TMI Blog2007 (10) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... o Rs. 51,60,935. Thereafter the return was picked up for scrutiny and notices under s. 143(2) were issued. Ultimately, the assessment was completed under s. 143(3) of the Act by order dt. 29th Feb., 2000. In this order, the AO computed the total income of the assessee in accordance with, the normal provisions of the IT Act, which resulted in a positive income of Rs. 41,50,102 and after adjusting the losses brought forward from the earlier years, the total income was computed at nil and the net loss to be carried over to the subsequent years was determined at Rs. 1,56,43,396. 3. In the same assessment order, the AO also computed the book profit of the assessee under s. 115JA of the Act. In the course of the assessment proceedings, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee did not conceal any particulars of income or furnished inaccurate particulars thereof. The reply did not find favour with the AO who imposed a penalty of Rs. 35,51,000 and in doing so has relied on the judgment of the Bombay High Court in CIT vs. Chemiequip Ltd. (2003) 182 CTR (Bom) 144 : (2004) 265 ITR 265 (Bom) to hold that after the insertion of Expln. 4(a) w.e.f. 1st April, 1976, it is possible to levy penalty for concealment of income even where the total income assessed is a loss or Rs. nil and no tax was payable by the assessee. 5. On appeal, the CIT(A) noted that the assessee had carried the assessment order in appeal before the CIT(A) and the Tribunal and after giving effect to the orders passed in appeal, the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 of the assessment order resulted in an income of Rs. 41,50,102 which was reduced to Rs. nil by adjustment of the brought forward losses to the extent of Rs. 41,50,102. The question is whether any penalty can be levied, on this fact situation, for concealment of income. In a very recent judgment dt. 17th Sept., 2007 in CIT vs. Moser Baer India Ltd. [reported at (2007) 213 CTR (Del) 64-Ed.] (copy of the judgment filed), the Hon'ble Delhi High Court has held that before the amendment to s. 271 w.e.f. 1st April, 2003 no penalty is leviable unless some tax is payable by the assessee, following the judgment of the Supreme Court in Virtual Soft Systems Ltd. vs. CIT (2007) 207 CTR (SC) 733 : (2007) 289 ITR 83 (SC), and has also examined the argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the AO the assessee increased its income by Rs. 82,58,439 comprising of the following: (a) Bad debts relating to agricultural activities Rs. 58,32,358 inadvertently claimed as deduction (b) 50 per cent of Bagwala office expenses and 50 per Rs. 24,25,781 cent of R D expenses claimed in the original return now withdrawn The claim of bad debt as a deduction is a patent error as is clear from the fact that the assessee itself narrated the claim as "bad debt related to agricultural activity written off during the year". The words shown in bold show that the claim was not allowable under the IT Act but was still claimed by the assessee inadvertently. The assessee did not withhold the information that the claim related to the agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a guilty mind (mens rea) which is necessary to be established in order to justify the levy of penalty for concealment of income, as held by. the Supreme Court in K.C. Builders Anr. vs. Asstt. CIT (2004) 186 CTR (SC) 721 : (2004) 265 ITR 562 (SC). In CIT vs. Bacardi Martini India Ltd. (2006) 206 CTR (Del) 250 : (2007) 288 ITR 585 (Del), the Hon'ble Delhi High Court has reiterated this position and has further held that merely because there is a difference of opinion for allowing or disallowing an expenditure, it cannot be said that the assessee intended to conceal the income and that where the assessee files a revised return withdrawing certain claims of expenditure, it does not amount to concealment or furnishing inaccurate particular ..... X X X X Extracts X X X X X X X X Extracts X X X X
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