2002 (8) TMI 37 - HC - Income Tax

Jurisdiction To Levy Penalty - whether on the facts and in the circumstances of the case the Appellate Tribunal was right in upholding the order of the Inspecting Assistant Commissioner imposing penalty under section 271(1)(c) having held that the law for the levy of the penalty is as it stood on the date when the penalty was imposed that is as amended with effect from April 1 1976. The first question is answered against the assessee and in favour of the Revenue. - whether on the facts and in the circumstances of the case the Appellate Tribunal was right in law in holding that the penalty under section 271(1)(c)(iii) is imposable even though the assessment for the year has resulted in a net loss and there is no total income assessed for the year and there is no tax payable thereon. The second question referred to us is answered in favour of the assessee and against the Revenue.

Summary

Issues:
1. Imposition of penalty under section 271(1)(c) for assessment years 1972-73 and 1973-74.
2. Imposition of penalty under section 271(1)(c)(iii) for the assessment year 1973-74 when there is a net loss and no tax payable.

Issue 1: Imposition of penalty under section 271(1)(c) for assessment years 1972-73 and 1973-74:
The first issue addressed in the judgment pertains to the imposition of a penalty under section 271(1)(c) for the assessment years 1972-73 and 1973-74. The court referred to a Supreme Court ruling in the case of CIT v. Smt. R. Sharadamma [1996] 219 ITR 671, which established that the Inspecting Assistant Commissioner retains jurisdiction to continue proceedings even after the deletion of sub-section (2) of section 274 by the Taxation Laws (Amendment) Act, 1975. The court held that the penalty imposed by the Commissioner post the deletion of the sub-section was within his jurisdiction. Therefore, the court ruled in favor of the Revenue, upholding the penalty imposed under section 271(1)(c).

Issue 2: Imposition of penalty under section 271(1)(c)(iii) for the assessment year 1973-74 when there is a net loss and no tax payable:
The second issue raised in the judgment concerns the imposition of a penalty under section 271(1)(c)(iii) for the assessment year 1973-74, despite there being a net loss and no tax payable by the assessee. The court referenced various precedents, including the case of Addl. CIT v. Murugan Timber Depot [1978] 113 ITR 99, which highlighted that penalties under section 271(1)(c) are contingent upon the tax payable by the assessee. The court emphasized that penalties are not applicable when no tax is payable, as evident in cases like CIT v. C.R. Niranjan [1991] 187 ITR 280 and CIT v. Prithipal Singh and Co. [1990] 183 ITR 69. The court further cited the decision of the Supreme Court in CIT v. Prithipal Singh and Co. [2001] 249 ITR 670, which dismissed an appeal against the judgment of the Punjab and Haryana High Court, reinforcing the principle that penalties are not exigible on losses. Consequently, the court ruled in favor of the assessee, stating that penalties cannot be levied when the assessment results in a net loss and no tax is payable.

In conclusion, the judgment addressed the imposition of penalties under section 271(1)(c) for different assessment years, emphasizing the importance of tax liability in determining the applicability of penalties. The court's analysis of relevant precedents and legal principles led to rulings in favor of the Revenue for one issue and in favor of the assessee for the other, based on the specific circumstances and tax implications involved in each case.