M/S 10-D RETAILS,CHANDIGARH vs. ITO, W-1(3), CHANDIGARH

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ITA 1277/CHANDI/2018Status: DisposedITAT Chandigarh06 August 2019AY 2011-125 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that Explanation 4 to Section 271 of the Act, as amended, applies even when the concealed income reduces a declared loss. Therefore, penalty can be levied on the amount that reduces the loss.

What were the facts?

The Assessing Officer made an addition of Rs. 3 lacs to the assessee's income on account of unexplained deposits. Penalty proceedings under Section 271(1)(c) were initiated. The CIT(A) deleted penalty on Rs. 70,000 but confirmed it on the remaining Rs. 2,30,000.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied when the addition made results in a reduction of loss rather than an increase in taxable income.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 271

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आदेश/Order

The present appeal has been preferred by the assessee against the order dated 06.07.2018 of the Commissioner of Income Tax (Appeals)- 4, Ludhiana [hereinafter referred to as ‘CIT(A)’].

2.

The assessee in this appeal has agitated the levy of penalty u/s 271 (1)(c) of the Income Tax Act, 1961 (in short 'the Act') imposed by the Assessing Officer and further confirmed by the Ld. CIT(A).

3.

The brief facts relating to the issue are that in the quantum proceedings, the addition of Rs. 3 lacs was made by the Assessing Officer into the income of the assessee on account of unexplained

ITA No. 1277-Chd-2018- M/s IOB Retails, Chandigarh 2 deposits. The penalty proceedings u/s 271 (1)(c) were initiated

separately for concealment of income and furnishing of inaccurate

particulars of income and thereby a penalty of Rs. 92,700/- was imposed

by the Assessing Officer @ 100% of the tax amount sought to be

evaded.

4.

In appeal, the Ld. CIT(A) deleted the penalty in respect of the

addition made by the Assessing Officer of an amount of Rs. 70,000/-,

however, in respect of the remaining addition of Rs. 2,30,000/- the Ld.

CIT(A) confirmed the penalty @ 100% of tax amount sought to be

evaded on this addition.

5.

Being aggrieved by the above order of the Ld. CIT(A), the

assessee has come in appeal before us. The sole contention raised by the

Ld. Counsel for the assessee has been that in this case the assessee had

declared loss of Rs. 4,02,723/- in the return of income. Consequent to

the addition made of Rs. 3 lacs made by the Assessing Officer, the

resultant effect was reduction of this amount out of the total loss

claimed. However, the total income of the assessee still remained in

negative i.e. net loss of Rs. 1,02,723/-. The Ld. counsel placing

reliance on the decision of the Hon'ble jurisdictional of Punjab &

Haryana High Court in the case of ‘CIT vs Pritipal Singh’ dated

3.11.1988 reported in (1990) 183 ITR 69 (P&H), has submitted that as

per the law laid down by the Hon'ble High Court, loss cannot be termed

as ‘income’. That the penalty provisions of section 271 (1)(c) of the

ITA No. 1277-Chd-2018- M/s IOB Retails, Chandigarh 3 Act are attracted only in the case of an assessee having positive income

and not in the case of loss, as the question of concealment of income to

avoid the payment of tax would arise only in the former case. The Ld.

Counsel, therefore, has submitted that the issue is squarely covered by

the aforesaid decision of the Hon'ble jurisdictional High Court and

since in the case in hand even after the addition made by the Assessing

Officer, there was a net loss, hence, the penal provisions of section

271 (1)(c) of the Act would not be attracted in this case.

6.

The Ld. DR, on the other hand, has relied upon the findings of the

lower authorities and also placed reliance on Explanation 4 to section

271 of the Act, as were applicable for the assessment year under

consideration, and has submitted that even where the net effect is

reduction of loss, the penalty can be imposed on the amount so reduced

from the net loss declared by the assessee.

7.

I have considered the rival submission and have also gone through

the record. Explanation 4(a) to section 271 as amended by Finance Act,

2002 w.e.f 1.4.2003 reads as under:-

“Explanation 4 - For the purpose of clause (iii) of this sub section, the expression “the amount of tax sought to be evaded” -

in any case where the amount of income in respect of which (a) particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, means the tax that would have been chargeable on the income in respect of which particulars have been concealed

ITA No. 1277-Chd-2018- M/s IOB Retails, Chandigarh 4 or inaccurate particulars have been furnished had such income been the total income.”

8.

The decision relied upon by the counsel for the assessee in the

case of ‘CIT vs Pritipal Singh’ (supra) is dated 3.11.1988 in respect of

the issue involved for the assessment year 1970-71. However, a lot of

water has flowed under the bridge since then. As per the aforesaid

statutory provisions as given in Explanation 4 to section 271, in the case

where the amount of income in respect of which the particulars have

been concealed or inaccurate particulars of income furnished has the

effect of reducing the loss declared in the return of income, the

provisions of section 271C of the Act would apply on the amount so

reduced from the loss declared.

In view of this, we do not find any merit in the appeal of the

assessee, and the same is accordingly dismissed.

Order pronounced in the Open Court on 06.08.2019

Sd/-

(संजय गग� / SANJAY GARG) �या�यक सद�य/ Judicial Member Dated : 06.08.2019 “आर.के.” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

ITA No. 1277-Chd-2018- M/s IOB Retails, Chandigarh 5

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar

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