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TMI Blog1998 (8) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 62,557 shall be included in 'nil' income in respect of which penalty proceedings under section 271(1)(c) were also initiated. 3. In response to show-cause notice, no compliance was made. The Assessing Officer, therefore, imposed the impugned penalty. Aggrieved thereby, the assessee carried the matter in appeal. 4. Before the CIT(A), it was contended that penalty proceedings are separate than assessment proceedings and merits of each addition should be considered on the basis of evidence that may be filed in the course of penalty proceedings. Copy of account of M/s. Pharma Distributors in the books of the assessee-company was filed. This showed the dates on which amounts were advanced by them to the assessee on which the assessee paid interest to them. It was argued that an amount of Rs. 94,057 was paid towards interest. It was pointed out that no partner of the said concern is related to any of the Directors of the assessee-company. As regards the new loans taken during the year it was submitted that most of them are old creditors and are Directors or their relatives, who are income-tax payers and whose identity is established. It was argued that the assessment was made e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laring loss of Rs. 2 lacs. The Assessing Officer had completed the assessment ex parte on total income of Rs. 50,000. It was held by the revenue authorities that the income concealed was Rs. 2,50,000. When the matter went before the Tribunal, the tribunal held that for the purposes of penalty under section 271(1)(c) the income concealed was the income actually determined i.e. Rs. 50,000 and reduced the penalty to Rs. 50,000 from Rs. 2,50,000. At the instance of the revenue, the Tribunal granted reference and referred the following question for the opinion of the Hon'ble High Court. "Whether on the facts and in the circumstances of the case, the income concealed was Rs. 2,50,000 or Rs. 50,000 and whether the Tribunal was justified in law in reducing the quantum of penalty from Rs. 2,50,000 to Rs. 50,000 ?" The Hon'ble High Court found that the crucial words in clause (iii) of section 271(1) are 'the amount of the income". According to the Court "income" even in its broadest connotation refers to monetary return "coming in" and is conceptually contradictory to "loss". The Court went on to observe further that section 4 of the Act taxes income and not loss. The contention that a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the names of certain creditors aggregating Rs. 5,78,937 in respect of which even confirmatory letters had not been filed and disallowance of Rs. 62,557 out of interest account on ground of excessive claim. The Assessing Officer eventually imposed the impugned penalty with reference to the above two amounts. Perusal of the penalty order would go to reveal that he has passed the order on 28-9-92 on which date itself the assessee had filed written explanation (copy at P.P. 1-2A of the assessee's compilation) which apparently has not been considered by the Assessing Officer in the penalty order. Even assuming that by the time the assessee's explanation reached the Assessing Officer, he had already passed the order, it is not in dispute that before the CIT(A) detailed explanation at 24-2-93 (copy at P.P. 3-7 of the assessee's paper book) was furnished. It is by now well established that the explanation can be offered by the assessee before the appellate authorities if explanation has not been offered before the Assessing Officer. The fact remains that the Assessing Officer imposed the impugned penalty solely on the basis of his findings recorded in ex parte assessment order. It has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the amount of income concealed. True, even in a case where the assessee has returned loss, the concealment penalty can be imposed on the basis of tax sought to be evaded on the amount of concealed income. But before proceeding to levy concealment penalty by invoking Explanation 4(a) there should be positive finding of concealment of income by the revenue which in the case before us is lacking. The burden which lay on the Assessing Officer to record the finding that there was concealment by bringing on record relevant material during penalty proceedings had not been discharged. We, therefore, reject the contention of Shri Brijesh Gupta, the ld. D.R., that Explanation 4(a) is applicable to the facts of the assessee's case. 10. It is an admitted position that loss of Rs. 10,69,191 has been reduced to 'nil'. In other words, no taxable income was computed. In a case where the declared loss was substantially reduced on assessment, the question of levy of concealment penalty in the context of Explanations 3 4 to section 271(1) came up for consideration before Punjab Haryana High Court in Prithipal Singh Co. 's case (supra) wherein their lordships held as under : "The word "in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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