INCOME TAX OFFICER v. GEEP INDUSTRIAL SYNDICATE LTD
[Citation -1987-LL-0713]

Citation 1987-LL-0713
Appellant Name INCOME TAX OFFICER
Respondent Name GEEP INDUSTRIAL SYNDICATE LTD.
Court ITAT
Relevant Act Income-tax
Date of Order 13/07/1987
Assessment Year 1978-79
Judgment View Judgment
Keyword Tags quantification of penalty • entertainment expenditure • disallowance of interest • tax sought to be evaded • unabsorbed depreciation • concealment of income • extra shift allowance • imposition of penalty • suppression of sales • concealed income • estimated profit • prescribed limit • original return • registered firm • interest paid • wrong claim • nil income • net loss
Bot Summary: The ITO came to the conclusion that the assessee by making wrong claim of depreciation and by not adding back the amounts which were required to be disallowed, as mentioned above, had concealed the particulars of its income or furnished inaccurate particulars of such income and had thus made itself liable to the imposition of penalty under section 271(1)(c). We uphold the finding of the CIT that when the assessee did not add back this expenditure in its computation of taxable income, it could not be said to have concealed the particulars of its income or furnished inaccurate particulars of such income. In the illustration taken above, there will be concealment of income in case there is positive total income assessed and there will be no concealment of income when the computation is a loss. Even though the suppression of sales was for Rs. 30,000 do we have to say that, when the total income is determined at Rs. 10,000, the concealment is of only Rs. 10,000 and when the total income is determined at Rs. 5,000, the concealment is only of Rs. 5,000 and in case the total income is nil or there is loss, there is no concealment of income. The IAC held that, inasmuch as the assessee had shown a loss of Rs. 2 lakhs whereas its income was computed at Rs. 50,000, the entire sum of Rs. 2.50 lakhs was the concealed income of the assessee and he levied a penalty of Rs. 2.50 lakhs. The quantification of penalty has to be made not with reference to the total taxable income of the assessee as determined in the assessment order but with reference to the amount of the assessee's income, including expenditure, deductions etc. Because of the foregoing discussion, we reject the contention of the assessee that since there was no positive total income assessed in the case under consideration, there was no concealment of income in case, the interpretation sought to be given by the assessee were to be accepted, then in the case of a loss, the concealment can be indulged into with impunity.


This appeal has been filed by Department against order of Commissioner of Income-tax (Appeals) [CIT (A) for short] cancelling penalty of Rs. 3,50,000 which had been imposed by Income-tax Officer (ITO for short) under section 271(1)(c) of Income-tax Act, 1961 in respect of assessment year 1978-79. 2. assessee is company, having business of manufacture of torches, miniature bulbs and dry cell batteries. It filed its return of income for assessment year 1978-79 on 31-8-1971, declaring income of Rs. 10,75,942, subject to set-off of brought forward losses and unabsorbed depreciation pertaining to earlier years. ITO, while processing assessment, found that assessee had made wrong claim for depreciation. In all, assessee had claimed depreciation of Rs. 21,36,791 on assets of battery unit. factory had worked in all for 301 days. It had worked in double shift for 300 days and in triple shift for 154 days. extra shift allowance up to maximum of amount equal to one-half of normal allowance is to be allowed where concern works double shift. Where concern works triple shift, extra shift allowance equal to normal allowance, instead of one-half of normal allowance, is to be allowed. assessee had claimed extra shift allowance for triple shift working for 154 days. Again, assessee claimed extra shift allowance for double shift working for 300 days. assessee should have confined its claim for extra shift allowance in respect of double shift working of concern to 146 days, since extra shift allowance in respect of 154 days had already been allowed on basis of triple shift working of concern. assessee, however, claimed extra shift allowance on account of double shift working for 300 days. In this manner, assessee claimed extra depreciation of Rs. 2,13,364. ITO brought this to notice of assessee by his letter dated 28-10-1980. assessee thereupon filed revised return of income on 14-3-1981. In this return, assessee modified its claim for depreciation. Now, it claimed extra shift allowance for 146 days for double shift working and for 154 days for triple shift working. assessee thus reduced its claim for depreciation by sum of Rs. 2,13,364. assessee also made few more modifications of income as originally returned by it. It added back in its computation of taxable income sum of Rs. 2,38,415 which was required to be added on account of disallowance of interest under section 40A(8). it also modified its income by adding back sum of Rs. 51,372 being entertainment expenditure and sum of Rs. 71,160 which was required to be disallowed out of travelling expenses being in excess of prescribed limit. Thereupon, ITO completed assessment of assessee. ITO came to conclusion that assessee by making wrong claim of depreciation and by not adding back amounts which were required to be disallowed, as mentioned above, had concealed particulars of its income or furnished inaccurate particulars of such income and had thus made itself liable to imposition of penalty under section 271(1)(c). ITO by his order dated 30-7-1983 imposed penalty of Rs. 3,50,000. Being aggrieved by this order of ITO, assessee went up in appeal before CIT (A). Before CIT (A), assessee raised two-fold contentions. first one was that omissions or mistakes were inadvertent and hence on basis of such omissions or mistakes it would not b e justified to raise charge of concealment of income against assessee. other arguments of assessee as to why penalty should not be imposed were of legal nature. It was pointed out that assessed total income was nil. It was argued that where net result of computation of total income made by ITO was nil, no penalty was leviable. argument was that there could not be any question of ' concealment ' unless there was positive assessed income in respect of which ' concealment ' could be said to have taken place. It was hence contended that since in this case total income determined on assessment was nil, there was no concealment of income and hence question of levying penalty did not arise. It was also argued that provisions, w h ic h provided for computation of penalty, also did not become applicable in facts of case and hence penalty did not become exigible. CIT (A) found force in both contentions of assessee. He hence cancelled penalty of Rs. 3,50,000 which had been imposed by ITO. Being aggrieved by this decision of CIT (A), Department has come up in appeal before us. It is contended by Department that CIT (A) was not justified to cancel penalty. It is contended by Department that hence order of CIT (A) should be set aside and order of ITO levying penalty should be restored. 3. First of all, we will consider whether CIT (A) was justified to come to conclusion that omissions in original return, as filed by assessee, were inadvertent and on basis of such omissions it would not be justified to say that assessee had concealed particulars of his income or furnished inaccurate particulars thereof. items, in respect of which penalty had been levied, are as under: (1) Disallowance of interest under section 40A(8) for Rs. 2,38,415. (2) Disallowance of entertainment expenditure for Rs. 51,372. (3) Disallowance of travelling expenses for Rs. 7,160. (4) Disallowance of extra claim of depreciation for Rs. 2,14,364. 4. While submitting its return originally, assessee appended following note with regard to disallowance of Rs. 2,46,547 which was required to be made under section 40A(8) out of interest payment: " We intend to contest vires of section 40A(8) in writ. Hence, we have not added back Rs. 2,46,547 being 15 per cent of interest paid on deposits." Taking this into consideration, CIT (A) held that in respect of this addition, it would not be justified to hold that assessee had concealed its income. view taken by CIT (A) is reasonable and fair and we do not consider any interference with this view of CIT(A) to be necessary. assessee had itself mentioned in note given in original return that amount of Rs. 2,46,547, which was disallowable under section 40A(8), was not being added to total income on account of fact that assessee was proposing to challenge vires of provisions of section 40A(8). In view of this, it cannot be said that assessee had concealed particulars of its income or furnished inaccurate particulars of such income as far as it goes. 5. CIT (A) has also rightly come to conclusion that in respect of disallowance of entertainment expenditure of Rs. 51,372, it would not be justified to make charge of concealment against assessee. assessee had explained to CIT (A) that it had not added back this expenditure in its computation of taxable income, as assessee was under bona fide impression that expenditure incurred on serving tea, refreshments etc. would not constitute entertainment expenditure which was required to be disallowed. It h s been further stated by assessee that it had not withheld giving information about this expenditure. It was pointed out that figure of this expenditure had been provided in break up of miscellanous expenses which had been furnished by assessee to ITO even before filing of revised return. contention of assessee was that there was no attempt on his part to hoodwink Department and hence in respect of this addition, it would not be justified to impose any penalty for concealment. We uphold finding of CIT (A) that when assessee did not add back this expenditure in its computation of taxable income, it could not be said to have concealed particulars of its income or furnished inaccurate particulars of such income. 6. sum of Rs. 7,160 was disallowed out of travelling expenses, being amount in excess of limits prescribed under Rule 6D of income-tax Rules, 1962. ITO had considered this to be concealment of income. CIT (A) felt satisfied with explanation of assessee and came to conclusion that there was no concealment of income on account of this addition. It had been stated by assessee that omissions to add back this amount in original return was inadvertent. It was stated that when fresh scrutiny revealed that amount in excess of prescribed limit had been spent, it was voluntarily offered by assessee for addition, without any query from Department on that behalf. conclusion reached by CIT (A) is fair. We uphold finding of CIT (A) on this behalf. 7. Now, we come to consideration of add back of Rs. 2,13,364, which has been made by ITO out of claim for depreciation. facts with regard to this have already been narrated above. To recall, factory had worked during year for 301 days. It worked double shift for 300 days and triple shift for 154 days. At time of filing of original return, assessee had claimed extra shift allowance for triple shift working for 154 days. assessee also claimed extra shift allowance for double shift working for 300 days. Since extra shift allowance for triple shift working had already been days. Since extra shift allowance for triple shift working had already been allowed for 154 days, assessee should have claimed extra shift allowance on account of double shift working only for 146 days. Thus, in respect of 154 days, assessee claimed extra shift allowance on account of double shift working twice over, once when it claimed extra shift allowance on account of triple shift working for these days and again when it claimed extra shift allowance on account of double shift working for 300 days. contention of assessee that it was only inadvertent mistake, which would not amount to concealment, had not found favour with ITO. CIT (A), however, accepted contention of assessee that mistake being inadvertent, charge of concealment could not be levelled against assessee in respect of this addition. 8. We have considered matter carefully. We do not agree with finding given by CIT (A). assessee is limited company. It has been in existence for number of years. It has assistance of experts who advise it on matters pertaining to taxation. We do not think that mistake in making higher claim of depreciation was only inadvertent one. We were informed by authorised representative of assessee that it was only for assessment year under consideration and for immediately preceding year that extra shift allowance had been claimed on this basis. We were informed that for assessment years prior to that, extra shift allowance had been claimed on different basis. We fail to understand as to why assessee, who had been claiming extra shift allowance correctly in past, had to change basis for its claim for assessment year under consideration. There is no satisfactory explanation for this. assessee company has been in existence for long time. In past, it had claimed extra shift allowance on correct basis. We fail to comprehend provocation for altering basis for claim of extra shift allowance. We find it difficult to appreciate contention of assessee that mistake in claim of extra shift allowance for year under consideration was only inadvertent mistake. In our view chances of making mistake of type which has been made by assessee are practically nil. triple shift working includes double shift. Hence when claim for extra shift allowance on account of triple shift working had been made, claim for double shift working was included in it. There was no question of making separate claim for double shift working. There is practically no scope for making mistake of type which has been made by assessee. We are inclined to take view that wrong claim of depreciation cannot be hence attributed to inadvertence, particularly keeping in view fact that in past depreciation had been claimed correctly. We hence conclude that by claiming depreciation wrongly assessee concealed particulars of its income or furnished inaccurate particulars of such income and thus has made itself liable to imposition of penalty. 9. Hence our finding is that assessee by making wrong claim of depreciation for Rs. 2,13,364 concealed particulars of its income or furnished inaccurate particulars of such income. As far as other additions are concerned, we uphold view of CIT (A) that they did not give rise to any concealment. 10. Now we will proceed to examine legal arguments of assessee. first argument put forth by authorised representative of assessee w s that since there was no positive assessed income in case under consideration, it cannot be said that there had been concealment of any income within meaning of clause (c). It was stated that there must be positive assessed income in respect of which ' concealment ' can be said to have taken place. According to him, in absence of positive assessed income, there can be no concealment of income. We do not find it possible to persuade ourselves to accept this contention of authorised representative of assessee. ' concealment of particulars of income ' and ' total income assessed ' are two different things. Let us take case where assessee does not disclose its income from house property. On assessment, there is no positive total income. There was loss from business. After it was set off against property income, there was still some loss left. Can it be said that assessee had not concealed its income from property? net result on assessment may be nil income or loss on account of so many factors. Whether there has been concealment of income or not will not depend on there being positive total income computed in assessment. It will be erroneous to think that unless there is positive total income determined on assessment, there cannot be concealment of income. person who has inflated his loss by making some wrong claims has certainly given inaccurate particulars of his income. For example, assessee carrying given inaccurate particulars of his income. For example, assessee carrying on cloth business files return declaring loss of Rs. 50,000. When ITO processes assessment, he finds that assessee has suppressed his sales by Rs. 30,000. ' addition ' of Rs. 30,000 on account of suppression of sales is made and loss of Rs. 20,000 is determined on assessment as against loss of Rs. 50,000, which had been disclosed by assessee. Can it be said that just because there was no positive total income determined on assessment, assessee did not give inaccurate particulars of his income? According to us, t h e assessee has given inaccurate particulars of his income. There is no connection between income that has been concealed and total income assessed. If income that has been sought to be concealed is to be made dependent on total income assessed, then it will lead to odd results. In illustration taken above, there will be concealment of income in case there is positive total income assessed and there will be no concealment of income when computation is loss. We fail to understand as to how same fact of suppression of sales amounting to Rs. 30,000 can be viewed differently, depending on whether there was positive assessed income or not. Even though suppression of sales was for Rs. 30,000 do we have to say that, when total income is determined at Rs. 10,000, concealment is of only Rs. 10,000 and when total income is determined at Rs. 5,000, concealment is only of Rs. 5,000 and in case total income is nil or there is loss, there is no concealment of income. It is self-evident that as to what income has been concealed would not depend on total income determined on assessment. If assessee has inflated its expenditure or has suppressed its receipts by certain sum, then concealment is of that sum by which expenditure has been inflated or receipts have suppressed, regardless of final result obtaining as per profit and loss account of assessee. If assessee has suppressed its receipts by Rs. 10,000, concealment is of Rs. 10,000 regardless of fact that net profit of assessee as per its profit and loss account was only of Rs. 5,000. net result as per profit and loss account of assessee is not material for determination of quantum of concealment. Less so is total income determined on assessment. determination of total income on assessment will depend on so many factors like carried forward business, losses or unabsorbed depreciation of earlier years etc. 11. authorised representative of assessee has relied on decision of Madhya Pradesh High Court in case of CIT v. Jaora Oil Mill [1981] 129 ITR 423. In that case, for assessment year 1968-69, assessee had returned loss of Rs. 2 lakhs. On assessee's failure to produce books of account, ITO completed assessment u/s. 144 and he computed total income of assessee at Rs. 50,000. Proceedings u/s. 271(1)(c) were initiated. IAC held that, inasmuch as assessee had shown loss of Rs. 2 lakhs whereas its income was computed at Rs. 50,000, entire sum of Rs. 2.50 lakhs was concealed income of assessee and he levied penalty of Rs. 2.50 lakhs. At that time, as per clause (iii) of sub-sec. (1) of sec. 271, measure of penalty was income concealed. Tribunal held that income concealed was income actually determined on assessment, that is Rs. 50,000. It hence reduced penalty to Rs. 50,000. On reference, Madhya Pradesh High Court confirmed view of Tribunal. It was held that income, which was determined by ITO, was income that could be said to have been concealed by assessee. On basis of this decision, it was argued by authorised representative of assessee that since there was no positive assessed income in case under consideration, it was required to be held that there was no concealment of income within meaning of section 271(1)(c). 12. We have to point out that similar question had arisen for consideration before Kerala High Court in case of CIT v. India Sea Foods [1976] 105 ITR 708. In that case also, proceedings had related to assessment year 1968-69. assessee firm had filed return in which it had declared net loss of Rs. 3,29,304. assessee firm made settlement with Department, pursuant to which, while finalising assessment for assessment year 1968-69, amount of Rs. 2,84,727 was added as concealed income. net result of this addition and certain disallowances was that in place of loss of Rs. 3,29,304 shown in return, assessment was finalised on total income of Rs. 18,460. Penalty proceedings u/s. 271(1)(c) were initiated. question arose as to what was amount of concealed income. contention of assessee was that concealment, if any, could only be to extent of assessed income, that is, Rs. 18,460. Department was, on other hand, of view that concealed income was of Rs. 2,84,727, which was amount that was added in assessment of assessee on account of his concealed income for year. Kerala High Court did not accept view of assessee that quantum of concealment can never exceed amount of taxable income as finally determined in order of assessment. High Court affirmed Department's view that concealment was of Rs. 2,84,727. Kerala High Court observed as under: " Hence, it is not possible to construe word ' income ' occurring in sub- clause (iii) as connoting total income of assessee as assessed under section 143, 144 or 1 47. We have to understand said word as having been used in same wide sense in which it has been used in clause (c) of section 271(1) of Act. quantification of penalty has, therefore, to be made not with reference to total taxable income of assessee as determined in assessment order but with reference to amount of assessee's income, including expenditure, deductions etc. in respect of which assessee had either concealed particulars or furnished inaccurate particulars. It is quite conceivable that amount of income in respect of which there has been concealment or furnishing of inaccurate particulars may, in certain cases, exceed total income determined as assessable after making allowance for admissible expenses, other deductions and prior losses, if any, carried forward. present case is typical instance of kind. Here, amount of income in respect of which particulars had admittedly been concealed was Rs. 2,84,727 whereas total income assessed was only Rs. 18,460, what sub-clause (iii) enjoins is that even in such cases quantification of penalty has to be made with reference to amount of income in respect of which concealment of particulars or furnishing of false particulars had actually taken place." (Emphasis supplied) From this decision of Kerala High Court, it becomes clear that word ' income ' has been used in clause (c) in wide sense and it will be wrong to understand by it only assessed total income. word ' income ' in clause (c) has connotation different from connotation of " assessed total income ". 13. This conclusion that word ' income ' as used in clause (c) has connotation different from connotation of words ' total income assessed ' is also forced on us by examination of language of Explanation 4 to sub- section (1) of section 271 which has been on statute with effect from 1-4- 1976. Clause (a) of this Explanation states that where amount of income, in respect of which particulars have been concealed, or inaccurate particulars have been furnished, exceeds total income assessed, amount of tax sought to be evaded means tax that would have been chargeable on income in respect of which particulars have been concealed or inaccurate particulars have been furnished, had such income been total income. From language of this clause, it is quite apparent that it has been very much envisaged that concealed income and total income determined on assessment are two different things. It may be mentioned that this Explanation was not on statute when penalty was levied in case of Jaora Oil Mill. Hence Madhya Pradesh High Court, while deciding that case, had no occasion to look into this Explanation. Hence, if at all there was any doubt with regard to connotation of term ' income ' as used in clause (c) as being different from connotation of term ' total income assessed ', this is to be considered to be set at rest after introduction of this Explanation with effect from 1-4-1976. 14. Because of foregoing discussion, we reject contention of assessee that since there was no positive total income assessed in case under consideration, there was no concealment of income in case, interpretation sought to be given by assessee were to be accepted, then in case of loss, concealment can be indulged into with impunity. loss can be inflated without any fear of consequences of concealment by way of penalty being made to visit on assessee. Loss is to be carried forward and set off against income of subsequent year. In current year, no penalty will become imposable on basis of interpretation given by assessee, since there is no positive total income. In subsequent year, no penalty can be imposed, as concealment was not in that year. view canvassed by assessee is not warranted by language of section and if interpretation sought to be given by assessee were to be accepted, very object and purpose of section would he defeated. We, hence, reject this contention of assessee. 15. second argument raised by learned authorised representative o f assessee was that since in this case, there was not any tax payable on assessment, as total income determined was nil, question of levying any penalty would not arise. According to him, liability to pay penalty would arise only if, as result of assessment, assessee is found liable to payment of some tax. In support of this contention, reliance was placed by assessee on decision of Madras High Court in case of Addl. CIT v. Murugan Timber Depot [1978] 113 ITR 99. Attention was drawn to following observations of High Court at page 105: " Therefore, it is clear that legislature intended penalty as deterrent to prevent evasion of tax and when there was no tax payable, there cannot be any evasion of tax and, therefore, there was no question of levying any penalty as deterrent for evasion of tax." authorised representative also drew our attention to words " in addition to any tax payable " appearing in clause (iii). It was argued that penalty was to be levied in addition to tax and if there was no tax payable on assessment, no penalty could be levied. On other hand, it was argued by Departmental Representative that penalty would be levied even though there might not be liability to pay tax. 16. We have considered matter carefully. law of penalty, which is relevant for proceedings under consideration before us is in vital respect different from law, which was applicable in case of Murugan Timber Depot. Explanation 4 to sub-section (1) of section 271 was not then on statute. This Explanation was brought on Statute by Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976. This Explanation is applicable for proceedings, which are subject matter of appeal before us. This Explanation gives meaning of expression " amount of tax sought to be evaded " used in clause (iii) of sub-section (1) of section 271. insertion of this Explanation in statute has brought about material change and according to us, observation of Madras High Court in case of Murugan Timber Depot will be no more valid. In case of Murugan Timber Depot assessee, which was registered firm, filed its return for assessment year 1964-65, disclosing income of Rs. 16,950. ITO found that assessee had not disclosed certain sales in its regular books of account. ITO made addition of Rs. 6,400 being estimated profit on suppressed turnover and thus, he made assessment on total income of Rs. 24,990. He imposed penalty u/s. 271(1)(c) for concealment of income. Tribunal cancelled, penalty. assessee had contended before Tribunal that since no tax was payable by it, no penalty could be levied. At that time, no tax was payable by registered firm on first Rs. 25,000 and total income determined was only Rs. 24,990. Tribunal accepted contention of assessee that since there was no tax payable, no penalty could be levied. Thereupon department obtained reference to High Court. High Court considered question whether penalty u/s. 271(1)(c) was not exigible, because firm was not liable to pay tax. Taking into consideration relevant statutory provisions, which were applicable to those proceedings, High Court came to conclusion that liability to penalty was attracted only when tax was payable by assessee and in case, there was no tax payable, no penalty could be levied. 17. Now, let us examine basis of this decision of High Court. Sub- section (1) of section 271 falls in two parts. first part spells out defaults and second part deals with respective penalties to be levied. Clause (c) of sub-section (1) provides for case where assessee has concealed particulars of his income or deliberately furnished inaccurate particulars thereof and related provisions for levy of penalty is clause (iii) of that sub-section. This clause (iii) as was applicable to proceedings in case of Murugan Timber Depot was as under: " (iii) In cases referred to in clause (c), in addition to any tax payable by him, sum which shall not be less than 20 per cent, but which shall not exceed 1 1/2 times amount of tax, if any, which would have been avoided if income as returned by such person, had been accepted as correct income." Madras High Court, after analysing provisions, came to obvious conclusion that there could be no case in which penalty could be levied where no tax was payable by assessee. quantification of penalty was dependent upon tax payable. High Court observed as under: Therefore, conclusion is irresistible that when assessee is not able to pay any tax, no penalty can be levied on said assessee." 18. But this view of High Court, which was based on language of provisions relevant to proceedings under their consideration, would not hold good for proceedings under our consideration, in view of altered legal position, since then. Clause (iii) which is relevant for our purpose is worded as under: " In cases referred to in clause (c), in addition to any tax payable by him, sum which shall not be less than, but which shall not exceed twice amount of tax sought to be avoided by reason of concealment of particulars of his income or furnishing of inaccurate particulars of such income." As to what is to be understood by expression " amount of tax sought to be evaded " has been provided for. Explanation 4 to sub-section (1) of section 271 says as under: " Explanation 4 - For purposes of clause (iii) of this sub-section, expression " amount of tax sought to be evaded ",--- (a) in any case where amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished exceeds total income assessed, means tax that would have been chargeable on income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been total income; (b) in any case to which Explanation 3 applies, means tax on total income assessed; (c) in any other case, means difference between tax on total income assessed and tax that would have been chargeable had such total income been reduced by amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished." From above provisions, it is clear that, now, even if there was no tax liability on assessment, penalty could be levied. After examining provisions of clause (iii) as it had existed when penalty was levied in case of Murugan Timber Depot, High Court had come to conclusion that there could be no case in which penalty could be levied where no tax was payable by assessee. This was because of fact that quantification of penalty was totally dependent upon tax payable by assessee. It was under that circumstance that they found that " conclusion is irresistible that when assessee is not liable to pay any tax, no penalty can be levied on said assessee ". But legal position relevant to proceedings under our consideration has changed. Clause (a) of Explanation 4 provides that in certain cases, amount of tax sought to be evaded would be tax that would be chargeable on income in respect of which particulars have been concealed. Hence, no more quantification of penalty is dependent only upon tax payable by assessee on assessment. On account of this Explanation, it is obvious that it is no more necessary that there must be tax payable on assessment in order to give rise to penalty as was case previously. Hence, it will be no more valid to say that unless there was tax payable on assessment, no penalty could be levied. decision of Madras High Court in case of Murugan Timber Depot will hence not apply to proceedings under our consideration. 19. authorised representative of assessee had also drawn our attention to words " in addition to tax payable " appearing in clause (iii). According to him, significance of these words was that there must be tax payable on assessment in addition to which penalty could be levied. We do not subscribe to this view. These words only mean that penalty will be in addition to tax. There being tax is not necessary precondition for levy of penalty. As matter of fact, assessee in case of Murugan Timber Depot, had raised such argument and this argument had also found favour with Tribunal. Tribunal found it significant that whereas words " tax, if any, payable by him " had been used in clause (i) and words " tax, if any, which would have been avoided ", had been used in clause (iii), words that were used in clause been avoided ", had been used in clause (iii), words that were used in clause (iii) were " in addition to any tax payable by him ". According to Tribunal, omission of words " if any " in clause (iii) was significant. High Court, however, did not base its conclusion that if no tax was payable, no penalty could be levied on this ground. High Court stated as under at page 104: " In this particular case, as we have pointed out already and as was admitted before Tribunal itself, no tax was payable by assessee and, therefore, no penalty is leviable on assessee. This conclusion of ours is based on interpretation of all three clauses namely, clauses. (i), (ii) and (iii) of section 271(1) and for such conclusion, presence of words " if any " in clause (i) and absence thereof in clauses (ii) and (iii) are totally immaterial." (Emphasis supplied) We have already referred above to basis of their decision. basis of their decision was that since penalty was measure of tax unless tax was there, there could be no penalty. 20. From above, it becomes clear that use of words " in addition to any tax payable by him " in clause (iii) cannot be interpreted to mean that there must be tax payable on assessment before penalty can be levied. These words only mean that penalty will be in addition to tax, but they do not mean that there being tax is necessary condition for levy of penalty. 21. authorised representative of assessee also drew our attention to decision dated 30th July, 1983 of Chandigarh Bench of Tribunal in case of ITO v. Sudha Pharmaceuticals (P.) Ltd. [IT Appeal No. 631 (Chd.) of 1981]. On basis of that decision, it was argued by authorised representative of assessee that clause (a) of Explanation 4 to sub-section (1) of section 271 did not become operative in case of assessee. It was hence contended that since machinery provision to determine penalty did not become applicable, no penalty could be levied. Attention was drawn to words " income assessed " in clause (a). Chandigarh Bench of Tribunal had accepted contention of assessee that by words " income assessed ", it was to be understood only positive total income. Chandigarh Bench of Tribunal had come to conclusion that in case there was loss, clause (a) of Explanation would not become applicable. Chandigarh Bench of Tribunal had observed as under: " Even if it is conceded that total income can be negative figure, we cannot concede to proposition that income assessed can be negative figure. " According to Chandigarh Bench, if intention of legislature was that clause (a) was also to apply in cases where there was no positive total income, there was no need for legislature to add word " assessed ". According to Chandigarh Bench, words " total income " would have sufficed, since these words mean positive or negative income. According to Chandigarh Bench of Tribunal, legislature, by adding word " assessed ", wanted to confine operation of clause (a) only to such cases where there was positive figure of total income on assessment. We have given our utmost consideration to this point of view. With respect, we have to say that we find it difficult to persuade ourselves to accept this point of view. According to us, total income assessed can be positive figure or negative figure. According to us, clause (a) of Explanation will apply both in cases where there is positive total income or where there is negative total income, on assessment. We do not think that word " assessed " is to be construed to mean that intention of legislature was to confine operation of clause (a) only to such cases where there was positive figure of total income. We see no justification as to why clause (a) should not apply to cases where there is negative total income. 22. We hence hold that penalty for concealment of income is imposable in respect of concealment of Rs. 2,14,364 on account of wrong claim of depreciation, as made by assessee. We direct that minimum penalty may be imposed. 23. In result, appeal of department is partly allowed. *** INCOME TAX OFFICER v. GEEP INDUSTRIAL SYNDICATE LTD.
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