TaxTMI 
TaxTMI 
2005 (7) TMI 84
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....m business of tanning raw hides. The assessee had filed a return of income showing a profit of Rs. 3,57,454 but subsequently the same had been revised to Rs. 5,01,579. After allowing deductions under section 80HHC, even the revised return filed was at nil income. The assessing authority has also assessed the assessee at a nil income. Despite that the Assessing Officer initiated penalty proceedings, on the difference of income shown in the original return and in the subsequent revised return, the explanation of the assessee that there was no positive income even after the revised income and, thus, no penalty provisions were attracted, was not accepted and a penalty under section 271(1)(c) was imposed. Against the penalty order, the assessee filed appeal before the Commissioner of Income-tax (Appeals), which was allowed, and the penalty was deleted. The Revenue filed appeal before the Tribunal, which was rejected. The Tribunal held as follows: "We have heard the parties at length and we are of the opinion that there is no infirmity in the order of the learned Commissioner of Income-tax (Appeals). The Bombay Bench of the Tribunal in the case of Star Galvanizers v. Asstt. CIT [1990]....
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...., returned income was loss or nil and the assessee was subjected to assessment at nil income, the asses see is not absolved from penalty. In support of his contention, he relied upon the decision of the Karnataka High Court in the case of P.R. Basavappa and Sons v. CIT reported in [2000] 243 ITR 776. Learned counsel for the assessee submitted that the word "income" in Explanation 4 to section 271(1)(c) refers to positive income and unless actual tax is found to be evaded, penalty should not be levied In support of his contention, he relied upon the following decisions: (1) CIT v. Harprasad and Co. P. Ltd. reported in [1975] 99 ITR 118 (SC); (2) CIT v. India Sea Foods reported in [1976] 105 ITR 708 (Ker); (3) CIT v. Rowther Brothers reported in [1979] 119 ITR 353 (Ker); (4) Samunder Bhan Sadh v. CIT reported in [1991] 188 ITR 638 (All); (5) CIT v. Prithipal Singh and Co. reported in [2001] 249 ITR 670 (SC); and (6) Henri Isidore v. CIT reported in [1999] 240 ITR 247 (Mad). We have heard learned counsel for the parties and perused the order of the Tribunal. Section 271(1)(c) of the Act immediately prior to amendment by the Taxation Laws (Amendment) Act, 1975, ....
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....ed',- (a) in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished exceeds the total income assessed, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income; (b) in any case to which Explanation 3 applies, means the tax on the total income assessed; (c) in any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished." Section 271(1)(c) of the Act has been further amended by the Finance Act, 2002, by which clause (iii) and Explanation 4 has been modified. After the amendment section reads as follows: "(iii) in the cases referred to in clause (c) in addition to any tax, if any payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment o....
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.... sub-clause referred to as the 'beneficiary') and any sum paid by the representative assessee in respect of any obligation which, but for such payment, would have been payable by the beneficiary. (v) any sum chargeable to income tax under clauses (ii) and (iii) of section 28 or section 41 or section 59; (va) the value of any benefit or perquisite taxable under clause (iv) of section 28; (vi) any capital gains chargeable under section 45; (vii) the profits and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society, computed in accordance with section 44 or any surplus taken to be such profits and gains by virtue of provisions contained in the First Schedule; (viii) any annuity due, or commuted value of any annuity paid, under the provisions of section 280D; (ix) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever;" In the case of CIT v. India Sea Foods [1976] 105 ITR 708, the Division Bench of the Kerala High Court held that the penalty under section 271(1)(c) of the Act is leviable with re....
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....he 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) of section 271 of the Act and it clearly provides therein that the penalty or further sum payable by a person would be in addition to any tax payable by him. Explanations 3 and 4 annexed to the said provision of law also presuppose taxable income with regard to the assessment year in question. If there is no taxable income or tax assessed for payment during a particular year, the question of evasion and consequently penalty do not arise. As is obvious from annexure 'B', the assessee was assessed finally to a loss figure amounting to Rs. 34,164 as pointed out at p. 33 of the record. Thus, there was no income and so the motive to avoid tax during the year in question is completely missing. May be, it may give a benefit to the assessee in the coming year as the loss could be carried forward but, by no stretch of imagination, can it be said that, during the assessment year in question, the assessee had concealed its income. 'Income' has been define....
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.... determined penalty could not be quantified. In the case of the assessee, the assessment having been made at loss, the question of determining the amount of tax did not arise and, therefore, no penalty could be determined. When the penalty cannot be quantified, in absence of determination of tax, it goes without saying that no penalty could be imposed. Even if there were concealment, assessments having been made at loss, no penalty could be imposed." The Punjab and Haryana High Court in the case of CIT v. Varindra and Co. [2001] 71 CTR 51, which related to the assessment year 1990-91 followed the earlier decision in the case of CIT v. Prithipal Singh and Co. [1990] 183 ITR 69 and has further held that the decision of the apex court in the case of Prithipal Singh and Co [2001] 249 ITR 670 is also applicable to the assessment year 1990-91 and the penalty cannot be levied where the assessed income is loss. It may be mentioned here that after the amendment in clause (iii) and Explanation 4 to section 271(1)(c) by the Finance Act, 2002, there is no manner of doubt that the penalty is leviable even in cases where no tax is payable and if income is assessed at a loss in respect of t....
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....ore the amendment by the Finance Act, 1993, which read as follows: "(1A)(a) Where, in the case of any person, the total income, as a result of the adjustments made under the first proviso to clause (a) of sub-section (1), exceeds the total income declared in the return by any amount, the Assessing Officer shall,- (i) further increase the amount of tax payable under sub-section (1) by an additional income-tax calculated at the rate of twenty per cent of the tax payable on such excess amount and specify the additional income-tax in the intimation to be sent under sub-clause (1) of clause (a) of sub-section (1)." The issue whether the additional tax could be levied where the assessed income is loss as per the above provision of section 143(1A), came up for consideration before this court in the case of Indo-Gulf Fertilizers and Chemicals Corporation Ltd. v. Union of India [1992] 195 ITR 485. This court relying upon the decision in the case of CIT v. Prithipal Singh and Co. [1990] 183 ITR 69 (P & H) held that the same principle would apply in the case of an order imposing additional income-tax. This court held as follows: "We feel that the same principle would apply in the ....