<h1>Supreme Court: Section 271(1)(c) Penalties Apply to Loss Returns Retroactively Post-2003; Overrules Virtual Soft Systems Ruling.</h1> The Supreme Court ruled that penalties under Section 271(1)(c) of the Income Tax Act can be imposed even if the returned income is a loss, following the amendment by the Finance Act, 2002, which applies retrospectively from March 1, 2003. The Court clarified that Explanation 4 to this section is clarificatory, not substantive. The decision overruled a previous ruling in the case of Virtual Soft Systems Ltd., which stated that penalties could not be levied without positive income. The Court emphasized that retrospective application depends on legislative intent, inferred from the statute's language and context.