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2 Penalty —
Concealment of income — Penalty could be imposed u/s.271(1)(c) of the Act even
if the returned income as well as the assessed income is a loss.
[CIT v. Moser Baer India Ltd.,
(2009) 315 ITR 460 (SC)]
The assessee had filed a return
of income declaring a loss of Rs.2,72,12,620. In the course of the assessment
proceedings it was found that although the assessee had excluded the income of
floppy units II and III from its total income by claiming exemption u/s.10A and
u/s.10B of the Act, the depreciation in respect of these units had been deducted
from its income. The assessee had explained that the claim for depreciation was
a clerical mistake. The assessee filed a further application withdrawing its
claim of deduction u/s.10B of the Act in respect of floppy unit II for the
assessment year in question, since that unit had incurred a loss.
The Assessing Officer computed
the total income at Rs. Nil after adjusting the brought forward
losses/depreciation of Rs.47,01,433.11. The Assessing Officer disallowed the
depreciation in respect of floppy unit II and III of Rs.4,81,83,139. The
Assessing Officer also initiated penalty proceedings u/s.271(1)(c) of the Act.
An order imposing penalty of Rs.4,43,28,488 u/s.271(1)(c) of the Act came to be
passed.
The Commissioner of Income-tax
(Appeals) allowed the appeal holding that since the tax payable on the total
income as assessed was nil, there was no positive income, and therefore, the
penalty could be levied.
On an appeal to the Tribunal by
the Revenue, the assessee filed a cross-objection to support the order of the
Commissioner of Income-tax (Appeals) additionally on the ground that the
Assessing Officer had not recorded his satisfaction in the assessment order that
the penalty proceedings ought to be initiated against the assessee.
The Tribunal inter alia,
relied on the decision of the Delhi High Court in CIT v. Ram Commercial
Enterprises Ltd., (2000) 246 ITR 568 and concluded that the Assessing Offer
had not recorded a specific satisfaction before initiating the penalty
proceedings against the assessee and accordingly, the entire penalty proceedings
were set aside.
The High Court dismissed the
appeal of the Revenue following the decision of the Supreme Court in Virtual
Soft Systems Ltd. (2007) 289 ITR 83 (SC) in which it was held that no penalty
could be levied u/s.271(1)(c) of the Act, prior to amendment made to S. 271 by
the Finance Act, 2002, where there is no positive assessed income on which any
tax is payable.
The Supreme Court reversed the
judgment of the High Court in view of the decision of its Larger Bench in CIT
v. Gold Coin Health Food Pvt. Ltd., (2008) 304 ITR 308 and remitted the
matter to the Tribunal for considering the question regarding concealment.
