ORDER
Egbert Singh, Accountant Member
1. The appeal by the revenue is that the Commissioner (Appeals) erred in accepting the contention of the assessee that at the relevant time, the assessee entertained a bonafide belief that it was not obliged to file the estimate Under Section 212(3A) of the Income-tax Act, 1961 (‘the Act’) and that constituted a reasonable cause for failure to furnish the estimate Under Section 212(3A) and thereby the Commissioner (Appeals) erred in cancelling the penalty levied by the ITO Under Section 273(c) of the Act.
2. The ITO in his order mentioned that Under Section 210, the ITO asked the assessee to pay advance tax of Rs. 1,85,044 which was calculated by him on the basis of the total income (Rs. 2,87,480) assessed for the assessment year 1967-68 which was the latest regular assessment. The year under consideration was 1971-72. The advance tax demand was payable in three instalments, i.e., 15-9-1970, 15-12-1970 and 15-3-1971. In compliance there with, the assessee paid two instalments. On 17-2-1971, the order Under Section 210 of the Act was revised Under Section 210(3) purportedly on the basis of the tax paid Under Section 140A of the Act for the assessment year 1970-71. The ITO also mentioned that according to the revised order, the total advance tax payable was Rs. 9,22,366 and after deducting the tax already paid, i.e., Rs. 1,23,362, the balance tax payable was at Rs. 7,99,004. The assessee was required to pay this amount by 15-3-1971.
3. The ITO mentioned that the assessee by its letter dated 1-3-1971 informed the ITO that the amended order Under Section 210 could be passed on the basis of the tax paid Under Section 140A and not on the basis of the tax payable Under Section 140A. It was also submitted that the tax Under Section 140A for the assessment year 1970-71 was not paid before 17-2-1971. In the circumstances, it was contended that the order Under Section 210 was bad in law and the demand notice was invalid. On 19-3-1971, the assessee addressed in another letter to the ITO pointed out to the validity of the original order Under Section 210 in the background of the relevant provision of the law and contended that the said order was bad in law and accordingly, the assessee was under no obligation to pay the last instalment which would be due on 15-3-1971. But the assessee assured that as a gesture of goodwill, the last instalment would be paid which was done on 15-3-1971.
4. The return was filed on 15-10-1971 with an income of Rs. 21,47,880. The ITO started proceedings Under Section 273(c) and a show-cause notice was issued to the assessee asking why the penalty should not be imposed for the assessee’s failure to furnish without reasonable cause the estimate of advance tax Under Section 212(3A).
5. The assessee submitted that there was no valid demand Under Section 210 and there was no obligation to furnish estimate Under Section 212(3A). It was contended that as per demand Under Section 210 dated 3-8-1970, the same was raised on the basis of the latest completed assessment for the assessment year 1967-68 wherein the total income was assessed at Rs. 2,87,840. It was pointed out that the assessee filed returns for the assessment years 1968-69 and 1969-70 and paid tax thereon Under Section 140A before the demand of advance tax was raised for the first time on 3-8-1970. It was noted that as the return for the assessment year 1969-70 was filed on 31-3-1978 showing an income of Rs. 4,14,313 and as the tax Under Section 140A was paid on 3-4-1970 the demand for the financial year 1970-71 should have been based on the returned income for the assessment year 1969-70 in accordance with the provisions of Section 209(d)(i)of the Act.
6. It was also contended that the assessee was under a bonafide belief that the notice of demand Under Section 210 being not in accordance with law, therefore, the assessee was not under any obligation to file estimate Under Section 212(3A). It was, therefore, contended that there was a reasonable cause for not filing an estimate.
7. The ITO considered the submission made before him, but he noted that the order Under Section 210 dated 3-8-1970 was not bad in law, nor the demand made in pursuance thereof was invalid. He observed that it may be that there are some procedural mistake in calculating the tax and that in fact, the demand was, according to the assessee, for a lesser amount. He pointed out that the assessee accepted that order and paid two instalments of advance tax in compliance with the order Under Section 210 dated 3-8-1970 and, hence, if there was any irregularity in the order, the assessee waived the same on its own and acted in compliance with the order. He, therefore, was of the view that the contention of the assessee for non-filing of estimate of advance tax was not tenable. He was, therefore, satisfied that the assessee had failed to furnish an estimate of advance tax Under Section 212(3A) without any reasonable cause. He directed that Rs. 1 lakh should be paid by the assessee by way of penalty Under Section 273(c).
8. The assessee took up the matter before the AAC at the first instance reiterating the similar contentions. The assessee placed reliance on the decision of the Hon’ble Allahabad High Court in the case of Chitra Cinema V. ITO [1968] 68 ITR 877. The A AC on the reasons recorded by him cancelled the penalty. Thereafter, the revenue took up the matter before the Tribunal. The Tribunal amongst other things observed that basic requirement of Section 209(1)(a) was satisfied and as such, the order Under Section 210 could not be held to be bad in law and having regard to the very high income returned by the assessee in this year, the Tribunal observed that the obligation of the assessee to file the estimate Under Section 212(3A) was there. The Tribunal, therefore vacated the said order of the AAC and restored the appeal to his file for considering the question of imposition of penalty on merits and for disposal of the assessee’s other grounds of appeal that there being a reasonable cause for not furnishing an estimate and also for considering the quantum of penalty. Hence, the appeal was taken up by the present Commissioner (Appeals) whose order is impugned before us. He noted that the assessee on the earlier order of the Tribunal has taken a reference to the Hon’ble High Court raising a question whether the Tribunal was correct in holding that there was no invalidity in the imposition of the penalty Under Section 273(c) on the ground that the demand raised Under Section 210 was not illegal.
9. Before the Commissioner (Appeals), the assessee submitted a written explanation to the effect that the ITO has failed to adduce any reason as to why the assessee was required to file estimate and although the ITO did mention in his order that the assessee filed a return of income on 15-10-1971 showing an income of Rs. 21,47,880, which fact by itself would not lead to the inference that the assessee was under the obligation to file an estimate Under Section 212(3A). It was also contended that the ITO made no attempt to ascertain whether the tax payable on current income was likely to exceed the advance tax demanded by more than one-third of the demand and in the absence of such investigation, the ITO erred in inferring that the assessee’s case fell within the mischief of Section 273(c) relying on the decision in the case of P.V. Kurian V. ITO [1961] 43 ITR 432 (Ker.).
10. It was also contended that such penalty could be imposed if the ITO was satisfied that the assessee failed to furnish an estimate of advance tax without reasonable cause. It was pointed out that similar expression ‘without reasonable cause’ appears in Section 271(1)(a), 271(1)(b) and 271(1)(c) of the Act. It was contended that there can be no dispute that when prosecution was launched for the offence Under Section 276(6) of the Act, the mental element would be relevant. It was thus argued that while considering the provisions of Section 273(c), the mental element cannot be ruled out and the levy of penalty is a mere concomitant of a failure to file an estimate of advance tax. The assessee also relied on the observation of the Hon’ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26. The assessee submitted that as there being no validity order Under Section 210(1) or Section 210(3), it had no obligation to file estimate Under Section 212(3A) and this point did involve a controversial issue and the Tribunal admitted that there was a controversy when it referred to question Under Section 256(1) of the Act as mentioned earlier. It is, therefore, argued that the assessee cannot be said to have taken a frivolous contention merely for the purpose of avoiding the liability to pay advance tax. It was urged that the assessee entertained bonafide belief that it was not liable to file the estimate Under Section 212(3A). The assessee placed reliance on the decisions in Y. Narayana Chetty v. ITO [1959] 35 ITR 388 (SC), Chitra Cinema’s case (supra), Addl. CITv. I.M. Patel & Co. [1977] 107 ITR 214 (Guj.) (FB) and Addl. CIT v. Ranjitsinhji Oil Mills (P.) Ltd. [1976] 103 ITR 405 (Guj.).
11. The Commissioner (Appeals) considered the submissions raised by the assessee from various angles. He pointed out that the case relied on by the assessee in P.V. Kuriatfs case (supra) it was held that for mere disparity between the estimate by the assessee and the income returned or the final assessment made by the ITO, no inference of dishonesty could necessarily be drawn as a matter of law. The Commissioner (Appeals) declined to accept this contention in view of another decision in the case of Kashmir Vastralaya v. CIT[1978] 112 ITR 630 (Pat.). He, therefore, declined to accept the contention of the assessee on this aspect.
12. The Commissioner (Appeals) also considered the contention of the assessee that at the relevant time, the assessee had bonafide belief that it was not to file an estimate Under Section 212(3A) because the notice Under Section 210(1) or 210(3) was not valid in law. According to the assessee, it was reasonable cause for which no penalty is attracted. The Commissioner (Appeals) observed that after considering the sequence of events as well as the legal position in this regard, he found force in the assessee’s submission. He was of the view that obligation for filing the estimate Under Section 212(3A) is cast on the assessee who had been served with a notice Under Section 210. In other words, service of a valid notice Under Section 210 is a condition precedent to the obligation to file estimate Under Section 212(3A). He observed that it was a substantive right of the assessee to insist that he should be served with a valid notice before he is exposed to the hazards of the consequence following, relying on the decision of the Hon’ble Supreme Court in the case of Y. Narayana Chetty (supra). Further reference was made to the decisions in CIT v. Ramsukh Motilal [1955] 27 ITR 54 (Bom.) and R.K. Das & Co. v. CIT [1956] 30 ITR 439 (Cal.). The decision appearing in Chitra Cinema’s case (supra) was also considered, a portion of which was reproduced in the order of the Commissioner (Appeals). It was noted that the assessee had clear belief that both the original notice as well as revised notice Under Section 210 were not issued in accordance with law and the assessee was not required to comply with the legal requirements of filing estimate Under Section 212(3A), flowing from the two bad notices. The Commissioner (Appeals) pointed out that the assessee did write two letters to the ITO before 15-3-1971 when the ITO could rectify the bad notices. He noted that the ITO did not act on these letters and this only would have given credence to the assessee’s belief that it was not to comply with those notices. It was also noted that it was an important aspect of this case that the assessee did not intend to take unfair advantage of the two bad notices Under Section 210 but contemporaneously wrote the letters to the ITO clarifying the stand. The Commissioner (Appeals) observed that if the ITO made a mistake in issuing a notice Under Section 210 and if the assessee honestly held a belief that such notice was bad and, accordingly, which will not make him liable for filing enhanced estimate Under Section 212(3A) and also in the absence of the ITO to reply, then what the assessee was doing, was only acting in a bonafide manner. The Commissioner (Appeals) pointed out that if the assessee had not written these two letters and had kept the belief confined to itself, then it was for the assessee to show that such belief existed. He pointed out that in the present case the assessee not only entertained such belief but intimated such belief to the ITO which can be said to be in good faith. He, therefore, noted that it cannot be said that the belief entertained by the assessee in case was frivolous or mala fide. The Commissioner (Appeals) also referred to the observation of the Hon’ble Supreme Court in the case of Hindustan Steel Ltd. (supra).
13. He pointed out that the ITO referred to the fact that by its conduct in paying the three instalments on the basis of the order Under Section 210 dated 3-8-1970, the assessee waived irregularity in the order. The Commissioner (Appeals) found that this observation has no sequence as there is authority on the proposition that any agreement or arrangement would estop the either party even if it has been acted upon in the past. Reference was made to the decisions in CIT v. V. MR. P. Firm [1965] 56 ITR 67 (SC) and Bar, Das, Dey & Co. v. Sri Sri Ishwar Tarakeshwar Sib Thakur Jiu, Shebait Mohant Srimat Dandiswami Hrishikesh, Ashram AIR 1969 Cal. 565. According to the Commissioner (Appeals), the fact of the assessee having made payment of Rs. 1,84,044 would be inconsequential.
14. Accordingly, the Commissioner (Appeals) accepted the assessee’s contention that at the relevant time, the assessee entertained a bonafide belief that it was not obliged to file estimate and that would constitute a reasonable cause for the failure to file an estimate Under Section 212(3A). He, therefore, cancelled the penalty order passed by the ITO. Hence, this appeal by the revenue.
15. It is submitted by the learned departmental representative that the Commissioner (Appeals) erred in accepting the mere contention of the assessee that there was a bonafide belief that the assessee was under no obligation to file an estimate on the belief that the notice Under Section 210 was invalid. It was urged that the notice Under Section 210 was not bad in law. It is pointed out by the learned departmental representative that invalidity or otherwise of the notice Under Section 210 was dealt with by the Tribunal as mentioned earlier and, hence, this contention of the assessee would no longer be available to the Commissioner (Appeals) for basing his inference or conclusion, as it was done in the present case. It is submitted that the only issue restored to the Commissioner (Appeals) was for considering the demerits of the case and the existence of reasonable cause. It is stressed that the Commissioner (Appeals) had no more scope for examining or dealing with validity or otherwise of the notice Under Section 210. It is submitted further that the assessee by its own conduct did not show that there was such bonafide belief inasmuch as the assessee paid the instalments as demanded and so there was no misapprehension of the law by the assessee, as alleged. It is argued that if the ass essee had such doubt, then how payments were made. It is pointed out that the second notice referred to earlier was not acted upon. It is urged that in the penalty order itself basic facts of the case have been brought out which would show beyond doubt that the assessee had no reasonable cause for failure to file estimate Under Section 212(3A) in the circumstances of the case. It is submitted, therefore, that the order of the Commissioner (Appeals) may be reversed and that of the ITO may be restored.
16. On behalf of the assessee the learned counsel, on the other hand, supports the order of the Commissioner (Appeals). The provisions of Section 212(3A) were emphasised. The points mentioned by the assessee in the two letters referred to earlier are highlighted by the assessee’s learned counsel at the time of hearing. It is urged that the assessee had bonafide belief in the circumstances of the case that it had no obligation to file an enhanced estimate. It is pointed out that even the Tribunal referred the point to the Hon’ble High Court Under Section 256(1) in respect of the validity or otherwise of such demand notice as pointed out earlier. It is urged that in such a situation the Commissioner (Appeals) was justified in holding that the assessee acted in a bonafide manner. The points raised before the Commissioner (Appeals) are also reiterated before us. It is submitted vehemently on behalf of the assessee that the assessee genuinely entertained such belief and that was why no estimate Under Section 212(3A) was filed. It is urged at length that in the circumstances of the case, the order of the Commissioner (Appeals) was justified and valid and the same may be sustained.
17. We have gone through the orders of the authorities below for our consideration along with various submissions made before us. On behalf of the assessee, copy of the statement of the case for the assessment year 1971-72 as earlier mentioned, has been placed before us. The assessee also points out that in a similar situation in the case of Adinath Chandra Seal & Co. [IT Appeal No. 1651 (Cal.) of 1982 dated 3-11-1983], the Tribunal has cancelled the penalty as the Tribunal held that the assessee on the facts of that case, had reasonable cause for not filing the estimate Under Section 212(3A). The contention of the assessee is that the facts of that case were similar to those of the assessee. We have gone through those orders of the Tribunal also for our consideration. As mentioned earlier, the Tribunal has given a clear finding that the notice Under Section 210 was not bad in law as the basic requirement of Section 209(1)(a) was satisfied. It also noted that having regard to the very high income returned by the assessee in this year, the obligation to file estimate was there. The Tribunal vacated the order of the then AAC, but restored the matter to the file of the first appellate authority for dealing with the case of the assessee on merits. The case of the revenue is that the assessee had no reasonable cause for failure to file estimate Under Section 212(3A) particularly in view of the fact that the notice Under Section 210 cannot be said to be invalid even at the relevant point of time when the assessee wrote two letters to the ITO. The ground of contention of the assessee that such notices were not valid, was mentioned in those letters which were noted by the authorities below in their respective orders. The contention of the assessee, on the other hand, was that even at that very point of time, the assessee pointed out such irregularity or invalidity of orders of demand Under Section 210 and that was why the assessee entertained the bonafide belief that it had no obligation to file an estimate as mentioned above although as a gesture of goodwill, the assessee paid the third instalment within time. The contention of the assessee that by paying the instalment would not by itself validate an invalid notice and the ITO could not have taken advantage of that payment or honesty of the assessee.
18. It is true that penalty cannot be imposed for a technical or venial breach of law as contended. But, here in the instant case, it appears that the penalty had not been imposed for any technical or venial breach of law. On the contrary, it was the assessee who contends that since the notice Under Section 210 was not valid, the assessee had no obligation to file an estimate Under Section 212(3A) while at the same time the assessee did make payments of advance tax and that too, within the stipulated time. In other words, the assessee took advantage of that technical point, if at all, in order to say that since the notice Under Section 210 was invalid, there was no further obligation on the part of the assessee to comply. Yet, on the other hand, the assessee admittedly paid the third instalment notwithstanding. In fact, this very issue was pointed out by the Tribunal in its earlier order that the basic requirement of Section 209(1)(a) in the instant case was satisfied. Though this finding was given by the Tribunal subsequently, it has to be considered that that was the position at the relevant point of time also as far as the present proceedings are concerned. It cannot be said that the notice Under Section 210 became valid only after the order of the Tribunal. True, such conclusion is a referable question, but by itself it cannot be said that the assessee entertained a bonafide belief that there was no obligation to file the estimate as the notice was not valid. The Commissioner (Appeals) has pointed out that in the circumstances of the case, it cannot be said that the belief entertained by the assessee was frivolous or mala fide. On the reasons mentioned above, we fail to agree with his conclusion. It is also argued that since the AAC at the first instance, accepted the claim of the assessee that the notice issued by the ITO was invalid, which fact would also indicate that what the assessee entertained regarding invalidity of the notice, was a bonafide belief. This contention does not appeal to us in view of the reasons and the discussions made by us earlier.
19. True, in a similar situation in the case of Adinath Chandra Seal & Co. (supra) the Tribunal cancelled the penalty Under Section 273(c) as it found that the assessee had reasonable cause for not filing the estimate Under Section 212(3A). But the facts of that case were different as the notice Under Section 210 was found to be not valid and cannot be acted upon. On the contrary, the Tribunal in the instant case found the notice Under Section 210 was valid. Hence, the decision of the Tribunal in the case of Adinath Chandra Seal & Co. (supra) does not help the case of the assessee, even otherwise. Besides, the assessee’s contention is also that it acted bonafide in the circumstances of the case in not filing the appeal. Reference is made to the decision in the case of Hindustan Steel Ltd. (supra). The facts of the present case of the assessee were distinguishable. True, the assessee paid instalments of advance tax and on that fact alone, it cannot be said that by such payments the invalid notice Under Section 210 became valid or it cannot be said that the assessee has waived the irregularity, which notice was found to be valid factually even by the Tribunal as mentioned above. It cannot also be said that since the notice was invalid according to the assessee, the payments by the assessee also were invalid, which again is not correct as credit for such payments were already given in the computation of the tax.
20. It may be mentioned that before the Commissioner (Appeals), the assessee contended that the expression ‘without reasonable cause’ appears in Sections 271(1)(a), 273(c) and 276(6). The stand taken by the assessee that there can be no dispute that the prosecution was launched for offence Under Section 276(b), mental element would be relevant and the expression ‘without reasonable cause’ should also have the same meaning and while considering the provisions of Section 273(c) and the mental element cannot be ruled out. In this connection it would be useful to refer to the decision of the Hon’ble Kerala High Court of the Full Bench in the case of CIT v. Gujarat Travancore Agency [1976] 103 ITR 149 in which amongst other things and on the facts of that case, it was held that the penalty provisions under the Act and not as provisions of a criminal nature which warrant the requirements of mens rea in the sense in which the same is required for an offence by the criminal. It was also held that before imposition of penalty Under Section 271(1)(a) mens rea need not be established. Similar is the view of the Hon’ble Andhra Pradesh High Court of the Full Bench in the case of Addl. CIT v. Dargapandarinath Tuljayya & Co. [1977] 107 ITR 850. Similar was the view as expressed in the decision in the case of H.H. Maharani Sharmishthabai Holkar v. Addl. CIT [1981] 129 ITR 13 (MP) in which it was held that there is no material difference in the language of Sections 271(1)(a) and 273(c) regarding non-requirement of mens rea. It was held also in the Madhya Pradesh High Court case that for the purpose of Section 273(c), element of mens rea is not required to be considered.
21. Of course, in the case of Jaipur Udyog Ltd. v. CIT [1969] 71 ITR 799 (SC), it was held that on an invalid provisional assessment, advance tax demand Under Section 210 was also to be invalid. But in the instant case, the validity of the notice Under Section 210 was sustained by the Tribunal. The penalty in the case of this assessee has not been based merely on rejection of the assessee’s explanation, but on the facts and in the circumstances of the case noted earlier as discussed in the orders of the authorities below.
22. The decisions relied have been rendered in the circumstances of those cited cases, which were different from those of the assessee.
23. Having regard to the various submissions made before us and after considering different decisions cited and considered by the authorities below and as discussed by us above and having regard to the circumstances, we cannot subscribe to the view of the Commissioner (Appeals) in the instant case. We cannot, therefore, sustain his order. Accordingly, his order is reversed and that of the ITO is restored.
24. In the result, the appeal by the revenue is allowed.