty of Rs. 32,116 under section 273(a) of the Act. On appeal, it was argued before the Appellate Assistant commissioner that the Income-tax Officer should have taken into account the sum of Rs. 3,33,161, paid as advance tax by the assessee during the previous financial year immediately preceding the assessment year and if that were to be done, the shortfall would work out to Rs. 5,550 and no penalty could be imposed under section 273(a) of the Act. It was further contended that the revised estimate sent by the assessee on march 30, 1968, was valid and that since the advance tax of Rs. 6,32,500 was shown as due according to the revised estimate which did not fall short of 75% of the assessed tax, namely, Rs. 6,14,906, as determined by the Income-tax officer, no penalty could be imposed. The Appellate Assistant Commissioner accepted the assessee's contention and held that the penalty should be quantified by taking the shortfall at Rs. 5,550 as the basis. Accordingly, the Appellate Assistant Commissioner reduced the penalty from Rs. 32,116 to Rs. 555.
3. The Revenue filed an appeal before the Tribunal against the said order of the Appellate Assistant Commissioner. The learned Accountant Member, relying on the decision in the case of A. K. Bashu Saheb v. ITO [1967] 66ITR 20 (Mad), set aside the order passed by the Appellate Assistant commissioner and restred the order passes by the Income-tax Officer and thereby allowed the departmental appeal. On the other hand, the learned judicial member by distinguishing the judgment of the Madras High Court in A. K. Bashu Sahib v. ITO [1967] 66 ITR 20 on facts and following the decision of the Gujarat High Court in the case of CIT v. Kohinoor Flour Mills [1975] 99 ITR 54, confirmed the order passed by the Appellate Assistant Commissioner and dismissed the departmental appeal. The matter was referred to a third member, who agreed with the learned judicial member. Thus, in accordance with the majority view, the Tribunal passed an order accepting the case of the assessee, confirmed the order passed by the Appellate Assistant Commissioner and dismissed the appeal filed by the Department.
4. Learned standing counsel for the Department contended before use that the tax paid by the assessee on Mach 30, 1968, in pursuance of the invalid estimate cannot be considered to be advance tax paid under the provisions of Chapter XVII-C of the Act. It was pointed out that the advance tax paid was only Rs. 17,550 and the excess payment made in pursuance of the invalid estimate cannot be treated as advance tax. According to learned standing counsel, the payment of Rs. 3,20,000 made on March 30, 1968, could not be held as advance tax paid under Chapter XVII-C of the Act since that amount was paid on an invalid estimate filed on March 30,1968.
5. Learned standing counsel pointed out that, if the amount paid on the invalid estimate is ignored, then there is a shortfall of Rs. 3,21,161 and, therefore, the penalty is exigible under section 273(a). Learned standing counsel further pointed out that the fact that in the assessment proceedings,. the Department accepted the payment made on the invalid estimate as advance tax paid within the end of the financial year would not mean that the said payment should also be accepted as advance tax paid under Chapter XVII-C. Learned standing counsel submitted that, if this interpretation is accepted as the correct interpretation, then the very purpose for which section 273(a) was introduced would get frustrated. It was, therefore, pleaded that the Tribunal was not correct in upholding the order of the Appellate Assistant Commissioner.
6. On the other hand, learned counsel appearing for the assessee submitted that the assessee filed a revised estimate on march 30, 1968, and the income was shown as Rs. 11,50,500, on which the tax amounting to Rs. 6,32,500 was paid and, therefore, this should not be ignored before imposing the penalty under section 273(a). It was further submitted that if this amount of Rs. 3,33,161 paid on the basis of the revised estimate was taken into account as advance tax paid by the assessee during the financial year immediately preceding the assessment year under consideration, then the shortfall would be only Rs. 5,550. Learned counsel pointed out that the revised estimate filed by the assessee on March 30, 1968, was a valid estimate and that since the advance tax of Rs. 6,32,500 shown as due according to the revised estimate did not fall short of 75% of the assessed tax, viz., Rs. 6,14,906, as determined by the Income-tax Officer, no penalty could be imposed. Learned counsel finally contended that when the payment was treated as advance tax in the assessment proceedings, it is not open to the Department to treat the said payment as not made under the provisions of Chapter XVII-C in the penalty proceedings. It was, therefore, pleaded that the Tribunal was correct in confirming the order passed by the Appellate Assistant Commissioner.
7. We have heard the rival submissions. The question that arises for consideration in this reference is whether the payment of Rs. 3,20,000 made on March 30, 1968, should also be taken into account as tax actually paid within the meaning of section 273(a)(i) of the Act. The materials on record show that the assessee had actually paid a sum of Rs. 3,33,161 during the financial year immediately preceding the assessment year under consideration. The point is whether the above payment can be taken as actually paid under the provisions of Chapter XVII-C. According to the assessee, it was under the bona fide impression and belief of that the payment made by it on March 30, 1968, was made as advance tax payment in pursuance of a revised estimate filed. The payment was also accepted by the Income-tax Officer in the assessment proceedings as advance tax paid as contemplated under section 219. Therefore, the further question is whether the Department having accepted the payment as advance tax paid in the assessment proceedings, it is open tot he Department to ignore the said payment and treat it as payment not made under the provisions of Chapter XVII-C in the penalty proceedings.
8. From a reading of the relevant provisions of Section 273(a)(i) of the Act, it is clear that the penalty under section 273(a) of the Act could be imposed only on the amount by which the tax actually paid during the financial year immediately preceding the assessment year falls short of 75% of the assessed tax or when a notice under section 210 of the Act was issued to the assessee for the amount payable thereunder. Therefore, if the Income-tax Officer, in the course of any proceedings in connection with the regular assessment for any assessment year, is satisfied that any assessee has furnished under clause (a) of sub-section (1) of section 209, a statement of the advance tax payable by him which he knew or had reason to believe to be nature, he can levy penalty. The burden of proving that an estimate of advance tax submitted by an assessee was false to his knowledge or believed by him to be inaccurate is on the Department. According to the Income-tax Officer in the present case, the payment made in accordance with the valid estimate filed on June 14, 1967, alone could be taken as advance tax and, therefore, the valid estimate sent on June 14, 1967, is an underestimate. There is nothing in section 273 which empowers the Income-tax Officer to penalise an assessee for not furnishing a revised estimate. Penalty under that provision can be imposed only if the estimate already furnished by the assessee is found to be untrue and the Income-tax Officer is satisfied that when furnishing it, the assessee knew or had reason to believe that it was untrue. But the materials on record show that the Income-tax Officer has not recorded his satisfaction with regard to the fact that the assessee knew or had reason to believe that the estimate filed by the assessee was untrue. From the bare fact that there was disparity between the original estimate and the revised estimate filed by the assessee, no inference can be drawn that the assessee had reason to believe the original estimate to be untrue. Therefore, even on that score, we are of the opinion that the tribunal was correct in upholding the order of the Appellate Assistant Commissioner.
9. Now let us consider the decision cited by both the parties,. The first decision brought to our notice was that in the case of A. K. Bashu Sahib v. ITO [1967] 66 ITR 20 (Mad). That was a case where the assessee did not submit any estimate of income in the prescribed form within the prescribed time. On these facts this court held that the assessee was not entitled to pay the first installment of the advance tax demanded in accordance with the estimate filed by him belatedly. In the present case, the assessee had filed an estimate of advance tax originally and he sought to file a revised estimate, which estimate and the payment of tax in pursuance thereof were accepted by the Department as pertaining to advance tax payment. Therefore, the decision in A. K. Bashu Sahib's case [1967] 66 ITR 20 (Mad) will not be applicable to the facts of the present case.
10. In this connection, another decision cited before us was that in the case of CIT v. T. T. Investments and Trades (P.) Ltd. [1984] 148 ITR 347 (Mad) and while deciding the question relating to the interest payable to the assessee under section 214 on excess payment, this court had occasion to consider whether any payment made before the end of the accounting year for which the assessment is made should be taken as advance tax. In that case, this court held that (at p. 351) "when once the payment of the tax paid as advance tax is accepted, the payment cannot be said to be not towards advance tax. Any payment made before the end of accounting year for which the assessment has been made should be taken to be an advance tax."
11. In a similar situation in Addl. CIT v. Chitra Sagar [1980] 121 ITR 699, this court has specifically held that so long as the amount of advance tax is paid, though belatedly, but within the end of the accounting year, it will have to be taken as advance tax for the purpose of section 214 of the Act as, otherwise, credit cannot be given to that sum at the stage of the assessment under section 214.
12. Similar view wa also taken by the Gujarat High Court in the case of Chandrakant Damodardas v. ITO [1980] 123 ITR 748. In this decision, the Gujarat High Court explained the circumstances under which the deicsion in the case of Bharat Textile Works v. ITO [1978] 114 ITR 28 (Guj), was rendered. While rendering the decision in CIT v. T. T. Investments and Trades P. Ltd. [1984] 148 ITR 347, this court followed various judgments rendered in the case of CIT v. Kohinoor flour Mills [19785] 99 ITR 54 (Guj), in the case of Santha S. Shenoy v. Union of India , in case of CIT v. traub (India) P. Ltd. [1979] 118 ITR 525 (Bom), in the case of CIT v. Jagnnath Narayan Kutumbik Trust and in the case of Chandrakant Damodardas v. ITO [1980] 123 ITR 748 (Guj).
13. Another decision relied on before us was that reported in the case of CIT v. Vijayanthimala [1977] 108 ITR 882 (Mad). According to the facts appearing in that decision the amount was due and payable on September 1, 1968, the amount was paid only October 8, 1968, and hence it was held that the assessee was liable to pay penalty under section 221(1) of the Act. Therefore, the facts appearing in that decision are different from the facts appearing in the present case. hence, that decision will not be applicable to the facts of the present case.
14. Reliance was also placed on a decision reported in the case of Gursahai Saigal v. CIT [1963] 48 ITR (SC) 1. According to the facts appearing in that case, the assessee neither field an estimate not paid the tax in accordance with the provisions of section 18A(3) of the Indian Income-=tax Act, 1922. The contention of the assessee was that he is a person to whom sub-section (8) applies and in his case since he has not paid tax at all, it is not possible to calculate interest in the manner laid down in sub-section (6). While deciding the question arising in this case, the Supreme court refused to accept the contentions put forward by the assessee. Since the facts appearing in this decision are entirely different, this decision also will not render any assistance in deciding the issued arising in the present case.
15. Yet another decision brought to out notice was that reported in the case CIT v. Kohinoor Flour Mills [1975] 99 ITR 54 (Guj). The facts arising in this case are as under (headnote) :
"The assessee, a private limited company, was not assessed to income-tax before the assessment year 1965-66. It was liable to pay income-tax for the assessment year 1965-66 and, therefore, liable to file an estimate of advance tax before March 31, 1965, and to pay the advance tax on March 15, 1965. The assessee filed on March 25, 1965, an estimate showing an income of Rs. 3,66,000 and paid advance tax of Rs. 1,83,000 on March 26, 1965. As the estimate wa not filed before the due date, the assessee was held liable to pay penalty under section 273 of the Income-tax Act, 1961."
16. On these facts, the Gujarat high Court held as under.
"that having regard to the tenor and tense of the language used in section 273(b) read with section 273(ii), the crucial date for levy of penalty cannot be the date of default as contended on behalf of the Revenue. The basis of penalty under section 273(ii) is the amount on which interest is payable under section 217(1), interest payable in case of default for not filing return as required by section 212(3) is to commence from the 1st day of April next following the financial yea in which advance tax was payable and it is to run up to the date of regular assessment. Therefore, the basis of penalty, as prescribed under section 273(ii), being the amount on which interest is payable under section 217, the date with reference to which penalty is to be levied cannot be the date of default."
17. This decision was rendered under section 273(b). This decision was followed by the Tribunal in accepting the contentions put forward by the assessee.
18. Reliance was also placed on the decision reported in the case of CIT v. Bharat Nidhi Ltd. . In this decision, while considering the provision contained in section 215(1), 273(a) of the Act before amendment in 1968, the Delhi High Court pointed out the method in arriving at the shortfall. The contention of the assessee in this case was that on the language of section 273(a) the penalty in the present case should be 10% (as determined by the Tribunal) of the amount by which the tax paid by him during the financial year in quesion fell short of 75% of the tax determined on regular assessment minus the taxes deductible at source in accordance with the provisions of section 192 to 194, 194A and 195. On the other hand, according to the Department, the penalty should be 10% of the amount by which the tax paid by the assessee during the financial year fell short of 75% of the tax determined on regular assessment minus the tax deductible under sections 192 to 195. The Delhi High Court accepted the contention put forward by the assessee. The question of accepting the advance tax paid belatedly but before the end of the financial year, as advance tax paid under the provisions of Chapter XVII-C was not the subject-matter of this decision. Therefore, this decision is also not helpful in deciding the question arising in the present case.
19. It is also significant to note in this context that while considering the penalty imposable under section 18A(9) and 28(1) (c) of the Indian Income-tax 1922, in the case of P. Arunachala Mudaliar v. CIT [1963] 50 ITR 36, this court held as under (p. 41) :
"The point that arises for decision is whether the assessee furnished the estimate of the tax under section 18A (2) on September 13, 1952, knowing or having reason to believe that it was untrue. Now, section 18A(9) is one of the punishment section of the Act. It is a common feature of every taxing statute to impose penalty for violation of all or any of the provisions therein. Such penal provision has to be construed so as not to affect the subject, unless he or she is plainly caught within the literal statutory language. In adjudging the culpability of the assessee under section 18A the Department has the unified role of both the prosecutor and the judge. We do not suggest that the said provision is unifirm or invalid because of this circumstance. We only wish to emphasize the fact that every care and caution must be taken by the Department to see that the provision is not used against the assessee a an instrument of oppression. The proceedings are of a quasi-judicial character and it is unnecessary to point out that the authorities mustact in a fair and unbiased manner. The accusation against the assessee is in the nature of a criminal charge and it is obvious that the guilt must be brought home to him by adopting the standard of proof, as far as may be possible, requisite to sustain a conviction in a criminal court.
20. We have considered the decisions cited before us. The question that now remains to be considered is whether the advance tax paid belatedly but within the financial year immediately relevant to the assessment year under consideration can be taken as advance tax paid in pursuance of the provisions contained in Chapter XVII-C. The fact reminds that the sum of Rs. 3,20,000 paid as advance tax according to the estimate filed on March 30,1968, was accepted as advance tax and given credit for under section 219 by the Income-tax Officer in the assessment proceedings. A careful perusal of the decisions cited before us would go to show that while considering the provisions containing sections 214 and 217 of the Act the majority of the High Courts uniformly held that advance tax paid belatedly but before the end of the financial year immediately relevant to the assessment year under consideration should be taken as advance tax paid for the purpose of payment of interest under sections 214 and 217. In fact, the gujarat High court in CIT v. Kohinoor Flour Mills [1975] 99 ITR 54, as mentioned above, clearly pointed out that the basis of penalty under section 273(ii) is the amount on which interest is payable under section 217. We are also of the view that what is advance tax actually paid for the assessment proceedings can also be the advance tax actually paid for the assessment proceedings can also be the advance tax actually paid for the penalty proceedings under section 273(a) of the Act. The Department can not have two views, one for the assessment proceedings sand another for the penalty proceedings while considering the advance tax paid baldly, but before the end of the financial year immediately preceding the assessment year under consideration. Further, in a case of legislative ambiguity, the assessee should be entitled to the benefit of doubt particularly in a provision which attempts to penalise the assessee (See CIT v. Vegetable Products Ltd. ). We have already pointed out in this case that there is no finding given by the Income-tax Officer to the effect that the original estimate of the advance tax furnished by the assessee was untrue to the knowledge or reasonable belief of the assessee. On a careful consideration of all these aspects, we are of the opinion that the Tribunal was correct in upholding the order passed by the Appellate Assistant Commissioner in the penalty proceedings under section 273(a) of the Act.
21. In that view of the matter, we answer the question referred to us in the affirmative and against the Department. The assessee is entitled to its costs Counsel's fee is fixed at Rs. 500.