2009 (7) TMI 143 - HC - Income Tax

Penalty for concealment of income - The assessee filed a return of loss. The Assessing Officer while determining the net income to be nil, made additions to the returned income. - Assessing Officer initiated penalty proceedings in respect of the additions whether penalty can be imposed even if no positive income is there Held, yes

Summary

The High Court of Punjab and Haryana, in the 2009 judgment, was presided over by Adarsh Kumar Goel and Mrs. Daya Chaudhary JJ. The Revenue appealed under section 260A of the Income-tax Act, 1961, against a 2007 order by the Income-tax Appellate Tribunal for the assessment year 1995-96. The substantial questions of law raised included the application of a judgment in Virtual Soft Systems Limited v. CIT [2007] 289 ITR 83 (SC) after the insertion of Explanation 4 to section 271(1)(c) of the Income-tax Act, 1961, and the deletion of penalty under section 271(1)(c) due to the total income of the assessee being assessed at a loss figure.

The assessee filed a return of loss, and the Assessing Officer made additions to the returned income, which were subsequently deleted by the Commissioner of Income-tax (Appeals). Penalty proceedings were initiated by the Assessing Officer, but the Commissioner of Income-tax (Appeals) set aside the penalty, a decision upheld by the Tribunal. The Tribunal relied on the judgment in Virtual Soft Systems Limited [2007] 289 ITR 83 (SC), stating that in the absence of positive income and tax being attracted, a penalty for concealment could not be levied.

The Revenue argued that the Virtual Soft Systems Limited judgment had been overruled by a subsequent Supreme Court judgment in CIT v. Gold Coin Health Food Private Limited [2008] 304 ITR 308. Consequently, the High Court ruled in favor of the Revenue, setting aside the Tribunal's view and remanding the matter for further consideration on remaining points. The appeal was ultimately disposed of.