The truth or otherwise of an estimate at a given point of time is the gravamen of the charge in a proceeding under section 28(1)(c) of the Income-tax Act, 1922.

1. - At the instance of the assessee this court by its order dated December 26, 1966, directed the Income-tax Appellate Tribunal, Delhi Bench "C", to refer the following question for answer :

"Whether, on the facts and in the circumstances of the case, the levy of penalty of Rs. 2,500 on the assessee under section 18A(9) read with section 28(1)(c) of the Act was valid in law ?"

2. M/s. Jaipur Metals and Electricals Ltd. is a public limited company which manufactures electric meters, copper conductors, etc. The assessee's accounting year ends on 31st December. For the period relevant to the assessment year 1957-58, a notice was served on the assessee on May 31, 1956, indicating that the assessee was liable to pay income-tax in the sum of Rs. 48,639.20 under section 18A(1). The assessee filed an estimate on June 12, 1956, showing a loss in the sum of Rs. 50,000 till that date. On September 13 or 14, 1956, the assessee voluntarily revised its estimates showing an estimated income in the sum of Rs. 50,000. The department issued another notice to the assessee on December 1, 1956, making a revised demand upon the assessee to pay an advance tax in the sum of Rs. 1,03,458.75 on an estimated income of Rs. 3,03,565 based on the total income assessed for the accounting period relevant to the assessment year 1956-57. The assessee repeated its estimated income by its revised statement dated December 14, 1956, to be at Rs. 50,000. This estimate was filed by the assessee, it is claimed, on the basis of the books of account and material then available to the assessee. The assessee revised certain bills already submitted by it to the Government departments which resulted in increasing its profits by Rs. 27,755. These bills were revised some time after December 25, 1956. Not only that the assessee received a sum of Rs. 12,463 on December 20, 1956, from M/s. Rathi Steel Re-rolling Mills, Delhi, being some pool money on transfer of the steel quota. This brought in an unexpected profit in the sum of Rs. 40,000 and odd. The assessment of the company was completed on August 31, 1960, and the Income-tax Officer adjudicated the income of the assessee in the sum of Rs. 2,09,968 as against the return of the assessee in the sum of Rs. 84,220. An appeal was taken before the Appellate Assistant Commissioner and the income was reduced to Rs. 97,478. A notice was issued to the assessee under section 28(1)(c) read with section 18A(9) to show cause why penalty should not be imposed. The assessee filed a reply that he was not guilty of making any untrue statement within its knowledge or which it had reason to believe to be untrue. The Income-tax Officer, however, imposed a penalty on December 27, 1963, in the sum of Rs. 3,800. The Appellate Assistant Commissioner, however, dismissed the appeal but the Tribunal eventually on March 2, 1965, reduced the amount to Rs. 2,500. An application was made to the Tribunal for making a reference to this court under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter called "the old Act"), but the Tribunal rejected it on the ground that no question of law arose. As already indicated this court directed the Tribunal to refer the question aforesaid.

3. Mr. L.R. Mehta, appearing for the assessee, urged that when he filed the revised statement on September 13, 1956, and repeated it on December 14, 1956, in the sum of Rs. 50,000, it made no untrue statement within its knowledge or which it had reason to believe to be untrue. The unexpected increase in the income was after the filing of the revised return on December 14, 1956, and, therefore, the assessee was not hit by the mischief of section 18A(9) read with section 28(1)(c) of the old Act. The failure on the part of the assessee to revise its estimate on the 15th of March, 1957, is at worst an omission while the penalty clause of section 18A(9) read with section 28(1)(c) refers to a positively untrue statement within the knowledge or which the assessee had reaso