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TMI Blog2011 (5) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... d on facts in cancelling the said penalty on the ground that the issue is disputable and debatable without appreciating that the claim of cash credits introduced in the accounts of the assessee was found to be false as even the identity of those creditors could not be established. 1.4 In doing so, the ld. CIT(A) has erred in law and on facts in not appreciating the decision of the Hon'ble Supreme Court in the case of Union of India v. Dharamendra Textile Processors (306 ITR 277) in which the Hon'ble Apex Court has held that wilful concealment is not an essential ingredient for levy of penalty under section 271(1)(c). 2. Thus the revenue is aggrieved against the order of ld. CIT(A) dated 29-7-2009 wherein he has cancelled the penalty levied by the Assessing Officer under section 271(1)(c) of Rs. 3,19,400. 3. The facts of the case are that the assessee is engaged in the business of manufacturing and sales of inorganix chemicals. It filed return of income on 24-11-1997 declaring loss of Rs. 28,06,873. The assessment was completed under section 143(3) on 21-3-2000 determining total income at Rs. 33,66,149. The matter went before the ld. CIT(A) who allowed part relief to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditworthiness and existence of the depositors. Thus, in view of these facts, addition to the extent of Rs. 7,30,000 is made to the total income of the assessee being a non-genuine cash credit under section 68 of the Income-tax Act. Since the above deposits held as unexplained and non-genuine, as a natural corollary the interest paid thereon to the tune of Rs. 12,785 is disallowed and added to the total income. Penalty proceedings under section 271(1)(c) is initiated separately for the concealment of income and furnishing inaccurate particulars of the income." It seems that matter became final as ld. CIT(A) dismissed the appeal of the assessee by confirming additions and no further appeal channel was used by the assessee. According to the Assessing Officer the assessee failed to discharge the onus in respect of these creditors inasmuch as it has withdrawn the appeal filed before ld. CIT(A). Holding that there is filing of inaccurate particulars of income/concealment of particulars of income Assessing Officer levied the penalty. 4. The ld. CIT(A) deleted the penalty on the ground that addition is made only due to non-submission of some information and for not producing some of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found genuine by the revenue authorities. Otherwise non-furnishing of the details preventing the Assessing Officer to carry out its verification would be the case covered within the meaning of Explanation 1 to section 271(1)(c) which reads as under :- "271.(1) If the Assessing Officer or the Commissioner (Appeals) [or the Commissioner] in the course of any proceedings under this Act, is satisfied that any person- (a) ** ** ** (b) ** ** ** (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or (d) ** ** ** He may direct that such person shall pay by way of penalty- Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false or (B) such person offers an explanation which he is not able to substantiate and [fails to prove that such explanation is bona fide and that all the facts relating to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under :- "Explanation 4.-For the purposes of clause (iii) of this sub-section, the expression "the amount of tax sought to be evaded",- (a) in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished exceeds the total income assessed, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income; (b) in any case to which Explanation 3 applies, means the tax on the total income assessed; (c) in any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished." 10. Thereafter Finance Act, 2002, substituted new clause (a) with effect from 1-4-2003. The new clause (a) reads as under :- "(a) in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income reduces the returned loss. When the word "income" is read to include losses as held in Harprasad's case it becomes crystal clear that even in a case where on account of addition of concealed income the returned loss stands reduced and even if the final assessed income is a loss, still penalty was leviable thereon even during the period April 1, 1976, to April 1, 2003. Even in the Circular dated July 24, 1976, referred to above, the position was clarified by the Central Board of Direct Taxes (in short "the CBDT"). It is stated that in a case where on setting off the concealed income against any loss incurred by the assessee under any other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure the penalty would be impossible because in such a case "the tax sought to be evaded" will be tax chargeable on concealed income as if it is "total income"." 12. In respect of retrospectivity the Hon'ble Supreme Court observed as under :- "14. The presumption against retrospective operation is not applicable to declaratory statutes . . . In determining, therefore, the nature of the Act, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in Virtual Soft Systems Ltd. v. CIT [2007] 289 ITR 83/159 Taxman 155 had taken a contrary view which was over-ruled in Gold Coil Health Food (P.) Ltd. (supra). Earlier to the decision in Virtual Soft Systems Ltd. (supra), Hon'ble Delhi High Court in CIT v. Aditya Chemicals Ltd. [2006] 283 ITR 458/[2005] 147 Taxman 688 analysed the then existing provisions of Explanation 4 and had observed as under :- "The liability to penalty arises if any person has concealed the particulars of his income or furnished inaccurate particulars of such income. The liability for penalty is not in any manner linked with whether the total income assessed is positive or negative. Explanation 4 to section 271(1)(c) of the Income-tax Act, 1961, deals with three different and distinct situations under clauses (a), (b) and (c). Clause (a) pertains to a situation where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished exceeds the total income assessed. Clause (b) deals with a situation where Explanation 3 applies. By virtue of Explanation 3, since no return is filed before a specified date, the entire taxable income is deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prithipal Singh could not be a precedent or authority with regard to the interpretation of Explanation 4. Therefore, the Tribunal was not justified in holding that the decisions in Prithipal Singh's case (183 ITR 69 and 249 ITR 670) would apply even after the insertion of Explanation 4 to section 271(1)(c) with effect from April 1, 1976. Observations on Explanation 4 to section 271(1)(c) in CIT v. Prithipal Singh & Co. [1990] 183 ITR 69 (Punj. & Har.) held obiter dicta." 14. Thus, Hon'ble Delhi High Court held on the then existing clause 4(a) that it would be applicable where addition on account of concealed income is more than total income assessed. If we apply the ratio of Hon'ble Delhi High Court in Aditya Chemical Ltd.'s case (supra) on the basis of the then existing Explanation 4(a) we find that addition in the present case is of Rs. 7,42,785 which is more than the assessed income of Rs. NIL . 15. When we consider to apply new Explanation 4(a) introduced by Finance Act, 2002 and made effective prior to the assessment years 2003-04 also by the Hon'ble Supreme Court in Gold Coin Health Food (P.) Ltd.' case (supra) we find that returned income in the present case is a loss of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax sought to be evaded would be carried out in accordance with what is stated in clause (a) and one need not go to clause (b) or clause (c). Where clause (a) is not applicable but clause (b) is applicable because assessee has failed to furnish a return within the stipulated time then one need not go to clause (c) to calculate tax sought to be evaded. But where facts of a particular cause does not fall either in clause (a) or clause (b) only, then one has to invoke clause (c). The words "in any other case" clearly signify the intention of the Legislature that clause (c) is a residual clause and will come into play when a case does not fall in clause (a) and in clause (b). The clause (c) provides that tax sought to be evaded would be the difference between tax on the assessed income less tax on (assessed income minus addition representing concealed) income. This can be explained by the following example : Suppose an assessee has declared an income of Rs. 100. The Assessing Officer proposes an addition of Rs. 75 which consisted of addition of Rs. 50 in respect of which there is a finding that assessee has concealed the particulars of income or furnished inaccurate particulars of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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