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TMI Blog2008 (8) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... JUDGMENT Dr. ARIJIT PASAYAT, J. 1. Leave granted. 2. Expressing doubt about the correctness of the judgment rendered by a Division Bench of this Court in Virtual Soft Systems Ltd. V. Commissioner of Income Tax, Delhi (2007 (9) SCC 665), a reference has been made by another Division Bench by order dated 7.4.2008 to a larger Bench. The question which was decided in Virtual's case (supra) was as to whether the penalty under Section 271 (1) (c) of the Income Tax Act, 1961 (in short the `Act') can be levied if the returned income is a loss. This question has to be considered in the background of the amendment made by Finance Act, 2002 (in short `Finance Act') w.e.f. 1.4.2003 in Explanation 4 to Section 271(1)(c)(iii) of the Act. In Virtual's case (supra) the department placed reliance on Notes on Clauses relating to the aforesaid amendment to submit that the amendment was clarificatory in nature and consequentially it was applicable retrospectively. This argument was rejected by this Court in para 52 of the judgment. The Division Bench while making reference was of the view that the true effect of the amendment was not considered, as it was prima facie of the view that merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Singh Co. (1990 (183) ITR 69). It is pointed out that the revenue's appeal before this Court was dismissed in Commissioner of Income Tax v. Prithipal Singh and Ors. (2001 (249) ITR 670). It is submitted that there is nothing in Section 271(1) (c) as amended by Finance Act to suggest that the amendment is retrospective. The amendment and the Explanation 4(a) carried out, enlarged the scope for levying penalty under Section 271(1) (c) and, therefore, does not operate retrospectively and is applicable only w.e.f. 1.4.2003. The relevant portion in the Finance Act relating to amendment reads as follows: "Section 271 of the Income Tax Act provides that the assessing Officer or the Commissioner (Appeals) shall levy penalty in cases of failure to comply with certain notices issued in the course of assessment proceedings and cases in which particulars of income have been concealed or inaccurate particulars furnished. It is proposed to amend the section to include a reference to the Commissioner as being an authority who can initiate any levy penalty under sub-section (1) of the said section. Similar reference is proposed to be made in Explanation 1 and Explanation 7 to the said s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Commissioner of Income Tax (Central), Delhi v. Harprasad Co. P. Ltd. (1975 (99) ITR 118). This Court held with reference to the charging provisions of the statute that the expression `income' should be understood to include losses. The expression `profits and gains' refers to positive income whereas losses represent negative profit or in other words minus income. This aspect does not appear to have been noticed by the Bench in Virtual's case (supra). Reference to the order by this Court dismissing the revenue's Civil Appeal No.7961 of 1996 in Commissioner of Income Tax v. Prithipal Singh and Co. is also not very important because that was in relation to the assessment year 1970-71 when Explanation 4 to Section 271(1) ((c) was not in existence. The view of this Court in Harprasad's case (supra) leads to the irresistible conclusion that income also includes losses. Explanation 4 (a) as it stood during the period 1.4.1976 to 1.4.2003 has to be considered in the background. 8. It appears that what the Finance Act intended was to make the position explicit which otherwise was implied. The recommendations of the Wanchoo Committee pursuant to which Explanation 4(a) was inserted w. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e" is read to include losses as held in Harprasad's case (supra) it becomes crystal clear that even in a case where on account of addition of concealed income the returned loss stands reduced and even if the final assessed income is a loss, still penalty was leviable thereon even during the period 1.4.1976 to 1.4.2003. Even in the Circular dated 24.7.1976, referred to above, the position was clarified by Central Bureau of Direct Taxes (in short `CBDT'). It is stated that in a case where on setting of the concealed income against any loss incurred by the assessee under any other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure the penalty would be imposable because in such a case "the tax sought to be evaded" will be tax chargeable on concealed income as if it is "total income". 12. Law is well settled that the applicable provision would be the law as it existed on the date of the filing of the return. It is of relevance to note that when any loss is returned in any return it need not necessarily be the loss of the concerned previous year. It may also include carried forward los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks to cut down that exemption to a limited extent, namely whenever there is a policy of insurance in respect whereof periodical premia are payable for a duration of less than 10 years, then in such a case a proportionate exemption specified therein will be available to the assessee irrespective of what type of policy it is; the proviso has no other effect. That such was the object or purpose of inserting the proviso will be clear if regard is had to relevant part of Notes on clauses accompanying the Bill and the relevant portion of the speech of the Finance Minister while introducing the Bill. We were taken through the relevant portions of Notes and clauses [vide 93 ITR 125 (Statutes)] and the speech of the Hon'ble Finance Minister while introducing the Bill [vide 93 ITR 74 (Statutes)] and in our view far from supporting the contention of counsel for the Revenue these lend support to the view which we have just expressed. The relevant portion of "Notes on clauses" states that, "under this amendment (the insertion of proviso) the value of the taxpayer's right or interest in a policy of insurance will be exempt from tax only if the premia are payable over a period of ten years or mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language `shall be deemed always to have meant' or 'shall be deemed never to have included'' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law when the constitution came into force, the amending Act also will be part of the existing law." 16. In Zile Singh v. State of Haryana and Ors. (2004 (8) SCC 1), it was observed as follows: "13. It is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. But the rule in general is applicable where the object of the statute ..... X X X X Extracts X X X X X X X X Extracts X X X X
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