2010 (4) TMI 44 - HC - Income Tax

Delay in filing an appeal by revenue delay of 517 days held that - The view taken by the Supreme Court in Gold Coin Health Food Pvt. Ltd 2008 -TMI - 30245 - SUPREME COURT was that when there was a loss return filed by the assessee and the Assessing Officer determined a loss but at a reduced figure the assessee would be liable for penalty under Section 271(1)(c) provided the conditions specified therein are satisfied. It is after the decision of the Supreme Court in Gold Coin Health Food (2008 -TMI - 30245 - SUPREME COURT) that the department has woken up and has decided to file this appeal after a delay of 517 days. There is no other reason given for the delay in filing of the appeal. no sufficient cause for condoning the delay in filing the appeal inasmuch as the order of the tribunal dated 26.10.2007 had attained finality decided in favor of assessee

Summary

Issues:
1. Imposition of penalty when income determined is a loss.
2. Delay in filing the appeal.

Analysis:

Issue 1: Imposition of penalty when income determined is a loss
The judgment deals with the issue of whether a penalty under Section 271(1)(c) can be imposed when the income determined is a loss. Initially, the Supreme Court held in Virtual Soft Systems Ltd v. Commissioner of Income-tax that penalty could only be imposed if there was a positive income determined in the case of a returned loss. The tribunal ruled in favor of the assessee following the Virtual Soft decision. However, a larger Bench of the Supreme Court in Commissioner of Income-tax v. Gold Coin Health Food Pvt. Ltd took a different view, stating that an assessee would be liable for penalty under Section 271(1)(c) even if a loss was determined by the Assessing Officer, provided the specified conditions were met. The department filed an appeal after a delay of 517 days following the Gold Coin Health Food decision. The court rejected the application for condonation of delay, emphasizing that the tribunal's order had attained finality based on the earlier Supreme Court decision. Consequently, the appeal was dismissed.

Issue 2: Delay in filing the appeal
The court addressed the delay of 517 days in filing the appeal. It was noted that the department decided to appeal only after the Supreme Court's decision in Gold Coin Health Food, which changed the interpretation of when a penalty could be imposed on a loss return. The court found that the department's delay in filing the appeal was not sufficient cause for condonation, especially considering that the tribunal's decision had already been finalized based on the earlier Supreme Court ruling. Therefore, the court rejected the application for condonation of delay and dismissed the appeal on this ground.

In conclusion, the judgment clarifies the circumstances under which a penalty can be imposed when income is determined as a loss and emphasizes the importance of timely filing appeals in tax matters to avoid delays based on changing legal interpretations.