Law:

Section:

Section 221 of the Income-tax Act, 1961 - Collection and recovery of tax - Penalty payable when tax in default - Assessment year 1988-89 - Assessee-company was under belief that its total income would not exceed Rs. 2,500 and, therefore, it did not file any estimate nor did it pay any advance tax on or before 15-9-1987, i.e., date on which first installment was due - However, assessee on or about 11-12-1987 sent an estimate computing its income on basis of section 115J and deposited advance tax accordingly - Later, assessee, on 11-3-1988, i.e., before date on which last installment became due, filed a revised estimate in Form No. 29 showing 'nil' income on premises that provisions contained in newly inserted section 115J were not applicable as per legal advice - Whether aforesaid estimate filed on 11-3-1988 accompanying legal opinion was a valid estimate which had superseded estimate filed on or about 11-12-1987 and, therefore, assessee could not be deemed to be an assessee in default and, thus, demand or penalty proceedings under section 221 could not be initiated - Held, yes Facts For the assessment year 1988-89, the assessee-company was under the belief that its total income would not exceed Rs. 2,500 and, therefore, it did not file any estimate and did not pay any advance tax on or before 15-9-1987, i.e., the date on which the first installment was due. The assessee, however, on or about 11-12-1987 sent an estimate computing its total income on the basis of section 115J at Rs. 450 lakhs and paid a sum of Rs. 93,12,500 as advance tax. However, the assessee on 11-3-1988, before the date on which the last installment became due, filed a revised estimate in Form No. 29, showing nil income on the premises that the provisions contained in the newly inserted section 115J were not applicable as per the legal advice of its legal advisor. Along with the estimate the assessee also attached the legal opinion so obtained. The ITO held that under section 209A, the total income means total amount of income computed in the manner laid down in the Act including1 section 115J. He, therefore, raised a demand and issued notice under section 221(1). On writ : Held It cannot be…

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