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TMI Blog2007 (9) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... d income was nil because of adjustment of brought forward losses or for any other reason - 1458 and 1690 of 2006 - - - Dated:- 17-9-2007 - Madan B. Lokur and Dr. S. Muralidhar JJ. JUDGMENT These appeals under section 260A of the Income Act, 1961 ("Act") are directed against the common order dated March 1, 2006, passed by the Income-tax Appellate Tribunal ("Tribunal"), Delhi Bench "D", New Delhi, in I. T. A. No. 1568/Del/2001 and C. O. No. 112/Del/2005 for the assessment year 1996-97 concerning the penalty proceedings under section 271(1)(c) of the Act. The assessee filed a return on November 30, 1996, declaring a loss of Rs. 2,72,12,620. In the course of assessment proceedings it was noticed that although the assessee had exclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parately." Following this a penalty notice was issued to the assessee on March 8, 1999. The assessee had requested the penalty proceedings to be kept in abeyance since it had filed a quantum appeal. After the quantum appeal of the assessee was dismissed by the Commissioner of Income-tax (Appeals) ("CIT(A)") on January 24, 2000, the Assessing Officer on July 21, 2000, issued an order under section 271(1)(c) of the Act imposing a penalty of Rs. 4,43,28,488 on the assessee. The appeal by the assessee was allowed by the Commissioner (Appeals) by on order dated January 31, 2001. The Commissioner (Appeals) held that since the tax payable on the total income as assessed was nil, there was no positive income and, therefore, the penalty could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round that in the said case the adjustment of unabsorbed depreciation of the previous years resulted in a negative income whereas in the present case the brought forward losses of earlier years was adjusted to result in nil income. Appearing for the assessee, Mr. Ajay Vohra, learned advocate drew our attention to the charging section which is section 4 of the Act which reads as under: "4. Charge of income-tax.— (1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income tax) of, this Act in respect of the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, the income of the assessee for the present assessment year was assessed as a positive income, then penalty proceedings might revive at that stage. The amendment adding Explanation 4 to section 271(1)(c) of the Act which permits the levy of penalty even where the income is not positive was made effective only from April 1, 2003, that is, from the assessment year 2003-04 onwards. This amendment came after the decision of the Supreme Court in CIT v. Prithipal Sing [2001] 249 ITR 670, affirming the decision of the Punjab and Haryana High Court that for levy of penalty there had to be a positive income. The position that existed in law earlier has been explained. The relevant observations of the Supreme Court in this regard read as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03. It is only by this amendment that the hitherto inseverable inter-connection between the liability to pay tax and the imposition of penalty was severed for the first time. It may be noted that the amendment made to section 271 by the Finance Act, 2002, only stated that the amended provision would come into force with effect from April 1, 2003. The statute nowhere stated that the said amendment was either clarificatory or declaratory. On the contrary, the statute stated that the said amendment would come into effect on April 1, 2003, and, therefore, would apply to only to future periods and not to any period prior to April 1, 2003, or to any assessment year prior to the assessment year 2003-04. It is the well-settled legal position that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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