1993 (2) TMI 120 - AT - Income Tax

Assessee's Penalty Overturned for Loss Assessment Year 1985-86

The Tribunal held that penalty under section 271(1)(c) was not applicable as the assessment resulted in a loss, overturning the penalty of Rs. 1 lakh ... Computation Of Capital, Mistake Apparent From Record Issues Involved: The judgment involves the levy of penalty u/s 271(1)(c) in a sum of Rs. 1 lakh on the assessee for the assessment year 1985-86.Details of the Judgment:1. Issue 1 - Concealment Penalty in Case of Loss Assessment: - The assessee contended that penalty under section 271(1)(c) was not applicable as the assessment resulted in a substantial loss of Rs. 9,80,397. - Cited High Court decisions and Tribunal rulings supporting the stance that penalty is not leviable when assessment shows a loss. - Highlighted that the penalty order was based on an item described as 'lease expenses' which was actually a provision for customer claims, approved by the Institute of Chartered Accountants. - Departmental Representative argued that the change in the accounting system by the assessee was not properly disclosed, justifying the penalty. - The Tribunal noted various legal precedents and concluded that penalty under section 271(1)(c) cannot be levied when the assessment results in a loss, based on a strict interpretation of the statutory provisions.2. Conclusion: - The Tribunal found that the penalty order could not be sustained as the assessment had resulted in a loss, making the penalty under section 271(1)(c) inapplicable. - Consequently, the penalty was quashed, and the assessee's appeal was allowed.