Rajes Kumar, J. - (1.) The Tribunal has referred the following question under Section 256(2) of the IT Act (hereinafter referred to as "Act") relating to the asst. yr. 1985-86 for opinion to this Court : "Whether the Tribunal was justified in confirming the view taken by the CIT(A) holding that Sub-clause (a) of Expln. 4 appended to Section 271(1)(c) of the IT Act, 1961, was applicable only if there was a positive income of an assessee and not applicable where even as a result of the detection of concealment or furnishing of inaccurate particulars of income, loss shown by such assessee got reduced or waived off ?"
(2.) The brief facts of the case are as follows. The assessee-opposite party (hereinafter referred to as the "assessee") is a registered firm deriving income from business of tanning raw hides. The assessee had filed a return of income showing a profit of Rs. 3,57,454 but subsequently the same had been revised to Rs. 5,01,579. After allowing deductions under Section 80HHC, even the revised return filed was at nil income. The assessing 'authority has also assessed the assessee at a nil income. Despite that the AO initiated penalty proceedings, on the difference of income shown in the original return and in the subsequent revised return, the explanation of the assessee that there was no positive income even after the revised income and, thus, no penalty provisions were attracted, was not accepted and a penalty under Section 271(1)(c) was imposed. Against the penalty order, the assessee filed appeal before CIT(A), which was allowed, and the penalty was deleted. Revenue filed appeal before the Tribunal, which was rejected. The Tribunal held as follows : "We have heard the parties at length and we are of the opinion that there is no infirmity in the order of the learned CIT(A), Bombay Bench of the Tribunal in the case of Star Galvanizers v. Asstt. CIT (1990) 38 TTJ (Bom) 12 held that where the assessee was assessed at a loss even often the addition of concealed income provisions of Section 271(1)(c) were not attracted. Likewise again the Bombay Bench in the case of Mutual Plastics v. ITO (1989) 35 TTJ (Bom) 467 had held that the Expln. 4 (a) to Section 271(1)(c) deals with cases of positive income only and it does not specifically provide for levy of any penalty in case of assessed loss. Accordingly, in the said case, penalty imposed was deleted. Again Ahmedabad Bench in the case of H.T. Power Structures (P) Ltd. v. Asstt. CIT (1993) 47 TTJ (Ahd) 146 : (1993) 45 ITD 571 (Ahd) had held that where the assessment had resulted in a loss, penalty under Section 271(1)(c) would not be leviable even on the basis of Expln. 4 to Section 271(1)(c) as inserted w.e.f. 1st April, 1976. Even Jaipur Bench in the case of Indo German Electricals v. ITO (copy filed in the compilation) had held that where total income is assessed at a loss, no penalty under Section 271(1)(c) is leviable. Even the Hon'ble Allahabad High Court in the case of Indo-Gulf Fertilizers & Chemicals Corporation Ltd. v. Union of India and Anr. had laid down a ratio that income means positive income and it does not mean a case of overall loss. No doubt it was a question of levy of additional income-tax under Section 143(1A), yet the point involved was the same as to whether even after certain additions the overall result was loss. All the decisions mentioned above clearly lay down that the word "income" as defined in Section 2(24) means a positive income and it does not mean a loss. Hence, in a case where even after certain additions the overall picture is either nil income or of loss, it cannot be said that there was any mens rea on the part of the assessee to conceal any income and thereby no penalty provisions could be attracted. We, therefore, hold that the order passed by the learned CIT(A) was perfectly correct and justified and does not call for any interference."
(3.) Heard Shri R.K. Upadhyaya, learned standing counsel for the Revenue, and Sri S.D. Singh, learned counsel for the respondent-assessee.;