TMI Blog2004 (3) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant previous year, disclosed loss of ₹ 14,53,538 which was finally assessed at a loss of ₹ 6,25,504. In the course of assessment, the additions were made of ₹ 5,45,581 on account of unexplained credits, being loans which could not be satisfactorily proved, and another ₹ 2,70,000 on account of unexplained credits, being unverified issue of share capital. These additions were confirmed in appeal by the CIT(A) and the mater did not travel any further in appeal. On these facts, and for the detailed reasons rejecting the explanation of the assessee as set out in the penalty order, the Assessing Officer imposed penalty of ₹ 4,70,998 which was equivalent to 100% of the tax sought to be evaded. 3. For the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty is further sum payable by the a person would be in addition to any tax payable by him. Explanations 3 and 4 annexed to the said provisions of law also presuppose taxable income with regard to the assessment year in question. If there is no taxable income or tax assessed for payment during a particular year, the question of evasion and consequently penalty do not arise...... Thus (on the given facts) there was no income and so the motive to avoid tax during the year is completely missing. Maybe it may give a benefit to the assessee in the coming year as the loss could be carried forward but, by no stretch of imagination, can it be said that, during the assessment year in question, the assessee had concealed income. In the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter, in our considered view, it is settled legal position, as was laid down by the Hon'ble Punjab Haryana High Court and as approved by the Hon'ble Supreme Court, that in a situation where, as a result of additions being made by the Assessing officer, only the loss is reduced, it cannot be said that the assessee has suppressed any income which would have attracted liability to tax, and, therefore, the question of penalty under section 271(1)(c) does not arise. 8. We further find that, by the virtue of amendment brought about vide Finance Act, 2002 and with effect from assessment year 2003-2004, clause (a) of Explanation 4 to section 271 (1)(c) provides as follows : In any case where the amount of income in respect of whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and this view, in the light of dismissal of civil appeal against the judgment based on the said view, has the approval of Hon'ble supreme Court. The school of thought emerging from these discussions, therefore, suggest that without the aid of amendment in clause (a) of Explanation 4 to section 271(1)(c), additions or disallowances resulting in reduction of assessed losses vis-a-vis returned losses can not be visited with penal provisions under section 271(1)(c) of the Act. That is our humble understanding of the legal position. 9. Revenue's objection to the above legal proposition is two fold - first, that the judgment of Hon'ble Supreme Court is not binding inasmuch as no law is laid down by the same, and second, that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interference is called for. Therefore, Hon'ble Supreme Court has approved the proposition laid down by the Hon'ble Supreme Court to the effect that in a case where returned income of the assessee as also the finally assessed income are negative figures, penalty under section 271(1)(c) is not levaible. With utmost respect to the Hon'ble Supreme Court, we are inclined to follow, in letter and in spirit, the legal propositions so approved by the Hon'ble Supreme Court, and we are duty bound to do so, As far as Hon'ble Jurisdictional High Court's judgment in the case of Chemiequip Limited (supra) is concerned, we have taken not of the fact that this judgment was passed ex parte qua the assessee and that Hon'ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought to the notice of the Hon'ble jurisdictional High Court, Punjab Haryana High Court's judgment stood approved by the Hon'ble Supreme Court in civil appellate proceedings. As to what is the legal position in such a situation, we can do not better than to quote the words of Hon'ble Jurisdictional High Court itself in the case of CIT Vs. Rare Earth Limited (181 ITR 22 Full bench) : .....It is True that this judgment has not been directly disapproved or over-rules by the Supreme Court in either of the three cases relied upon by Shri Jetley for the Department. However, the Supreme Court in ITO Vs. Mewalal Dwarka Prasad [1989] 176 ITR 529, in terms, approved the Andhra Pradesh High Court decision in Pulavarthi Visw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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