GANESHDASS BHOJRAJ Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) ON an application under Section 256 (1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), filed by Ganesh Dass Bhojraj, the assessee, the Income-tax Appellate Tribunal, Amritsar, Amritsar Bench, has stated the case and referred the following question of law for the opinion of this court: "whether, on the facts and in the circumstances of the case, the notice of advance-tax under Section 210 was invalid and imposition of penalty under Section 273 (c) was not sustainable in law on that ground ?"

(2.) THE assessee had filed the return for the assessment year 1974-75 showing an income of Rs. 1,00,870. The Income-tax Officer issued a notice under Section 210 to the assessee to show cause why penalty under Section 273 (c) should not be imposed for not complying with the provisions of Section 212 (3a) of the Act. In reply to the show-cause notice, the assessee submitted that he had filed a return for the assessment year 1975-76 showing an income of Rs. 6,65,850 and the assessment had been made on an income of Rs. 7,40,967. It was explained by the assessee that the estimate under Section 212 (3a) had not been filed as the assessee had earned some unexpected profit under the guchi account and this fact was not known to them at the time when the revised estimate was filed. This plea was not accepted by the Inspecting Assistant Commissioner. He held that the assessee was to file an estimate of income by December 15, 1975. He had ample time after the close of books of account to make out a near correct estimate of his income and pay the advance tax accordingly. He imposed a penalty of Rs. 11,720, vide his order dated March 14, 1980. On an appeal filed by the assessee, the Commissioner of Income-tax (Appeals), Amritsar, held that the notice issued to the assessee under Section 210 was bad in law. The assessee had, as per the revised return filed on September 13, 1974, declared an income of Rs. 1,00,870 and this was the income which could have formed the basis for the issue of advance tax notice by the Income-tax Officer. However, the Income-tax Officer had issued notice on the basis that the income of the assessee was Rs. 1,08,870. Clearly, the demand raised was incorrect and was not in accordance with law. The notice which formed the very basis of the requirement for filing of an estimate under Section 212 (3a) was invalid in the eye of law and, consequently, no penalty could be imposed for any subsequent act of omission on the part of the assessee. The plea of the Revenue that there was only an clerical and typographical mistake in the notice, that instead of Rs. 1,00,870 the income was mentioned at Rs. 1,08,870 and the matter was covered by Section 292 of the Act, did not prevail with the Commissioner of Income-tax (Appeals) and was rejected on the ground that Section 292b had been enforced with effect from October 1, 1975, and the notice had been issued prior to that date. No other point was raised before the Commissioner of Income-tax (Appeals ).

(3.) THE Revenue went up in appeal before the Income-tax Appellate Tribunal, Amritsar Bench, and the learned Tribunal came to the conclusion that the Commissioner of Income-tax (Appeals) had cancelled the penalty only on the ground that notice under Section 210 of the Act was invalid because it gave the figure of income wrongly. The income returned for the assessment year 1974-75, which should have been the basis for the demand under Section 210, was Rs. 1,00,870, whereas the Income-tax Officer had issued notice showing the income as Rs. 1,08,870. This was clearly a mistake. The notice under Section 210 clearly mentioned that the basis was the income for the assessment year 1974-75 and as the assessment had not been completed by that time, the returned income could be the basis for such demand. The assessment year having been mentioned correctly, a small inaccuracy in the mentioning of the income or the demand will not invalidate the notice under Section 210. If, according to the assessee, the demand is excessive, he could certainly move the Income-tax Officer to correct the demand, but the mere inaccuracy in the demand would not make the notice of demand void and ineffective. Reliance was placed on a decision of the Allahabad High Court in Lalloomal Dalai v. ITO [1959] 36 ITR 397, wherein it was held that such an inaccuracy in the demand does not invalidate the notice. The Tribunal further observed that the present was not a case where the demand had been raised on the basis of an income which had been reduced or modified at the time of the issue of such notice. The Tribunal was concerned with the liability of the assessee to file an estimate where he thinks that his income is more than the income on which he had paid the advance tax by a particular margin. This duty of the assessee was in no way affected by the small inaccuracy in the notice of demand issued by the Income-tax Officer. It could not mislead the assessee who had duly paid that demand. A demand notice mentioning a figure of demand which is inaccurate because of a wrong calculation does not become illegal and only requires rectification. The Tribunal also held that the notice issued under Section 210 was not invalid and the calculation of penalty on that basis was correct. The appeal of the Revenue was allowed and the order of the Commissioner of Income-tax (Appeals) was set aside.