1993 (2) TMI 120 - AT - Income Tax

Summary

Issues Involved:
The judgment involves the levy of penalty u/s 271(1)(c) in a sum of Rs. 1 lakh on the assessee for the assessment year 1985-86.

Details of the Judgment:

1. Issue 1 - Concealment Penalty in Case of Loss Assessment:
- The assessee contended that penalty under section 271(1)(c) was not applicable as the assessment resulted in a substantial loss of Rs. 9,80,397.
- Cited High Court decisions and Tribunal rulings supporting the stance that penalty is not leviable when assessment shows a loss.
- Highlighted that the penalty order was based on an item described as "lease expenses" which was actually a provision for customer claims, approved by the Institute of Chartered Accountants.
- Departmental Representative argued that the change in the accounting system by the assessee was not properly disclosed, justifying the penalty.
- The Tribunal noted various legal precedents and concluded that penalty under section 271(1)(c) cannot be levied when the assessment results in a loss, based on a strict interpretation of the statutory provisions.

2. Conclusion:
- The Tribunal found that the penalty order could not be sustained as the assessment had resulted in a loss, making the penalty under section 271(1)(c) inapplicable.
- Consequently, the penalty was quashed, and the assessee's appeal was allowed.