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TMI Blog2001 (12) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals), the Revenue preferred an appeal before the Tribunal which found no justification in the action of the learned CIT(A) deleting the entire additions and proceeded to sustain the addition to the extent of gross profit @ 20 per cent on the suppressed sale of Rs. 4,28,879 which was worked out to Rs. 85,776. The Assessing Officer treated this addition sustained by the ITAT as concealment of income by the assessee and imposed penalty in respect of the same under section 271(1)(c). The matter was carried before the learned CIT (Appeals) who deleted the penalty imposed by the Assessing Officer observing that no penalty can be imposed in this case since both the returned as well as finally assessed figures are negative. Aggrieved by the same, the Revenue is in appeal before us. 3. The learned Departmental Representative submitted before us that the penalty in this case was imposed by the Assessing Officer under section 271(1)(c) in respect of additions sustained by the Tribunal in the quantum proceedings considering that the finding given by him on the issue of suppression of sale stood confirmed by the Tribunal. He contended that the learned CIT (Appeals), however, deleted the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to levy the additional tax in the cases where the loss declared in the return has been reduced as a result of the adjustment made under section 143(1)(a) also, the said section 143(1A) was amended by the Finance Act, 1992 with retrospective effect from 1-4-1989 by substituting clause (a) in the said section to provide specifically that the additional tax shall be levied even in the cases where as a result of the adjustments made under section 143(1)(a), the loss declared by the assessee in the return is reduced or is converted into income. His contention, therefore, was that had the intention of the Legislature been to levy the concealment penalty in the cases of determined loss also, similar amendment to this effect would have been made to section 271(1)(c) also and the same having not been made by the law-makers, it is quite clear that there is no legislative intention to levy the penalty for concealment of negative income. 5. Referring to the decision of Hon'ble Madhya Pradesh High Court reported in CIT v. Jaora Oil Mill [1981] 129 ITR 423 and that of Madras High Court reported in CIT v. CR. Niranjan [1991] 187 ITR 280, the learned counsel for the assessee emphasised that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. [2001] 249 ITR 670 and, therefore, the issue under consideration has reached its finality. He also submitted that the Hon'ble Punjab Haryana High Court has also followed its decision in Prithipal Singh Co.'s case in its subsequent judgment delivered in the case of CIT v. Varindra Co. [2001] 118 Taxman 946 (Punj. Har.) wherein the assessment year involved was 1990-91, i.e., after the insertion of Explanation 4 to section 271 (1)(c). 7. The learned counsel for the assessee submitted that the decision of Hon'ble Karnataka High Court in the case of P.R. Basavappa Sons was cited by the learned Departmental Representative before this Bench in the case of ACIT v. Guru Storage Batteries, Nagpur involving assessment year 1995-96 and after taking into consideration the contrary view expressed by Hon'ble Punjab Haryana High Court in the case of Prithipal Singh Co. and also by Hon'ble Kerala High Court in the case of CIT v. N. Krishnan [1999] 240 ITR 47 on the similar issue the Tribunal preferred to follow the view taken in favour of the assessee and cancelled the penalty imposed under section 271(1)(c) vide its order dated 9-11-2000 in ITA No. 611/Nag./98. He, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the insertion of Explanation 4 in section 271(1)(c). Similarly the Hon'ble Kerala High Court in the case of N. Krishnan involving assessment year 1978-79 i.e. after the insertion of Explanation 4 to section 271(1)(c) held that where assessment is made at loss, tax cannot be determined as also penalty under section 271(1)(c) based on the same cannot be quantified and, therefore, no penalty can be imposed in the case where the assessed income is loss even if there was concealment. It is thus clear that the different High Courts have expressed contrary opinions on the issue of levy of concealment penalty in the case of reduction of loss in the assessments and in these circumstances, the Tribunal is bound to follow the view which is favourable to the assessee, as has been done by this Bench in the case of Guru Storage Batteries. 9. To make out the legislative intention of levying penalty under section 271(1)(c) only in respect of concealment of positive income very clear, the learned counsel for the assessee has compared the provisions of section 271(1)(c) with the provisions of section 143(1A) dealing with the levy of additional tax. In this regard, he has referred to Explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the return is increased; or (ii) the loss declared by such person in the return is reduced or is converted into income, the Assessing Officer shall,- (A) in a case where the increase in income under sub-clause (i) of this clause has increased the total income of such person, further increase the amount of tax payable under sub-section (1) by an additional income-tax calculated at the rate of twenty per cent on the difference between the tax on the total income so increased and the tax that would have been chargeable had such total income been reduced by the amount of adjustments and specify the additional income-tax in the intimation to be sent under sub clause (i) of clause (a) of sub-section (1); (B) in a case where the loss so declared is reduced under sub-clause (ii) of this clause or the aforesaid adjustments have the effect of converting that loss into income, calculate the sum (hereinafter referred to as additional income-tax) equal to twenty per cent of the tax that would have been chargeable on the amount of the adjustments as if it had been the total income of such person and specify the additional income-tax so calculated in the intimation to be sent under su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case where only loss has been reduced as a result of assessment, the assessee cannot be said to have concealed any income which would have attracted liability to tax. The Hon'ble High Court, therefore, proceeded to hold to that the question of imposition of penalty in such case did not arise because penalty is a deterrent measure to prevent evasion of tax and when there was no tax payable, there could not be any such evasion so as to provide a scope for levying any penalty. It is pertinent to note here that the said decision of the Hon'ble Punjab Haryana High Court in the case of Prithipal Singh Co. has been affirmed by the Hon'ble Supreme Court vide its judgment reported in Prithipal Singh Co.'s case. In these circumstances, even if it is assumed for the sake of arguments that the Prithipal Singh Co.'s case was related to assessment year 1970-71 i.e. prior to the date of insertion of Explanation 4 to section 271(1)(c) with effect from 1-4-1976 and that the purpose of said Explanation, as mentioned in para 61.11 of Circular No. 204 dated 24-7-1976 issued by the CBDT is to cover the cases where even after the relevant additions, the assessed income is still a loss, then i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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