Ganeshdass Bhojraj vs Commissioner of Income Tax

Sukhdev Singh Kang, J.—On an application u/s 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 u/s 210 was invalid and imposition of penalty u/s 273(c) was not sustainable in law on that ground ?"

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 u/s 210 to the assessee to show cause why penalty u/s 273 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 u/s 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 u/s 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 u/s 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).

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 u/s 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 u/s 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 u/s 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 u/s 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 Dalal Vs. Income Tax Officer, Kanpur, , 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 u/s 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.

On an application filed by the assessee, the case has been stated and the above-mentioned question of law has been referred to this court for opinion.

We have hoard learned counsel for the parties and perused the record. Shri G.C. Sharma, Senior Advocate, learned counsel for the assessee, with his usual fairness, has conceded that he had no quarrel with the proposition enunciated by the Tribunal that a mere inaccuracy in mentioning the income in the notice of demand shall not vitiate the proceedings u/s 210 of the Act. He, however, argued that the notice u/s 210 was without jurisdiction. Under this Section, the notice for filing a revised return could be issued only if the assessment for the previous year 1974-75 was without jurisdiction.

We have, with the help of learned counsel for the parties, gone through the order of the Tribunal and we find that this point was not raised there. It has not been considered and adjudicated upon. Therefore, this question does not arise out of the order of the Tribunal.

Mr. Sharma then contended that the question as framed was wide enough to comprehend this contention. We regret our inability to accept this contention. The question framed is whether, on the facts and in the circumstances of the case, the notice of advance tax u/s 210 was invalid. On the facts brought out, the issue raised by Mr. Sharma does not arise.

We answer the question in the negative and in favour of the Revenue.