TMI Blog1993 (2) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... loss of Rs. 13,01,641 and assessment was completed on 25-3-1988 on a total loss (including depreciation etc.) of Rs. 9,80,397. The adjustments made in the assessment included one of Rs. 1,70,360 and penalty proceedings under section 271(1)(c) were initiated. Ultimately, the penalty order dated 30-3-1989 was passed levying a penalty of Rs. 1 lakh and the appeal was dismissed by the CIT (Appeals) vide his order dated 9-7-1991. 3. Before us, the learned Advocate for the assessee first of all submitted that since assessment even after the adjustment of the impugned addition resulted in a huge loss of Rs. 9,80,397, concealment penalty of section 271(1)(c) was not leviable in the eye of law. Reliance was placed primarily on the Hon'ble Punjab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9] 179 ITR 8. He submitted that in reality it was thus retention money kept back by the assessee for meeting the contingency of the claims which could have been made by the customers and he further submitted that the departmental authorities were wrong in mentioning that the said sum of Rs. 1,70,360 came to be accepted for disallowance by the assessee after detection by the Assessing Officer. He took us through the papers to claim that actually this question was not raised by the Assessing Officer and the assessee had its own decided to seek this adjustment without the Assessing Officer pointing out this item. He submitted that at any rate all the entries were incorporated in the accounts and hence there was no concealment at all. 5. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er referred to the commentary of Chaturvedi and Pithisaria, Volume 5, Third Edition of 1986 on pages 4793 onwards to say that in accordance with the Board's Circular penalty was leviable for and from assessment year 1976-77 even when the assessment resulted in a loss. He cited a number of decisions to claim that if after the filing of original return some amounts are surrendered the penalty is leviable with reference to the surrendered amounts. He also relied on the Kerala High Court decision in the case of CIT v. India Sea Foods [1976] 105 ITR 708 and CIT v. Gates Foam Rubber Co. [1973] 91 ITR 467 to say that it did not make a difference when the concealed income got adjusted against other items of deficiency or loss meaning thereby that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Tribunal decisions according to which penalty under section 271(1)(c) cannot be levied when the assessment has resulted in a loss. Of course, the Hon'ble Punjab Haryana High Court decision in Prithipal Singh Co.'s case is directly on the point and there are Tribunal's decisions also cited by the learned Advocate as noted above. Therefore, preponderance of judicial pronouncements is on this point in favour of the assessee. The Hon'ble Kerala High Court decision in Gates Foam Rubber Co.'s case cited by the learned D.R. is not helpful for resolving this issue. The other decision of the Hon'ble Kerala High Court in India Sea Foods's case is also not directly on the issue because in that case the assessed income was Rs. 18,460 (ie., a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and proceeding on that premise the penalty was leviable in addition to that tax payable. The Department's argument appears to be that in the phraseology extracted above the words used are "any tax payable" which should be construed as conveying the meaning of "tax, if any, payable" rather than the "tax payable". The Department's view is that the use of the word 'any' conveys this meaning. 9. On careful consideration, we find that in spite of this argument of the Departmental penalty in a loss assessed case cannot be levied even by invoking Explanation 4 below section 271(1). On this point it is sub-clause (a) of that Explanation which is relevant and may be extracted as follows :----- " Explanation 4 : For the purposes of clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or levy of penalty and it has been held repeatedly that penalty provisions should be construed rather strictly. Further, even in the penalty provisions Explanation 4 is a sort of deeming provision and such a provision has to be construed even more strictly. Even further, Explanation 4 seeks to prescribe what is the "amount of tax sought to be evaded" which means that it seeks to put an artificial meaning on these words viz., "the amount of tax sought to be evaded". In common parlance amount of tax means amount of tax and it cannot take into its ambit a case where no tax is leviable at all. This constitutes yet another reason for a very strict construction being placed on this provision of Explanation 4. Viewed in this light it would be very ..... X X X X Extracts X X X X X X X X Extracts X X X X
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