TMI Blog1989 (10) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the ITO for aforesaid year at ₹ 1,58,66,401. In addition to this unabsorbed depreciation pertaining to the year under consideration which was also eligible for being set off in subsequent years was determined by the ITO at ₹ 1,15,87,621. Thus the total amount of business of loss and unabsorbed depreciation pertaining to the year under consideration had been determined At ₹ 2,74,54,022 by the ITO. The assessee is also entitled to carry forward of past unabsorbed business loss, unabsorbed depreciation and development rebate for various years as per details mentioned in the assessment order for the year under consideration which is reproduced here under : Assessment year Business loss Deprn. Dev. Rebate Total 1973-74 - - 33,16,145 33,16,145 1976-77 - ₹ 6,96,853 - 696853 1978-79 - ₹ 67,83,671 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity from one account to another the addition made by the learned ITO is apparently incorrect and invalid. The assessee did not prefer any appeal against the said addition merely because there are huge losses and it would have been futile to incur further legal expenses for pursuing the aforesaid invalidity of the said addition of ₹ 12,88,165 he contended that purchase price payable to the members for supply of sugarcane grown by them by was sanctioned by the managing Committee at the rate or ₹ 137 per mt. He also invited our attention to wards resolution dated 25th November 1979 passed by the managing Committee of the aforesaid society in which it was decided that last year the assessee had distributed 10 per cent dividend per share and this year they intend to distribute dividend at the rate of 12 per cent. In order to pay such dividend at the rate of 12 per cent it was further decided that dividend contribution at the rate of ₹ 1.75 per M.T. be collected from the Members who had supplied sugarcane to the assessee for such Shareholders Dividend fund and accordingly the amount of ₹ 12,88,165 was debited in the account of Members against the amount payable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not at all liable to pay any income tax in view of the huge amount of assessed losses. The learned counsel further invited our attention to wards the facts proviso to Explanation 1 to section 271 (1) (c) which provides that nothing contained in section 271 (1) (c) will apply to a case referred to the clause (b) of Explanation 1 in respect of any amount added or disallowed as a result of he rejection of any explanation offered by such person if such explanation is bona fide and all the facts relating to the same and material to the computation of its total income have been disclosed by him. It was contended that the assessee s case is clearly covered by the aforesaid proviso which supports that no penalty could be validly imposed under the fact and circumstances of the assessee s case. The learned counsel also invited our attention to wards Explanation 4 to section 271 (1) (c) by resort to which the ITO has imposed the aforesaid penalty of ₹ 6,50,000. He contended that Explanation 4 (a) can be applied only in case where there is a positive income assessed and cannot be applied where the assessee has been made at a loss figure. He relied upon the decision of ITAT Ahmedabad Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ITO. The learned Departmental Representative also read the relevant paras of the order passed by the ITO imposing the penalty and also took us through the relevant para of the order passed the Commissioner (Appeals) in which the aforesaid penalty has been confirmed by him. He submitted that since the charge of filing in correct particulars of income in respect of addition of ₹ 12,88,165 stands established the clear language of section 271 (1) (c) should be given full effect and penalty imposed by the appellant should be sustained. He further contended that the ITO has computed the amount of penalty amounting to ₹ 6,50,00 treating the amount of aforesaid addition of ₹ 12,88,165 as the total concealed income as per Explanation 4 to section 271 (1) (c). He argued that in view of Explanation 4 the penalty under section 271 (1) (c) can be levied even when there is an assessed loss. It is not necessary that for invoking the Explanation 4 to section 271 (1) (c), there should be a positive figure of income assessed. In this connection, he invited our attention towards Commentary of Income-tax Law by Chaturvedi at page 4943 in which the scope and purpose of insertin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee conceals its income liable to tax. The word conceal means to hide or to keep secret. The very word conceal implies the existence of a guilty intention to evade tax In the present case, the assessee had suffered huge losses in several years and also suffered heavy losses in the year under appeal. The total amount of assessed business loss, assessed amount of unabsorbed depreciation and development rebate for the year under consideration as well as for earlier years as per assessment order passed by the ITO for the year under consideration is ₹ 5,27,53,814. In view of these it is amazing to presume that the assessee would have been gained by deliberately making any such false claim of excess purchase price amounting to ₹ 12,88,165 The motive of any tax evasion or any attempt to defraud the Revenue is apparently absent in the present case as there are no prospects in the near future of any profits beyond the huge amount of assessed loss of more than five crores as per the assessment order for the year under consideration. The statement made by the learned counsel during the course of hearing that the assessee society continued to incur heavy losses in all the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear from a very close reading of the provisions of section 271 (1) (c) read with other provisions of Explanation 4 ibid Explanation 4 clarified the expression of the amount of tax sought to be evaded used in cl. (iii) lays down the basis of quantification of penalty attracted by the provisions of section 271 (1) (c) of the Act, that is where an assessee has concealed the particulars of such income. The clause points out that in addition to any tax payable by the assessee, the ITO may direct that the assessee shall pay be way of penalty a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of concealment of particulars of his income or furnishing of inaccurate particulars of such income. The Honble Supreme Court in the case of Commissioner v. VEGETABLE PRODUCTS LTD. Mentioned supra, succinctly points out the difference between the tax payable and the tax assessed. This judgment was delivered on 28th January 1973. Thereafter, clause (iii) referred to supra, came as a substitute for the original clause by the Taxation laws (Amendment) Act, 1975 with effect from 1st April 1976. The Hon'ble Court has pointed out that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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