2001 (12) TMI 530

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....89, the assessee had filed his return declaring a loss of Rs. 3,86,980. The Assessing Officer had completed a best judgment assessment. He observed that the loss had arisen mainly due to claim for interest on borrowings. He further observed that the loans in the context of which the interest had been claimed were not accepted as genuine and were assessed as assessee's income from undisclosed sources. On that basis, he disallowed the assessee's claim for interest of Rs. 3,86,175 and completed the assessment on a total income of Rs. 800. For the assessment year 1989-90, the assessee had filed return declaring a loss of Rs. 4,22,800 and for the same reasons as were given in the assessment order for the assessment year 1988-89, the Assessing Of....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....nterest was disallowed is yet to be examined, the ld. counsel for the assessee submitted that in the circumstances of the case, no penalty under section 271(1)(c) of the Act was legally imposable. He pointed out that in both the years, returns were filed declaring loss and the assessments were completed on incomes below taxable limit. Hence, no tax was payable by the assessee. Relying on the decision of the Punjab & Haryana High Court in the case of CIT v. Prithipal Singh & Co. [1990] 183 ITR 70, affirmed by the Apex Court in the decision reported in CIT v. Prithipal Singh & Co. [2001] 249 ITR 670, it was submitted that penalty order deserved to be cancelled. In this very connection, reliance was also placed on the Punjab & Haryana High Cou....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....h is affirmed by the Apex Court. 8. As regards the plea of the ld. DR that the decision of the Punjab & Haryana High Court in the case of Prithipal Singh & Co. (supra) related to period before insertion of Explanation 4 to section 271(1)(c), I may point out that the said explanation merely defines the term "the amount of tax sought to be evaded." In this connection, it would be relevant to extract below the observations of the Hon'ble High Court at page 71 :- "Penalty impose is paid in addition to the tax payable. When there is no tax payable, the question of any penalty does not arise. In fact, evasion of tax is the sine qua non for imposition of penalty. Clause (iii) deals with cases referred to in clause (c) under sub-section (1) o....