innosearch Ltd. Vs. Assistant Commissioner of Income - Court Judgment

Excerpt:
since the commissioner was himself satisfied that payment of expenses in cash were made by the assessee in the capacity as a sales agent on behalf of its principal, therefore, no disallowance under section 40a(3) could be called for and the order of the assessing officer could not be said to be erroneous and prejudicial to interest of the revenue.one can be satisfied about the fact that the assessee-company made the payments on behalf of m/s. sarabhai chemicals. hence, the expenses were incurred for making payments by sarabhai chemicals and not by the assessee-company. the expenditure has been debited in the accounts of sarabhai chemicals. as per the order of the tribunal in income tax appeal no. 1057/a/90 disallowance was made in the hands of a commission agent and the tribunal held that the commission agent was making payment in the capacity of an agent. hence, disallowance under section 40a(3) was not warranted. in the present case also, the commissioner himself found after examining the record that the assessee was rendering services on behalf of sarabhai chemicals and payments were made on behalf of sarabhai chemicals. in such circumstances, no disallowance under section 40a(3) is called for at the hands of the assessee-company. it is a settled principle of law that for the purpose of invoking the jurisdiction under section 263 both the requirements has to be fulfilled, that firstly the order should be erroneous and secondly it should be prejudicial to the interest of revenue.considering the facts and circumstances of the case, the assessing officer in the present case has passed the order after making necessary enquiry with regard to the applicability of section 40a(3). hence, the said order cannot be said to be erroneous and prejudicial to the interest of revenue.addl. cit v. mukur corpn. (1978) 111 itr 312 (guj), cit v. annayappa & sons (1994) 206 itr 509 (karn) and cit v. minalben s. partho, smt.(1994) 215 itr 81 (guj) followed.this appeal by the assessee is directed against the order of cit(a)-h, ahmedabad, dt. 8th july, 1992, relating to asst. yr. 1984-85 confirming the penalty of rs. 1,50,000 levied by the ao under s. 273(2)(a) of the it act, 1961.2. briefly stated the facts of the case are that the assessee-company in the relevant previous year ended on 31st dec., 1983, was engaged in the business of marketing and distributing mass consumer products like synthetic detergents, washing soap, toilet soap, hair oil and industrial products, industrial detergents, glycerine, etc. for the assessment year under consideration the assesseecompany filed an estimate under s. 209a(1) in form no. 29 on 15th june, 1983, estimating its income subject to advance tax at rs. 3,38,000 and advance tax payable thereon at rs. 2,25,192. the advance tax instalments were also paid accordingly. the assessee filed its return of income on 10th sept., 1986, declaring total income at rs. 24,86,600 and tax payable thereon came to rs. 16,97,105. the ao completed the assessment on 27th march, 1987, determining total income at rs. 26,86,310. however, the total income of the assessee was reduced to rs. 26,85,130 in appeal by the cit(a). according to the ao, the advance tax payable on the basis of the estimate filed by the assessee was less than 75 per cent of the assessed tax and, therefore, he initiated penalty proceedings under s.273(2)(a) of the it act, 1961. the ao also issued a notice to the assessee requiring it to show cause as to why a penalty under s.273(2)(a) of the act, should not be levied for the default committed by it. a reply to the said show-cause notice was submitted by the assessee. it was also pleaded before the ao that the accounts of the assessee- company were not completed at the time of furnishing the estimate and, therefore, the correct income could not be estimated.while rejecting the assessee's contention, the ao held that the actual figures of income for the asst. yr. 1983-84 were available with the assessee and, therefore, the estimate would have been based on those figures. the ao further observed that the assesseecompany had not cared even to file a higher estimate of advance tax fully knowing that its income for the year under consideration would be much higher. the ao therefore, concluded that the assessee- company had furnished the estimate of advance tax payable by it and it not only knew to be untrue but it also had every reason to believe to be untrue. according to the ao the assesseecompany had failed to show any reason for the shortfall.in view of the above facts, the ao levied a penalty of rs. 10 lakhs under s. 273(2)(a). aggrieved by and dissatisfied with the order of the ao, the assessee went in appeal before the cit(a). it was contended before the cit(a) that for the asst. yr. 1981-82, the assessee had suffered a loss to the tune of rs. 24,42,886. however, the loss was determined by the ao at a figure of rs. 23,13,510. it was also submitted before the appellate authority below that for the asst. yr.1982-83 the income of the assessee was determined at rs. 2,84,700. it was also brought to the notice of the cit(a) that the accounts for the period relevant to asst. yr. 1983-84 could not be finalised in time and the return of income was filed on 29th aug., 1983 disclosing the income at nil figure. the assessee's further contention before the cit(a) was that at the time of filing of estimate on 15th june, 1983, the assessee was aware of the fact that only a small portion of the loss determined for the asst. yr. 1981-82 had been adjusted against the income of rs. 2,84,700 for asst. yr. 1982-83 and the balance of the loss was required to be set off against the income for asst. yr. 1983-84 and asst. yr.1984-85. the assessee also argued that the accounts for the period relevant to the asst. yr. 1983-84 were not available with the assessee at the time of filing the estimate and, therefore, the assessee assumed that a major portion of the loss determined for asst. yr. 1981-82 would be available for set off against the income for the assessment year under appeal. further contention of the assessee before the cit(a) was that in absence of the accounts for asst. yr. 1983-84, the assessee could not have visualised that entire loss for the asst. yr. 1981-82 would be adjusted against the income for asst. yr. 1983-84. the assessee also submitted before the appellate authority below that at the time of filing the estimate, for the present year, the assessee had estimated that it will have a positive income but that since the major portion of the income would be set off against the loss for the earlier, only an amount of rs. 3 to 4 lakhs would be the net income for the year under consideration. in view of the above submissions, the assessee urged before the cit(a) that the assessee had acted in a bona fide manner while filing the estimate and, therefore, the penalty levied by the ao should be cancelled.3. the cit(a) after considering the relevant facts of the case and the submissions made on behalf of the assessee, confirmed the action of the ao in levying the penalty under s. 273(2)(a) of the act. however, the cit(a) reduced the amount of penalty to rs. 1,50,000 against rs. 10 lakhs imposed by the ao. the cit(a) has held that if it is assumed that the books of the assesseecompany for the period relevant to asst. yr.1983-84 had not been completed at the time of filing the estimate in question, it was unimaginable that the assessee was not aware of the profitability of the period relevant to the asst. yr. 1983-84. he further observed that the income of the assessee for asst. yr. 198384 exceeded rs. 20 lakhs and this was more or less the amount of loss for asst. yr. 1981-82, which was required to be adjusted against the income of the year 1983-84. the cit(a) also observed that once it is accepted that the assessee should have been aware of the profit for the period relevant to asst. yr. 1983-84 at the time of furnishing estimate on 15th june, 1983, it can safely be concluded that looking to the business trends in the first six months relevant to assessment year under consideration, the assessee would have known that its income for this year would be higher than the income for asst. yr. 1983-84 and that hardly any amount of loss for asst. yr. 1981-82 would be available for set off for the year under consideration. the cit(a) also observed that even when the accounts for asst. yr. 1983-84 were finalised and the return for that year was filed and the assessee was well aware of the fact that no portion of loss of earlier year would be available for being adjusted against the income of the assessment year under appeal, the assessee took no steps to submit a revised estimate for the year under consideration. he, therefore, doubted about the bona fide action of the assessee. finally the cit(a) has held that there was no reasonable cause for the assessee to estimate the income for the year under consideration at a low figure of rs. 3,38,000; however, he has held that some margin or error was possible in estimating the income, in view of the fact that accounts for asst. yr. 1983-84 were not finalised, at the time of filing of the estimate for the year under consideration. according to the cit(a), the assessee did file an estimate of advance tax where the income was estimated at a positive income against the figure of loss estimated for the earlier years and, therefore, he held that this is one mitigating factor in favour of the assessee.in this view of the matter, the cit(a) reduced the amount of penalty to rs. 1,50,000 against rs. 10 lakhs imposed by the ao.4. before us, m.k. patel and r.k. patel, the learned counsel for the assessee reiterated the submissions made before the authorities below.the learned counsel for the assessee also filed a chart showing relevant dates and particulars of filing estimate of income, etc. for asst. yrs. 1981-82 to 1983-84, which is reproduced herein below : 5. in view of the above chart, the learned counsel for the assessee further contended that the appellate authority below has failed to take into consideration the past history with special reference to returned and assessed loss for asst. yr. 1981-82 return income for asst. yr.1982-83 and asst. yr. 198384, which were relevant material for the purpose of adjudication of the bona fides of the assessee as on the relevant date for filing the estimate. the learned counsel for the assessee vehemently argued that both the authorities below were not justified in placing the burden on the assessee to show that the estimate of advance tax filed on 15th june, 1983, was such, which was within the knowledge of assessee or that the assessee had reason to believe to be untrue. according to the learned counsel for the assessee this view of the authorities below is contrary to the settled legal position. it was also contended by the learned counsel for the assessee that the appellate authority below ought to have appreciated and held that the ao had failed to discharge the burden which was to show that the estimate filed by the assessee was untrue at the relevant point of time, the assessee could not have been penalised within the meaning of provisions of s. 273(2)(a) of the act. he, therefore, submitted that the ao was not correct while levying the penalty under s. 273(2)(a) of the act and further the cit(a) has wrongly sustained the penalty under s. 273(2)(a) of the act. in support of the above contentions, the learned counsel for the assessee also relied upon the order of the tribunal, dt. 17th aug., 1992 in the case of asstt. cit vs. l.m. patel & b.m. patel (huf) in ita nos. 4611 to 4613/ahd/1989 relating to asst.yrs. 1979-80 to 1981-82.6. on behalf of the revenue, s.s. panwar the learned departmental representative strongly supported the orders of the authorities below.the learned departmental representative further submitted that it is a wen-settled law that where there is a disparity and the disparity is enormous, mere selfserving statement of the assessee that he thought that his estimate represented the principal income of the year would not be sufficient to escape the liability under s. 273(2)(a) of the act. according to the learned departmental representative in this case, the assessee submitted its estimate of income for the year under consideration at rs. 3,38,000 and ultimately the ao assessed the income at rs. 26,86,310. thus it cannot be said that the estimate filed by the assessee was an honest estimate. he, therefore, contended that the penalty levied is justified.7. we have carefully considered the rival submissions and have also gone through the entire material placed on record. in our opinion the penalty under s. 2730(a) is leviable only when the assessee has furnished an estimate of advance tax payable by it which it knew or had reason to believe to be untrue. at the same time it is also true that only because there is a difference in the income estimated by the assessee on the relevant date and the income assessed by the ao no penalty under s. 273(2)(a) could be levied. the knowledge that the estimate is untrue or which the assessee believes to be untrue must be at the point of time when he submits the estimate. in the instant case, the estimate for the year under consideration was filed on 15th june, 1983. it was explained by the assessee before the authorities below that the estimate filed by it on 15th june, 1983, was true and correct.the assessee also claimed that the estimate filed by it was an honest estimate based on the accounts which were available with the assessee on the date of estimate. it is also worthwhile to mention here that the relevant factors which were taken into consideration by the assessee- company while determining its liability for payment of tax, were explained before the authorities below. from the record, it is evident that for asst. yr. 1981-82, the assessee had suffered a business loss of rs. 24,42,886. the loss was determined by the ao at rs. 23,13,510 vide his order, dt. 27th dec., 1988. the return of income for asst. yr.1982-83 was at rs. nil. the assessee also filed revised return of income for asst. yr. 1982-83 on 10th jan., 1983 declaring nil income.it is also relevant to note that an assessment order for asst. yr.1982-83 was passed on 15th march, 1985, i.e., beyond the last date (15th dec., 1983) for revising the estimate for asst. yr. 1984-85. the ao finally determined the income of the assessee for asst. yr. 1982-83 at rs. 2,84,700 vide his order, dt. 24th april, 1986, passed under s.154 of the act. the assessee- company filed its return of income for asst. yr. 1983-84 on 29th aug., 1983, declaring income at rs. nil.subsequently revised return of income was filed on 22nd march, 1984, declaring loss of rs. 2,70,745. it is also apparent from the above chart that the ao vide his order, dt. 29th july, 1988, passed under s.154 of the act determined the income of the assessee for asst. yr.1983-84 at rs. 2,16,366. from the above narrated facts it is clear that the return of income for asst. yr. 1983-84 was filed on 29th aug., 1983, i.e., after the filing of estimate for asst. yr. 1984-85. in our view there is substance in the contention of the learned counsel for the assessee that the accounts for the period relevant to asst. yr.1983-84 were not finalised before the filing of the estimate for asst.yr. 1984-85 and, therefore, some margin of error was possible in estimating income for the year under consideration. this aspect of the matter has also been admitted by the cit(a) while passing the impugned order. in the instant case it can also be not denied that the assessee was aware of the fact that only a small portion of the loss determined for asst. yr. 1981-82 could be adjusted against the income of rs. 2,84,700 for asst. yr. 1982-83 and the balance of the loss would be set off against the income for asst. yr. 1983-84 and asst. yr. 1984-85. it is an admitted fact that for asst. yr. 1981-82 the assessee had filed its return of income showing loss at rs. 24,42,890 and ultimately the assessment was completed on 30th march, 1988, determining total loss at rs. 23,13,510. in this view of the matter, it is also not disputed that the accounts for the period relevant to asst. yr. 1983-84 were not available with the assessee at the time of filing of estimate and obviously the assessee was under the impression that a major portion of the loss determined for asst. yr. 1981-82 would be available for being set off against the income of the year under consideration. in absence of accounts for asst. yr. 1983-84, the assessee could not have anticipated that the entire loss for asst. yr. 1981-82 would be adjusted against the income for asst. yr. 1983-84.8. keeping in view the above narrated facts, the only conclusion which can be drawn in the instant case is that the estimate submitted by the assessee on 15th june, 1983 was an honest estimate based on the accounts, which were available with the assessee on the date of estimate. it is also wellsettled law that where the estimate of income is submitted on the basis of bona fide belief but it turns out to be untrue, the estimate should be treated as an honest estimate. in the instant case the assessee has produced relevant material before the authorities below on the basis of which it had prepared its estimate of income, but the authorities below have not properly appreciated the past history of the assessee. in our view, the revenue has failed to establish on record that the estimate submitted by the assessee was without any basis and the reasons assigned by the assessee for making the estimate .were not genuine. it is also settled law that the burden of proving that an estimate of advance tax submitted by the assessee was untrue, is on the revenue. in our view, the revenue has miserably failed to discharge its burden. on the other hand the explanations given by assessee in support of the estimate made on 15th june, 1983 are appealing and, therefore, the penalty sustained by the cit(a) deserves to be deleted, and we accordingly delete the same.

Judgment:
Since the Commissioner was himself satisfied that payment of expenses in cash were made by the assessee in the capacity as a sales agent on behalf of its principal, therefore, no disallowance under section 40A(3) could be called for and the order of the assessing officer could not be said to be erroneous and prejudicial to interest of the revenue.

One can be satisfied about the fact that the assessee-company made the payments on behalf of M/s. Sarabhai Chemicals. Hence, the expenses were incurred for making payments by Sarabhai Chemicals and not by the assessee-company. The expenditure has been debited in the accounts of Sarabhai Chemicals. As per the order of the Tribunal in Income Tax Appeal No. 1057/A/90 disallowance was made in the hands of a commission agent and the Tribunal held that the commission agent was making payment in the capacity of an agent. Hence, disallowance under section 40A(3) was not warranted. In the present case also, the Commissioner himself found after examining the record that the assessee was rendering services on behalf of Sarabhai Chemicals and payments were made on behalf of Sarabhai Chemicals. In such circumstances, no disallowance under section 40A(3) is called for at the hands of the assessee-company. It is a settled principle of law that for the purpose of invoking the jurisdiction under section 263 both the requirements has to be fulfilled, that firstly the order should be erroneous and secondly it should be prejudicial to the interest of Revenue.

Considering the facts and circumstances of the case, the assessing officer in the present case has passed the order after making necessary enquiry with regard to the applicability of section 40A(3). Hence, the said order cannot be said to be erroneous and prejudicial to the interest of revenue.

Addl. CIT v. Mukur Corpn. (1978) 111 ITR 312 (Guj), CIT v. Annayappa & Sons (1994) 206 ITR 509 (Karn) and CIT v. Minalben S. Partho, Smt.

(1994) 215 ITR 81 (Guj) followed.

This appeal by the assessee is directed against the order of CIT(A)-H, Ahmedabad, dt. 8th July, 1992, relating to asst. yr. 1984-85 confirming the penalty of Rs. 1,50,000 levied by the AO under s. 273(2)(a) of the IT Act, 1961.

2. Briefly stated the facts of the case are that the assessee-company in the relevant previous year ended on 31st Dec., 1983, was engaged in the business of marketing and distributing mass consumer products like synthetic detergents, washing soap, toilet soap, hair oil and industrial products, industrial detergents, glycerine, etc. For the assessment year under consideration the assesseecompany filed an estimate under s. 209A(1) in Form No. 29 on 15th June, 1983, estimating its income subject to advance tax at Rs. 3,38,000 and advance tax payable thereon at Rs. 2,25,192. The advance tax instalments were also paid accordingly. The assessee filed its return of income on 10th Sept., 1986, declaring total income at Rs. 24,86,600 and tax payable thereon came to Rs. 16,97,105. The AO completed the assessment on 27th March, 1987, determining total income at Rs. 26,86,310. However, the total income of the assessee was reduced to Rs. 26,85,130 in appeal by the CIT(A). According to the AO, the advance tax payable on the basis of the estimate filed by the assessee was less than 75 per cent of the assessed tax and, therefore, he initiated penalty proceedings under s.

273(2)(a) of the IT Act, 1961. The AO also issued a notice to the assessee requiring it to show cause as to why a penalty under s.

273(2)(a) of the Act, should not be levied for the default committed by it. A reply to the said show-cause notice was submitted by the assessee. It was also pleaded before the AO that the accounts of the assessee- company were not completed at the time of furnishing the estimate and, therefore, the correct income could not be estimated.

While rejecting the assessee's contention, the AO held that the actual figures of income for the asst. yr. 1983-84 were available with the assessee and, therefore, the estimate would have been based on those figures. The AO further observed that the assesseecompany had not cared even to file a higher estimate of advance tax fully knowing that its income for the year under consideration would be much higher. The AO therefore, concluded that the assessee- company had furnished the estimate of advance tax payable by it and it not only knew to be untrue but it also had every reason to believe to be untrue. According to the AO the assesseecompany had failed to show any reason for the shortfall.

In view of the above facts, the AO levied a penalty of Rs. 10 lakhs under s. 273(2)(a). Aggrieved by and dissatisfied with the order of the AO, the assessee went in appeal before the CIT(A). It was contended before the CIT(A) that for the asst. yr. 1981-82, the assessee had suffered a loss to the tune of Rs. 24,42,886. However, the loss was determined by the AO at a figure of Rs. 23,13,510. It was also submitted before the appellate authority below that for the asst. yr.

1982-83 the income of the assessee was determined at Rs. 2,84,700. It was also brought to the notice of the CIT(A) that the accounts for the period relevant to asst. yr. 1983-84 could not be finalised in time and the return of income was filed on 29th Aug., 1983 disclosing the income at Nil figure. The assessee's further contention before the CIT(A) was that at the time of filing of estimate on 15th June, 1983, the assessee was aware of the fact that only a small portion of the loss determined for the asst. yr. 1981-82 had been adjusted against the income of Rs. 2,84,700 for asst. yr. 1982-83 and the balance of the loss was required to be set off against the income for asst. yr. 1983-84 and asst. yr.

1984-85. The assessee also argued that the accounts for the period relevant to the asst. yr. 1983-84 were not available with the assessee at the time of filing the estimate and, therefore, the assessee assumed that a major portion of the loss determined for asst. yr. 1981-82 would be available for set off against the income for the assessment year under appeal. Further contention of the assessee before the CIT(A) was that in absence of the accounts for asst. yr. 1983-84, the assessee could not have visualised that entire loss for the asst. yr. 1981-82 would be adjusted against the income for asst. yr. 1983-84. The assessee also submitted before the appellate authority below that at the time of filing the estimate, for the present year, the assessee had estimated that it will have a positive income but that since the major portion of the income would be set off against the loss for the earlier, only an amount of Rs. 3 to 4 lakhs would be the net income for the year under consideration. In view of the above submissions, the assessee urged before the CIT(A) that the assessee had acted in a bona fide manner while filing the estimate and, therefore, the penalty levied by the AO should be cancelled.

3. The CIT(A) after considering the relevant facts of the case and the submissions made on behalf of the assessee, confirmed the action of the AO in levying the penalty under s. 273(2)(a) of the Act. However, the CIT(A) reduced the amount of penalty to Rs. 1,50,000 against Rs. 10 lakhs imposed by the AO. The CIT(A) has held that if it is assumed that the books of the assesseecompany for the period relevant to asst. yr.

1983-84 had not been completed at the time of filing the estimate in question, it was unimaginable that the assessee was not aware of the profitability of the period relevant to the asst. yr. 1983-84. He further observed that the income of the assessee for asst. yr. 198384 exceeded Rs. 20 lakhs and this was more or less the amount of loss for asst. yr. 1981-82, which was required to be adjusted against the income of the year 1983-84. The CIT(A) also observed that once it is accepted that the assessee should have been aware of the profit for the period relevant to asst. yr. 1983-84 at the time of furnishing estimate on 15th June, 1983, it can safely be concluded that looking to the business trends in the first six months relevant to assessment year under consideration, the assessee would have known that its income for this year would be higher than the income for asst. yr. 1983-84 and that hardly any amount of loss for asst. yr. 1981-82 would be available for set off for the year under consideration. The CIT(A) also observed that even when the accounts for asst. yr. 1983-84 were finalised and the return for that year was filed and the assessee was well aware of the fact that no portion of loss of earlier year would be available for being adjusted against the income of the assessment year under appeal, the assessee took no steps to submit a revised estimate for the year under consideration. He, therefore, doubted about the bona fide action of the assessee. Finally the CIT(A) has held that there was no reasonable cause for the assessee to estimate the income for the year under consideration at a low figure of Rs. 3,38,000; however, he has held that some margin or error was possible in estimating the income, in view of the fact that accounts for asst. yr. 1983-84 were not finalised, at the time of filing of the estimate for the year under consideration. According to the CIT(A), the assessee did file an estimate of advance tax where the income was estimated at a positive income against the figure of loss estimated for the earlier years and, therefore, he held that this is one mitigating factor in favour of the assessee.

In this view of the matter, the CIT(A) reduced the amount of penalty to Rs. 1,50,000 against Rs. 10 lakhs imposed by the AO.4. Before us, M.K. Patel and R.K. Patel, the learned counsel for the assessee reiterated the submissions made before the authorities below.

The learned counsel for the assessee also filed a chart showing relevant dates and particulars of filing estimate of income, etc. for asst. yrs. 1981-82 to 1983-84, which is reproduced herein below : 5. In view of the above chart, the learned counsel for the assessee further contended that the appellate authority below has failed to take into consideration the past history with special reference to returned and assessed loss for asst. yr. 1981-82 return income for asst. yr.

1982-83 and asst. yr. 198384, which were relevant material for the purpose of adjudication of the bona fides of the assessee as on the relevant date for filing the estimate. The learned counsel for the assessee vehemently argued that both the authorities below were not justified in placing the burden on the assessee to show that the estimate of advance tax filed on 15th June, 1983, was such, which was within the knowledge of assessee or that the assessee had reason to believe to be untrue. According to the learned counsel for the assessee this view of the authorities below is contrary to the settled legal position. It was also contended by the learned counsel for the assessee that the appellate authority below ought to have appreciated and held that the AO had failed to discharge the burden which was to show that the estimate filed by the assessee was untrue at the relevant point of time, the assessee could not have been penalised within the meaning of provisions of s. 273(2)(a) of the Act. He, therefore, submitted that the AO was not correct while levying the penalty under s. 273(2)(a) of the Act and further the CIT(A) has wrongly sustained the penalty under s. 273(2)(a) of the Act. In support of the above contentions, the learned counsel for the assessee also relied upon the order of the Tribunal, dt. 17th Aug., 1992 in the case of Asstt. CIT vs. L.M. Patel & B.M. Patel (HUF) in ITA Nos. 4611 to 4613/Ahd/1989 relating to asst.

yrs. 1979-80 to 1981-82.

6. On behalf of the Revenue, S.S. Panwar the learned Departmental Representative strongly supported the orders of the authorities below.

The learned Departmental Representative further submitted that it is a wen-settled law that where there is a disparity and the disparity is enormous, mere selfserving statement of the assessee that he thought that his estimate represented the principal income of the year would not be sufficient to escape the liability under s. 273(2)(a) of the Act. According to the learned Departmental Representative in this case, the assessee submitted its estimate of income for the year under consideration at Rs. 3,38,000 and ultimately the AO assessed the income at Rs. 26,86,310. Thus it cannot be said that the estimate filed by the assessee was an honest estimate. He, therefore, contended that the penalty levied is justified.

7. We have carefully considered the rival submissions and have also gone through the entire material placed on record. In our opinion the penalty under s. 2730(a) is leviable only when the assessee has furnished an estimate of advance tax payable by it which it knew or had reason to believe to be untrue. At the same time it is also true that only because there is a difference in the income estimated by the assessee on the relevant date and the income assessed by the AO no penalty under s. 273(2)(a) could be levied. The knowledge that the estimate is untrue or which the assessee believes to be untrue must be at the point of time when he submits the estimate. In the instant case, the estimate for the year under consideration was filed on 15th June, 1983. It was explained by the assessee before the authorities below that the estimate filed by it on 15th June, 1983, was true and correct.

The assessee also claimed that the estimate filed by it was an honest estimate based on the accounts which were available with the assessee on the date of estimate. It is also worthwhile to mention here that the relevant factors which were taken into consideration by the assessee- company while determining its liability for payment of tax, were explained before the authorities below. From the record, it is evident that for asst. yr. 1981-82, the assessee had suffered a business loss of Rs. 24,42,886. The loss was determined by the AO at Rs. 23,13,510 vide his order, dt. 27th Dec., 1988. The return of income for asst. yr.

1982-83 was at Rs. Nil. The assessee also filed revised return of income for asst. yr. 1982-83 on 10th Jan., 1983 declaring Nil income.

It is also relevant to note that an assessment order for asst. yr.

1982-83 was passed on 15th March, 1985, i.e., beyond the last date (15th Dec., 1983) for revising the estimate for asst. yr. 1984-85. The AO finally determined the income of the assessee for asst. yr. 1982-83 at Rs. 2,84,700 vide his order, dt. 24th April, 1986, passed under s.

154 of the Act. The assessee- company filed its return of income for asst. yr. 1983-84 on 29th Aug., 1983, declaring income at Rs. Nil.

Subsequently revised return of income was filed on 22nd March, 1984, declaring loss of Rs. 2,70,745. It is also apparent from the above chart that the AO vide his order, dt. 29th July, 1988, passed under s.

154 of the Act determined the income of the assessee for asst. yr.

1983-84 at Rs. 2,16,366. From the above narrated facts it is clear that the return of income for asst. yr. 1983-84 was filed on 29th Aug., 1983, i.e., after the filing of estimate for asst. yr. 1984-85. In our view there is substance in the contention of the learned counsel for the assessee that the accounts for the period relevant to asst. yr.

1983-84 were not finalised before the filing of the estimate for asst.

yr. 1984-85 and, therefore, some margin of error was possible in estimating income for the year under consideration. This aspect of the matter has also been admitted by the CIT(A) while passing the impugned order. In the instant case it can also be not denied that the assessee was aware of the fact that only a small portion of the loss determined for asst. yr. 1981-82 could be adjusted against the income of Rs. 2,84,700 for asst. yr. 1982-83 and the balance of the loss would be set off against the income for asst. yr. 1983-84 and asst. yr. 1984-85. It is an admitted fact that for asst. yr. 1981-82 the assessee had filed its return of income showing loss at Rs. 24,42,890 and ultimately the assessment was completed on 30th March, 1988, determining total loss at Rs. 23,13,510. In this view of the matter, it is also not disputed that the accounts for the period relevant to asst. yr. 1983-84 were not available with the assessee at the time of filing of estimate and obviously the assessee was under the impression that a major portion of the loss determined for asst. yr. 1981-82 would be available for being set off against the income of the year under consideration. In absence of accounts for asst. yr. 1983-84, the assessee could not have anticipated that the entire loss for asst. yr. 1981-82 would be adjusted against the income for asst. yr. 1983-84.

8. Keeping in view the above narrated facts, the only conclusion which can be drawn in the instant case is that the estimate submitted by the assessee on 15th June, 1983 was an honest estimate based on the accounts, which were available with the assessee on the date of estimate. It is also wellsettled law that where the estimate of income is submitted on the basis of bona fide belief but it turns out to be untrue, the estimate should be treated as an honest estimate. In the instant case the assessee has produced relevant material before the authorities below on the basis of which it had prepared its estimate of income, but the authorities below have not properly appreciated the past history of the assessee. In our view, the Revenue has failed to establish on record that the estimate submitted by the assessee was without any basis and the reasons assigned by the assessee for making the estimate .were not genuine. It is also settled law that the burden of proving that an estimate of advance tax submitted by the assessee was untrue, is on the Revenue. In our view, the Revenue has miserably failed to discharge its burden. On the other hand the explanations given by assessee in support of the estimate made on 15th June, 1983 are appealing and, therefore, the penalty sustained by the CIT(A) deserves to be deleted, and we accordingly delete the same.