TMI Blog2003 (2) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... tice u/s 148?" - We answer the questions in the negative, i.e., in favour of the Department and against the assessee. - - - - - Dated:- 20-2-2003 - Judge(s) : S. H. KAPADIA., J. P. DEVADHAR. JUDGMENT The judgment of the court was delivered by S.H. KAPADIA J.-Being aggrieved by the decision of the Tribunal, the Department has come by way of appeal under section 260A of the Income-tax Act, 1961, with the following questions of law in respect of the assessment year 1988-89. "(1) Whether, on the facts and in the circumstances of the case, and in law, the honourable Income-tax Appellate Tribunal was right in cancelling the levy of penalty under section 271(1)(c) on the ground that no penalty can be levied where the assessed income is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evised return, in response to a notice under section 148 of the Act, the assessee offered Rs. 1,07,27,006 to tax for the assessment year 1988-89 and also withdrew its claim for deduction under section 80HHC amounting to Rs. 7,35,871. In the circumstances, penalty proceedings were initiated under section 271(1)(c) of the Act. However, the fact remained that even after the revised return, the resultant figure was a total loss and the effect of the revised return was only that the loss stood reduced from Rs. 1,73,05,721 to Rs. 58,42,844 on July 24, 1992. Therefore, the Assessing Officer levied penalty under section 271(1)(c) amounting to Rs. 61,89,955. Being aggrieved by the order imposing penalty, the assessee carried the matter in appeal to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took the view that as a result of concealment of income, only the loss stood reduced and, therefore, there was no suppression of income. In the circumstances, the Tribunal took the view that section 271(1)(c) was not applicable and, therefore, the penalty could not be imposed. The Tribunal took the view that the assessee had no positive income during the assessment year in question and, therefore, the penalty cannot be levied. Being aggrieved by the order of the Tribunal, the matter has come in appeal before this court. Arguments: Mr. R.V. Desai, learned senior counsel appearing on behalf of the Department, invited our attention to the provisions of section 271(1)(c) read with Explanation 4. He also relied upon the judgment of the Karn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal. On this factual conclusion, there is no challenge from the side of the assessee. Therefore, the only limited question which we have to answer in this case is : whether the Tribunal was right in holding that in the absence of positive income, penalty could not be levied under section 271(1)(c)? Section 271(1)(c) provides that if any person conceals particulars of income or furnishes inaccurate particulars of such income then, in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed three times the amount of tax sought to be evaded by reason of concealment or furnishing of inaccurate particulars of such income, could be imposed. Explanation 4 has defined the expression "the amount of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought to be evaded. Therefore, Explanation 4 applies to cases where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or it has the effect of converting that loss into income. Therefore, the Tribunal erred in coming to the conclusion that section 271(1)(c) was hot applicable as the finally assessed income was a reduced loss. Explanation 4 was not in existence during the assessment year 1970-71. The judgment of the Punjab and Haryana High Court in Prithipal Singh's case [1990] 183 ITR 69 was applicable to the assessment year 1970-71 whereas, we are concerned with the assessment year 1988-89 when Explanation 4 was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words, at the time of filing the original return of income for the assessment year 198889, a sum of Rs. 1,07,27,006 was not offered to tax. That, the said amount was offered to tax only in response to a notice under section 148 of the Act. This offer is also to be seen with the false claim for deduction under section 80HHC by the assessee for Rs. 7,35,871. Therefore, this is a case where the assessee had wilfully enhanced the losses on two counts, viz., by claiming wrong deduction under section 80HHC and, secondly, by not offering to tax an amount of Rs. 1,07,27,006 which was offered to tax only in response to a notice under section 148 of the Act. Taking an over all view of the matter, we answer question No. 2 also in the negative, i.e., ..... X X X X Extracts X X X X X X X X Extracts X X X X
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