TMI Blog2008 (6) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the penalty order by the learned CIT(A). For the sake of convenience, the same are also referred to here as under : "Return disclosing income of Rs. 1,27,219 was filed on 30th Nov., 1996 against which assessment under s. 147/143(3) was completed on 13th March, 2002 on a total income of Rs. 24,62,160. This income was adjusted against brought forward business losses and taxable income was computed at nil. During the course of assessment proceedings following additions inter alia were made : (1) Bogus purchases/Bogus freight charges Rs. 13,82,562 (2) Unexplained cash credits Rs. 5,28,039 (3) Unexplained cash credits Rs. 4,24,340 2. During the course of passing assessment order under s. 147/143(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleaded by the assessee that its case is squarely covered by the decision of Hon'ble Supreme Court in the case of Virtual Soft Systems Ltd., as assessee has not to pay any tax on account of adjustment of brought forward losses against income returned as well as against income assessed. 4. The learned CIT(A), following the above decision of Hon'ble Supreme Court, cancelled the penalty. 5. Before us, the learned Departmental Representative submitted that the learned CIT(A) is incorrect to hold that income assessed was a loss. In fact, as per penalty order itself it is clear that return of income was filed on 30th Nov., 1996 disclosing income of Rs. 1,27,219 in which several additions were made and finally assessed income was worked out at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of s. 271(1)(c) of the Act could not be invoked. 7. We have considered the rival submissions and perused the material on record. The AO has levied the penalty under s. 271(1)(c) of the Act without considering as to which Explanation would be applicable in the present case. It is undisputed fact that assessee had brought forward losses which were set off against income returned as well as against finally computed income. Thus, income returned after set off of brought forward losses amounted to Rs. nil. Similarly, assessed income after set off of losses also amounted to Rs. nil. 8. In this regard, we refer to s. 271(1)(c) of the Act as under (prior to amendment by Finance Act, 2002 w.e.f 1st April, 2003) : "271. Failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty. Explanation 4 inserted for the purpose of cl. (iii) where the expression 'the amount of tax sought to be evaded' is used, had in fact made no difference insofar as the main criteria, namely, absence of tax continued to exist, prior to or after 1st April, 1976, changing only the measure or the scale as to the working of the penalty which earlier was with reference to the 'income' and after the amendment related to the 'tax sought to be evaded'. The sine qua non which was there prior to or after the amendment on 1st April, 1976, viz., the fact that there must be a positive income resulting in tax before any penalty could be levied, continued to exist. Penalty imposed was in 'addition to any tax'. If there was no tax, no penalty co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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