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Issues:
Penalty under section 271(1)(c) for alleged concealment of income based on estimated calculations and unexplained gaps in billed kilometres. Legal issue of whether penalty is leviable when assessed income results in a loss. Analysis: 1. The appeal concerns the imposition of a penalty of Rs. 1,77,290 by the Assessing Officer under section 271(1)(c), which was later cancelled by the CIT(A). The dispute revolves around the assessment year 1994-95 and pertains to an addition of Rs. 3,08,329 made by the Assessing Officer due to discrepancies in billed kilometres for trucks owned by the assessee. The Assessing Officer presumed an average rate per kilometre and calculated a mileage gap of 1,84,735 kms. The assessee's explanations for the gap, such as breakdowns, repairs, and detours, were not supported by evidence, leading to the reduction of the loss to Rs. 9,897 and the subsequent imposition of the penalty. 2. The CIT(A) accepted the assessee's contentions that the addition was made on an estimate basis and that there was no concealment of income. Citing various legal precedents, the CIT(A) cancelled the penalty levied by the Assessing Officer. The Revenue, aggrieved by this decision, argued that the Assessing Officer had thoroughly examined the case and established that the excess kilometres were not billed, indicating concealment of income. The Revenue contended that since the assessed income resulted in a loss, penalty under section 271(1)(c) should be levied. 3. The legal issue at hand was whether penalty is leviable when the assessed income is a loss. The Revenue relied on a decision by the Karnataka High Court regarding the applicability of Explanation 4 to section 271(1)(c) in cases where additions reduce assessed losses. The assessee, on the other hand, argued that the Assessing Officer's assumptions regarding mileage were unfounded, and the assessed income being a loss had no tax effect. Citing relevant legal precedents, the assessee maintained that no concealment of income was established, justifying the CIT(A)'s decision to cancel the penalty. 4. The Tribunal carefully considered the arguments presented and reviewed the legal precedents cited by both parties. It noted that the Punjab and Haryana High Court had held that penalty is not leviable when the assessment results in a loss figure, a position affirmed by the Supreme Court. The Tribunal also observed that the Legislature had not amended the relevant provisions to allow for penalties in cases of assessed losses. Additionally, it found that the Revenue had not proven concealment of income and that the assessee's explanations were not false. Consequently, the Tribunal held that penalty was not leviable due to the assessed figure being a loss and dismissed the appeal filed by the Revenue.
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