TaxTMI 
TaxTMI 
1989 (10) TMI 234
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....ed on 27th August, 1983 in which the business loss was assessed by the ITO for aforesaid year at Rs. 1,58,66,401. In addition to this unabsorbed depreciation pertaining to the year under consideration which was also eligible for being set off in subsequent years was determined by the ITO at Rs. 1,15,87,621. Thus the total amount of business of loss and unabsorbed depreciation pertaining to the year under consideration had been determined At Rs. 2,74,54,022 by the ITO. The assessee is also entitled to carry forward of past unabsorbed business loss, unabsorbed depreciation and development rebate for various years as per details mentioned in the assessment order for the year under consideration which is reproduced here under : Assessment year Business loss Deprn. Dev. Rebate Total 1973-74 - - 33,16,145 33,16,145 1976-77 - Rs. 6,96,853 - 696853 1978-79 - Rs. 67,83,671 - 6783671 1979-80 4,41,059 Rs. 1,40,62,064 - 1,45,03,123 2.2 During the year under consideration the assessee has debited in the trading account the sum of Rs. 9,64,46,340 as purchase price of 7,42,717 matric tonnes of ....
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....s for supply of sugarcane grown by them by was sanctioned by the managing Committee at the rate or Rs. 137 per mt. He also invited our attention to wards resolution dated 25th November 1979 passed by the managing Committee of the aforesaid society in which it was decided that last year the assessee had distributed 10 per cent dividend per share and this year they intend to distribute dividend at the rate of 12 per cent. In order to pay such dividend at the rate of 12 per cent it was further decided that dividend contribution at the rate of Rs. 1.75 per M.T. be collected from the Members who had supplied sugarcane to the assessee for such Shareholders Dividend fund and accordingly the amount of Rs. 12,88,165 was debited in the account of Members against the amount payable to them for sugarcane supplied by them and the same amount was credited in the "Shareholders Dividend Account Fund". This recommendation of the Managing Committee was approved in the General Meeting of the Society held on 30th December1979. He further contended that in the immediately preceding year, similar addition at Rs. 11,93,246 was made by the ITO and that too was not contested by the assessee in the precedin....
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....d by such person if such explanation is bona fide and all the facts relating to the same and material to the computation of its total income have been disclosed by him. It was contended that the assessee's case is clearly covered by the aforesaid proviso which supports that no penalty could be validly imposed under the fact and circumstances of the assessee's case. The learned counsel also invited our attention to wards Explanation 4 to section 271 (1) (c) by resort to which the ITO has imposed the aforesaid penalty of Rs. 6,50,000. He contended that Explanation 4 (a) can be applied only in case where there is a positive income assessed and cannot be applied where the assessee has been made at a loss figure. He relied upon the decision of ITAT Ahmedabad Bench in the case of PATEL SABAR PVT LTD. v. ITO (1986) 26 TTJ (Ahd) 89 and also relied upon the decision of ITAT Chandigarh Bench in the case of SUDHA PHARMACEUTICALS PVT LTD. (1983) 17 TTJ (Chd) 518. He contended that the decision of ITAT Chandigarh bench is directly applicable in the case of the assessee In that case it was held by the tribunal that no penalty is leviable under section 271 (1) (c) if no tax is payable by the asse....
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....ion 271 (1) (c) should be given full effect and penalty imposed by the appellant should be sustained. He further contended that the ITO has computed the amount of penalty amounting to Rs. 6,50,00 treating the amount of aforesaid addition of Rs. 12,88,165 as the total concealed income as per Explanation 4 to section 271 (1) (c). He argued that in view of Explanation 4 the penalty under section 271 (1) (c) can be levied even when there is an assessed loss. It is not necessary that for invoking the Explanation 4 to section 271 (1) (c), there should be a positive figure of income assessed. In this connection, he invited our attention towards Commentary of Income-tax Law by Chaturvedi at page 4943 in which the scope and purpose of inserting Explanation 4 to section 271 (1) (c) has been explained as under: "This portion of definition has application to cases where the amount of income in respect to which the particulars have been concealed or in accurate particulars have been furnished exceeds the total income assessed. In such cases the base for quantum would be the tax that would have been chargeable on the income concealed, etc, had such income been the total income and not on the ....
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.... as per assessment order passed by the ITO for the year under consideration is Rs. 5,27,53,814. In view of these it is amazing to presume that the assessee would have been gained by deliberately making any such false claim of excess purchase price amounting to Rs. 12,88,165 The motive of any tax evasion or any attempt to defraud the Revenue is apparently absent in the present case as there are no prospects in the near future of any profits beyond the huge amount of assessed loss of more than five crores as per the assessment order for the year under consideration. The statement made by the learned counsel during the course of hearing that the assessee society continued to incur heavy losses in all the subsequent years further proves the absence of any guilty intention on the part of the assessee to defraud Revenue while making the aforesaid entry of Rs. 12,88,165 The said entry was made in accordance with the Resolutions passed by the Managing Committee of the society which were subsequently confirmed by the General Meeting of the society. Such entries were made by the society in a bona fide manner only with a view to find out away to pay dividend to its Members despite constant hu....
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....ect that the assessee shall pay be way of penalty a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of concealment of particulars of his income or furnishing of inaccurate particulars of such income. The Honble Supreme Court in the case of Commissioner v. VEGETABLE PRODUCTS LTD. Mentioned supra, succinctly points out the difference between the tax payable and the tax assessed. This judgment was delivered on 28th January 1973. Thereafter, clause (iii) referred to supra, came as a substitute for the original clause by the Taxation laws (Amendment) Act, 1975 with effect from 1st April 1976. The Hon'ble Court has pointed out that the tax payable is an amount for which a demand notice is issued under section 156 of the Income-tax Act 1961. When we see the case of the assessee in this context, we find that total income assessed was a loss of Rs. 2,08,193 to be carried forward. Even if it is conceded that total income can be a negative figure, we cannot concede to the proposition that income assessed can be a negative figure. The question of assessment will arise only when it is a positive figure and then tax will bec....