Applicability of s.271(1)(c) penalty where assessment recomputes taxpayer's total income as nil and penalty quashed

Whether penalty under s.271(1)(c) could be levied where AO, pursuant to CIT(A) order, recomputed total income at nil. Reasoning: s.271(1)(c) applies to concealment of income or furnishing inaccurate particulars; where AO's own revised assessment records the assessee's income as nil, there is no concealed income or inaccurate particulars to sustain penal liability. Outcome: penalty under s.271(1)(c) quashed and not sustainable.

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Issues: Whether penalty under Section 271(1)(c) of the Income-tax Act, 1961 can be sustained where, following appellate orders reducing/addjusting additions and allowing set-off of business loss, the assessee's total income is recomputed at nil.

Analysis: The appellate recomputation shows that additions made by the Assessing Officer were reduced and set-off of business loss was allowed, resulting in revised total income of nil for the relevant assessment years. The penalty proceedings under Section 271(1)(c) were initiated by the Assessing Officer based on alleged concealment or furnishing of inaccurate particulars corresponding to the additions. The recomputation to nil income on account of allowances and set-off directly affects the basis on which penalty under Section 271(1)(c) could be imposed. When the taxable income for the year is recomputed to nil, there is no resultant concealed income or taxable discrepancy to sustain a penalty under Section 271(1)(c).

Conclusion: Penalty under Section 271(1)(c) cannot be sustained where the assessee's income is recomputed to nil by appellate order; therefore the penalties imposed for the relevant assessment years are deleted in favour of the assessee.

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