COMMISSIONER OF INCOME TAX Vs. CHEMIEQUIP LTD

JUDGEMENT

(1.) BEING aggrieved by the decision of the Tribunal, the Department has come by way of appeal under Section 260a of the IT Act with the following questions of law in respect of asst. yr. 1988-89 :

(2.) ON 30th June, 1989, the original assessment was finalised under Section 143 (1) on a total loss of Rs. 1,73,05,721. Subsequently, proceedings under Section 147 were initiated in order to examine the claim made by the assessee for deduction under Section 80hhc. In response to the notice under Section 148, the assessee filed a revised return on 24th July, 1992, declaring a loss of Rs. 58,42,844. In other words, the figure of total loss came down from Rs. 1,73,05,721 to Rs. 58,42,844. At the time of filing the original return of income for the asst. yr. 1988-89, the amount of Rs. 1,07,27,006 was not offered. to tax by the assessee on the ground that the amount did not relate to the asst. yr. 1988-89, Further, in the original return of income, the assessee had increased the loss by claiming wrong deduction under Section 80hhg at Rs. 7,35,871. However, in the revised return, in response to notice under Section 148 of the Act, the assessee offered Rs. 1,07,27,006 to tax for the asst. yr. 1988-89 and also withdrew its claim for deduction under Section 80hhc amounting to Rs. 7,35,871. In the circumstances, penalty proceedings were initiated under Section 271 (1) (c) of the Act. However, the fact remained that even after the revised return, the resultant figure was a total loss and the effect of the revised return was only that the loss stood reduced from Rs. 1,73,05,721 to 58,42,844 on 24th July, 1992. Therefore, the AO levied penalty under Section 271 (1) (c) amounting to Rs. 61,89,955. Being aggrieved by the order imposing penalty, the assessee carried the matter in appeal to CIT (A) who took the view that penalty was not justified because the assessee had declared the loss in the return. That, it was a genuine mistake committed by the assessee which could have been rectified by prima facie adjustment under Section 143 (1) (a) and, therefore, there was no need for the AO to issue notice under Section 148. That, what was achieved by the assessee (assessment) being framed under Section 143 (3)7147, could have been achieved by making prima facie adjustment under Section 143 (1) (a) because the mistake committed by the assessee went unnoticed and even the AO had accepted the figure of loss declared by the assessee in the original return, which stood cleared when the AO passed an order under Section 143 (1 ). The CIT (A) also relied upon the judgment of Punjab and Haryana High Court in the case of CIT v. Prithipal Singh and Co. (1990) 85 CTR (Pandh) 26 : (1990) 183 ITR 69 (Pandh ). Being aggrieved by the order of CIT (A), the Department carried the matter in appeal to the Tribunal. On facts, the Tribunal concluded vide para 9 that there was concealment of income and there was also furnishing of inaccurate particulars. That, concealment of income and furnishing of inaccurate particulars was established beyond a shadow of doubt as the claim was patently inadmissible. However, following the judgment in Prithipal Singh's case, the Tribunal took the view that as a result of concealment of income, only the loss stood reduced and, therefore, there was no suppression of income; In the circumstances, the Tribunal took the view that Section 271 (1) (c) was- not applicable and, therefore, the penalty could not be imposed. The Tribunal took the view that the assessee had no positive income during the assessment year in question and, therefore, the penalty cannot be levied. Being aggrieved by the order of the Tribunal, the matter has come in appeal before this Court. Arguments

(3.) MR. R. V. Desai, learned senior counsel appearing on behalf of the Department invited our attention to the provisions of Section 271 (1) (c) r/w Expln. 4. He also relied upon the judgment of the Karnataka High Court in the case of P. R. Basavappa and Sons v. CIT (2000) 159 CTR (Kar) 198 : (2000) 243 ITR 776 (Kar), which has taken the view that since loss declared was reduced on detection of the concealment of income, penalty under Section 271 (1) (c) was leviable. The Karnataka High Court further took the view that the decision of the Punjab and Haryana High Court in the case of Prithipal Singh (supra) was not applicable as that judgment was concerning asst. yr. 1970-71 i. e. , before insertion of Expln. 4 and, therefore, the judgment in Prithipal Singh's case was not applicable to the cases falling after the Expln. 4 came to be introduced in the Act. Mr. Desai, learned senior counsel for Department, therefore, contended that, in this case, after coming to the conclusion that there was concealment of income, the Tribunal erred in holding that Section 271 (1) (c) was not applicable. He contended that Tribunal has omitted to look at Expln. 4.