C I T vs. M/S NUCHEM LTD.

PDF · subscribers
ITA/133/2009HC Punjab & HaryanaPHHC01084208200915 July 2009Author: MR. JUSTICE ADARSH KUMAR GOEL,MRS JUSTICE DAYA CHAUDHARY4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the questions proposed had to be answered in favour of the revenue and against the assessee. The Court noted the revenue's submission that the Supreme Court's decision in Virtual Soft Systems Limited had been overruled by its subsequent decision in CIT v. Gold Coin Health and Food Private Limited. Consequently, the High Court set aside the view taken by the ITAT. The matter was remanded to the ITAT for decision on any remaining points that might survive. The operative direction was to remand the matter to the Tribunal for fresh adjudication.

What were the facts?

The Revenue, Commissioner of Income Tax, Faridabad, appealed to the High Court of Punjab and Haryana against an order of the Income Tax Appellate Tribunal (ITAT), Bench 'H', New Delhi, dated 7.12.2007. The appeal concerned assessment year 1995-96 and challenged the deletion of penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961. The assessee, M/s Nuchem Limited, Faridabad, had filed a return of loss. The Assessing Officer (AO) made additions, resulting in the net income being assessed at nil. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted some additions. The AO initiated penalty proceedings for additions sustained by the CIT(A). However, the CIT(A) later set aside the penalty, holding that no penalty could be levied when the return was of loss and the assessed income was nil. The ITAT upheld this view, relying on the Supreme Court's decision in Virtual Soft Systems Limited.

What were the issues?

1. Whether the ITAT was justified in holding that the judgment in Virtual Soft Systems Limited v. CIT (289-ITR-83) applies even after the insertion of Explanation 4 to Section 271(1)(c) of the Income Tax Act, 1961, effective from 1.4.1976? (Question of law) 2. Whether the ITAT was right in deleting the penalty under Section 271(1)(c) on the ground that the total income of the assessee was assessed at a loss figure? (Question of mixed law and fact) 3. Whether the ITAT was right in confirming the deletion of penalty under Section 271(1)(c) by relying on the Apex Court decision in Virtual Soft Systems Limited, despite the issue of retrospectivity being referred to the Chief Justice of the Supreme Court as per (2008) 217 CTR (SC) 105? (Question of law) Assessee's contentions: The judgment does not record specific arguments made by the assessee. However, the ITAT's decision, upheld by the High Court, was based on the principle that no penalty for concealment could be levied in the absence of positive income and tax attracted, citing Virtual Soft Systems Limited. Revenue's contentions: The revenue argued that the view taken in Virtual Soft Systems Limited was overruled by a subsequent Supreme Court judgment in CIT v. Gold Coin Health and Food Private Limited, (2008) 304 ITR 308.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.

Date of decision: 15.7.2009 The Commissioner of Income Tax, Faridabad -----Appellant Vs. M/s Nuchem Limited, Faridabad Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:- Mr. Rajesh Katoch, Advocate for the revenue. Mr. Baljinder Singh, Advocate for the respondent- assessee. Adarsh Kumar Goel,J.

1.

The revenue has preferred this appeal under section 260A of the Income Tax Act, 1961 (in short, ‘the Act’) against order dated 7.12.2007 passed by the Income Tax Appellate Tribunal, Bench ‘H’ New Delhi in ITA No.1958(DEL) of 2007, for the assessment year 1995-96, proposing to raise following substantial questions of law:- “i) Whether on the facts and circumstances of the case, the Hon’ble Tribunal is justified in holding that the judgment in Virtual Soft Systems Limited v. CIT, 289-ITR-83 (SC) will apply even after insertion of Explanation 4 to Section 271(1) (c) of the Income Tax Act, 1961 with effect from 1.4.1976? ii) Whether on the facts and circumstances of the case, the Hon’ble Tribunal is right in deleting the penalty imposed under section 271(1)( c) of the Income Tax Act, 1961 on the ground that the total income of the assessee has been assessed at a loss figure? iii) Whether, on the facts and in the circumstances of the case, the Hon’ble ITAT is right in confirming the deletion of penalty under section 271(1) ( c) by relying on the Apex Court decision in the case of Virtual Soft Systems Limited (289- ITR-83) though the issue of retrospectivity has been referred to the Chief Justice of the Hon’ble Supreme Court as per (2008) 217 CTR (SC) 105?”

2.

The assessee filed return of loss. The Assessing Officer while determining the net income to be nil, made additions to the returned income. The CIT(A) deleted some of the additions. The Assessing Officer initiated penalty proceedings in respect of additions, which were sustained by CIT(A). On appeal, the CIT(A)

set aside the penalty on the ground that where the return is of loss and income assessed is nil, there could be no penalty. This view has been upheld by the Tribunal, inter-alia, in view of judgment of the Hon’ble Supreme Court in Virtual Soft Systems Limited (supra), wherein it was held that in absence of any positive income and tax being attracted, penalty for concealment could not be levied.

3.

Learned counsel for the revenue submits that the view taken in Virtual Soft Systems Limited (supra) has since been overruled in subsequent judgment of the Hon’ble Supreme Court in CIT v. Gold Coin Health and Food Private Limited, (2008) 304 ITR 308. 4. In view of above, the questions proposed have to be answered in favour of the revenue and against the assessee.

5.

Accordingly, we set aside the view taken by the Tribunal and remand the matter to the Tribunal for decision on remaining points, which may survive.

6.

The appeal is disposed of.

(Adarsh Kumar Goel) Judge July 15, 2009 (Daya Chaudhary) ‘gs’ Judge

More judgments on Section 271(1)(c)

All 25,141 judgments and leading authorities on Section 271(1)(c) →

Recent GST High Court judgments

Search GST case law →