Law:

Section:

Section 273(a), [as stood before 1-4-1970] read with section 215(1), of the Income-tax act, 1961-Penalty-For furnishing inaccurate estimate of advance tax-Whether penalty at 10 per cent was to be calculated on the footing that shortfall be determined by first reducing gross tax by 25 per cent and then deducting therefrom tax paid at source-Held, yes Facts The assessee-company, engaged in financing business, filed an estimate of advance tax in respect of the assessment year 1967-68 showing no tax as payable in advance on the ground that all its income was subject to deduction of tax at source. The ITO completed the assessment and the tax payable was computed at Rs. 1,34,068, after deducting the tax deducted at source. The ITO, accordingly, imposed penalty under section 273(a) which the AAC reduced in view of the relief obtained by the assessee in the quantum appeal. On further appeal, the Tribunal rejected the assessee's contention that there was no justification for levying any penalty, but agreed with the assessee that for determining the shortfall in the estimate of the tax, the income-tax authorities should have first taken the gross tax and reduced it by 25 per cent. and then, out of the balance so obtained, reduced the tax deducted at source. On reference: Held What section 273( a) contemplated was that if the advance tax paid by the assessee on the basis of his own estimate fell short of the tax determined to be payable by him when the regular assessment was made, he was liable to pay interest or penalty. To allow for a bona fide error, a margin of 25 per cent was allowed, and it was only if the advance tax fell short of 75 per cent of the tax payable by the assessee that the penalty and the interest provisions were attracted. The presence of a comma towards the end of the relevant portion of section 273(a) favoured the interpretation that the tax deductible at source had to be reduced or substracted - this being the modification provided for in section 215 - from 75 per cent of the tax determined on regular assessment. Even otherwise, without attaching too much significance to the comma, logically speaking, there was no reason to hold the view that the…

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