Penalty under section 271(1)(c) applies even when assessed income is a loss and returned loss is reduced.

Penalty under section 271(1)(c) of the Income-tax Act, 1961 is leviable even where the assessed income is a loss and the returned loss is reduced in assessment. The governing principle treated the levy as not dependent on positive taxable income, and the relevant amendment to section 271(1)(c) was regarded as retrospective. On that basis, cancellation of penalty solely because both the returned and assessed figures were losses was unsustainable.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 can be imposed where the assessed income is a loss and the returned loss is reduced in final assessment.

Analysis: The governing principle was already settled that penalty may be levied even where no tax is payable on the assessed income, and the amendment to section 271(1)(c) had been treated as retrospective in operation. On that basis, cancellation of penalty merely because the returned income and assessed income were both losses was held to be unsustainable.

Conclusion: Penalty under section 271(1)(c) of the Income-tax Act, 1961 is leviable even when the assessed income results in a loss and the return loss is reduced in assessment.

Ratio Decidendi: A penalty under section 271(1)(c) is not barred merely because the assessed income is a loss, if the statutory amendment governing the levy operates retrospectively.

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