1. The dispute in the present appeal is whether on the facts and in the circumstances of the case, the learned Commissioner (Appeals) was justified in cancelling penalty levied by the ITO in respect of the assessment year 1976-77 in terms of Clause (c) of Section 273(2) of the Income-tax Act, 1961 ('the Act').
(2) If the Income-tax 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- (c) has without reasonable cause foiled to furnish an estimate of the advance tax payable by him in accordance with the provisions of Sub-section (3A) of Section 212, he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way of penalty a sum- (iii) which, in the case referred to in Clause (c), shall not be less than ten per cent but shall not exceed one and a half times the amount by which the tax payable under the notice issued to the assessee under Section 210 falls short of seventy-five per cent of the assessed tax as defined in Sub-section (5) of Section 215.
3. It will be clear from the wordings of the aforesaid clause that it is in two parts, the first part defines the default for which penalty is imposable and the second part indicates the manner in which the penalty is to be computed. In order to constitute the default which has to be penalised, the following ingredients have been stipulated in the clause : (i) that there has been a failure on the part of the assessee to furnish an estimate of the advance tax payable by him in accordance with provisions of Sub-section (3A) of Section 212, (ii) that the ITO is satisfied, in the course of any proceedings in connection with the regular assessment that the aforesaid failure has been without reasonable cause.
4. If the aforesaid ingredients are fulfilled, the ITO has to make up his mind as to what would be the quantum of penalty that he would impose on the assessee taking into account the circumstances of the default: whether it would be ten per cent or the maximum, i.e., 150 per cent or somewhere in between.
5. Sub-section (3A) of Section 212 of the Act, with reference to which the assessee's default referred to above has to be considered, may also be taken note of at this stage. Sub-section (3A) of Section 212, so far as it is relevant for our purpose, reads as follows : In the case of any assessee who is required to pay advance tax by an order under Section 210, if, by reason of the current income being likely to be greater than the income on which the advance tax payable by him under Section 210 has been computed or for any other reason, the amount of advance tax computed...on the current income...exceeds the amount of advance tax demanded from him under Section 210 by more than 33| per cent of the latter amount, he shall at any time before the date on which the last instalment of advance tax is due from him, send to the Income-tax Officer an estimate of- (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 as accords with his estimate....
The reading of the aforesaid provisions of Sub-section (3A) would make it clear that the said sub-section casts two responsibilities on the assessee. The first responsibility is 'to send to the ITO an estimate of the current income and the advance tax payable by him on the current income at any time before the date on which the last instalment of advance tax is due from him' and the second responsibility is to pay 'such amount of advance tax as accords with his estimate'. For the failure of the assessee to comply with the aforesaid two obligations, the law provides for separate sanctions for such non-compliance. For non-compliance of the first obligation, the sanction is provided by Clause (c) of Section 273(2). For non-compliance of the second obligation, the sanction is provided by Sub-section (2) of Section 218 of the Act read with Section 221 of the Act. For the non-payment of advance tax in accordance with the estimate, penalty cannot be imposed under Clause (c) of Section 273(2). Similarly, for the failure to file an estimate of advance tax, penalty cannot be imposed under Sub-section (2) of Section 218 read with Section 221. The two defaults are separate and have been so dealt with by the statute.
6. In the present case, the default for which the assessee has been penalised is his failure to file an estimate of advance tax in terms of Sub-section (3A) of Section 212. It is not the case of the assessee that there was no obligation on the assessee in terms of Sub-section (3A) of Section 212, nor is it the assessee's case that he had filed an estimate of advance tax in terms of Sub-section (3 A) of Section 212, though it was not available on record. It is common ground that there was such a responsibility on the assessee and that he has not complied with the requirement of Section 212. Despite it, the defence of the assessee against the show cause notice of the ITO for imposing penalty, as stated before the Commissioner (Appeals), was that the said default should not be penalised (1) because the assessee had paid the advance tax to the extent of Rs. 90,000 as against the tax of Rs. 21,920 only demanded of him by the ITO under Section 210 of the Act and (2) if the provisions of Section 64 of the Act, as amended by the Taxation Laws (Amendment) Act, 1975 with effect from 1-4-1976, are ignored, the advance tax paid by the assessee would be, according to the assessee, more or less the same as would have been payable by him on his own income.
7. The learned Commissioner (Appeals) has accepted the above submission of the assessee and has, accordingly, deleted the penalty because, according to him, the default committed by the assessee was 'technical' and there was nothing, on the facts of the present case, to indicate that there was contumacious conduct or deliberate defiance of law on the part of the assessee.
8. The above order of the learned Commissioner (Appeals) was based on the decision of the Tribunal Indore Bench, which held on the facts of the said case as follows : as the advance tax was actually paid by the assessee, it was very likely that the assessee did prepare an estimate on the basis of which he had to pay the advance tax and he may have actually despatched the same and that the idea of Section 212(3A) was to ensure payment of advance tax and that had been done in the present case. Therefore, on the facts of the case, the Tribunal came to the conclusion that a penalty ought to have been imposed merely for a technical or venial breach of law and merely because it was lawful to do so....
9. The revenue is aggrieved of the aforesaid order of the learned Commissioner (Appeals) and it is pointed out by the revenue that the assessee had clearly committed a breach of law and that there was no proper explanation for it and, therefore, the imposition of penalty on the assessee was justified. On behalf of the assessee, reliance was placed on the order of the Commissioner (Appeals) and that of the Tribunal mentioned in the order of the Commissioner (Appeals). It is also the contention of the learned counsel for the assessee that, if the provisions of Section 64, as amended by the Taxation Laws (Amendment) Act, 1975 were ignored, the tax pajd by the assessee was enough to meet the requirement of payment of advance tax. The amendment, in question, was operative only with effect from 1-4-1976 and, therefore, the assessee could not visualize the responsibility under the amended provision and, therefore, he could not make suitable adjustment for the payment of advance tax.
10. We have given careful consideration to the facts of the case and the rival submissions. As noted earlier, vide para 5 supra, the requirement of the law appears to be that the assessee has two-fold obligations under Section 212(3A) and both the said obligations have to be complied with and if the assessee fails to comply with any one of them, there is a separate sanction against the non-compliance of the respective obligation. It is, therefore, not the correct approach, according to us, that, if the payment of advance tax has been made by the assessee, the default committed with regard to the other obligation to file the estimate of advance tax should not be penalised and that the payment of tax in itself would constitute a reasonable cause for not filing the estimate of advance tax. If it were so, the Legislature would not provide for a separate sanction for this default. This default, according to us, has to be considered independently of the payment of advance tax and one has to find whether there was a reasonable cause, which prevented the assessee from filing the estimate of advance tax. The payment of advance tax in full may constitute an attenuating circumstance, but that cannot be by itself be a reasonable cause for not filing the estimate of advance tax. By filing an estimate of advance tax, the assessee commits himself to a certain factual position from which various legal consequences flow, one of which has been provided for in Clause (a) of Section 273 itself. The said clause stipulates that, if the ITO finds an estimate of advance tax filed by the assessee to be untrue and if he has further reasons to believe that the assessee knew that statement to be untrue at the time when he filed it, the assessee is liable to be penalised in terms of the said clause.
If no estimate is filed by an assessee, he would never face the consequences of his action of paying advance tax, in accordance with an estimate, which may not be true.
11. In the case which was before our learned brothers of Indore Bench, it was submitted on behalf of the assessee that an advance tax estimate was sent by him to the ITO, but it was not found on record. The Tribunal regarded the aforesaid submission of the assessee as probable and, therefore, felt that the facts of the case did not warrant the imposition of penalty. It was in the context of the aforesaid finding that our brothers, referred and relied upon to the well-known decision of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 and deleted the penalty imposed on the assessee. The facts of the above cas'e have no likeness with the facts of the present case. As noted earlier, it has never been the assessee's plea in the present case that it had filed an estimate of advance tax and that it was not on the record of the ITO. It is an admitted position in the present case that the estimate was never filed. The assessee has not explained as to why the estimate of advance tax was not filed by the assessee. There can, therefore, be no question of giving to the assessee the benefit of doubt, which our brothers of Indore Bench did. The default consists in not filing the estimate and the non-filing of the estimate has been made by the Legislature as a substantive default vide Clause (c) of Section 273(2). It cannot, therefore, be treated as a 'venial' default, unless there was reasonable cause for not filing the estimate, the penalty would be leviable. On perusal of the record of the present case and on the basis of the submissions of the assessee, there is no reasonable cause for not filing the estimate. Even the second limb of the assessee's argument does not bear scrutiny.
12. The Taxation Laws (Amendment) Act, 1975 received the President's assent on 7-8-1975 and it made various Sections of the said Act applicable from different dates. The provisions pertaining to Section 64, as contained in Section 13 of the said Act, were made operative from 1-4-1976. The assessee had, therefore, ample notice of the amended provisions of the Act at the time when he paid the advance tax. There appears to be no substance in the assessee's contention that he could not anticipate the amendment to Section 64, as it came into operation from 1-4-1976. True, the said Section came into operation with effect from 1-4-1976, but the amendment in itself was public knowledge in August 1975 and so the assessee could have paid proper advance tax in accordance with law if he had cared to do so. He neither paid proper advance tax nor did he file the estimate of advance tax.
13. It is not the assessee's case that he was not familiar with the provisions pertaining to the filing of the estimate of advance tax and payment thereof. He is very much familiar with the said provisions, as is clear from his own action in making payment of Rs. 90,000 when the demand of advance tax under Section 210 was only of Rs, 21,920. When the assessee knew his obligation to pay more advance tax, he should have complied with the provisions of the law in full.
14. Taking into account the overall facts of the present case, we are convinced that the default under Clause (c) of Section 273(2) has been clearly made out against the assessee and that there is no reasonable cause for the said failure and that there is no intriguing circumstance. The order of the Commissioner (Appeals) is, according to us, erroneous and cannot be sustained. Accordingly, we vacate his order.
15. As regards the quantum of penalty, we note that the ITO has already imposed the minimum penalty on the assessee. We cannot, therefore, reduce it any further.