Jagdamba Sahakari Sakhar Karkhana Ltd., Ahmednagar V. ACIT, Ahmednagar

ITA 1690/PUN/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93874 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-07-2015
• Assessment Year: 1989-1990
• Appeal Filed On: 16-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR P SINGH
• Keywords: Income from undisclosed sources

Judgement Text

] IQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE ! ' BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO.1690/PN/2012 !# $ %$ / ASSESSMENT YEAR : 1989-90 JAGDAMBA SAHAKARI SAKHAR KARKHANA LIMITED, A/P. RASHIN, TALUKA KARJAT, DIST : AHMEDNAGAR PAN NO.AAAAS3208H . / APPELLANT V/S ACIT, AHMEDNAGAR CIRCLE, AHMEDNAGAR . / RESPONDENT / APPELLANT BY : NONE / DEPARTMENT BY : SHRI B.C. MALAKAR P. SINGH & / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 09-02-2012 OF THE CIT(A)-I, PUNE RELATING TO ASSES SMENT YEAR 1989-90. 2. THIS APPEAL WAS FIRST FIXED FOR HEARING ON 01-10-2013. AT THE REQUEST OF THE LD. COUNSEL FOR THE ASSESSEE SHRI PRAMOD SHINGTE THE HEARING OF THE CASE WAS ADJOURNED TO 19-12-2013. SINCE ON 19-12- 2013 THE BENCH DID NOT FUNCTION THE CASE WAS ADJOURNED TO 05-03- / DATE OF HEARING : 09.07.2015 / DATE OF PRONOUNCEMENT: 10.07.2015 2 ITA NO.1690/PN/2012 2014. ON 05-03-2014, AT THE REQUEST OF THE LD. COUNS EL FOR THE ASSESSEE THE HEARING OF THE CASE WAS ADJOURNED TO 25- 03-2014. ON 25-03-2014 THE CASE WAS ADJOURNED TO 02-07-2014. ON 02-07-2014 AT THE REQUEST OF THE LD. COUNSEL FOR THE ASSESSEE THE HEA RING OF THE CASE WAS ADJOURNED TO 08-10-2014. ON 08-10-2014 THE CASE WAS AGAIN ADJOURNED TO 02-02-2015. ON 02-02-2015 THE LD. COUN SEL FOR THE ASSESSEE SOUGHT ADJOURNMENT ON THE GROUND THAT THE QUANTUM APPEALS ARE PENDING, ACCORDINGLY THE HEARING OF THE CASE WAS ADJOURNED TO 27-04-2015. ON 27-04-2015 NOBODY APPEA RED ON BEHALF OF THE ASSESSEE FOR WHICH THE HEARING OF THE CASE WAS AD JOURNED TO 09- 07-2015 BY ISSUE OF NOTICE THROUGH RPAD WHICH WAS DULY SERVED ON THE ASSESSEE AND THE ACKNOWLEDGEMENT IS PLACED ON RECO RD. WHEN THE NAME OF THE ASSESSEE WAS CALLED NONE APPEARED ON BEHALF OF THE ASSESSEE. IT IS SEEN FROM THE RECORD THAT NOBODY HAS APPEARED BEFORE THE CIT(A) ALSO FOR WHICH HE HAS PASSED AN EXPARTE ORDER . ACCORDINGLY, THE APPEAL IS BEING DECIDED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE. 3. LEVY OF PENALTY OF RS.44,53,000/- U/S.271(1)(C) OF THE I.T. A CT IS THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL. 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE SOC IETY FILED ITS RETURN OF INCOME ON 31-10-2009 DECLARING LOSS OF RS.1,26,90,5 60/-. THE AO PASSED THE ORDER U/S.143(3) ON 10-03-2013 AFTER MAKING VARIOUS ADDITIONS AGAINST WHICH THE ASSESSEE WENT IN APPE AL. THE CIT(A) VIDE ORDER DATED 03-11-1995 GRANTED PART RELIEF AG AINST WHICH THE ASSESSEE AS WELL AS THE REVENUE PREFERRED APPEAL BE FORE THE TRIBUNAL. THE TRIBUNAL DECIDED THE APPEALS ON 26-07-2001 AND 20- 09-2001 BY RESTORING SOME OF THE ISSUES TO THE FILE OF THE AO FOR FURTHER 3 ITA NO.1690/PN/2012 VERIFICATION AND ORDER. ACCORDINGLY, THE AO PASSED THE O RDER U/S.143(3) R.W.S. 254 ON 20-03-2003 IN WHICH ADDITION OF RS.1,90,32,050/- FOR SALE OF BAGASSE OUTSIDE BOOKS OF ACCOUN TS AND RS.9,62,150/- FOR SHORTAGE OF MOLASSES WERE MADE. THE AO THEREAFTER INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE IT. ACT WHILE GIVING APPEAL EFFECT TO THE ORDER OF THE TRIBUNAL. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE AO LEVIED PENALTY OF RS.44,53,000/- BEING 100% OF TAX SOUGHT TO BE EVADED U/S .271(1)(C) OF THE IT. ACT. WHILE DOING SO, HE OBSERVED THAT THE ASSESS EE WAS UNABLE TO EXPLAIN THE SHORTAGE OF MOLASSES FOUND DURING THE ASSE SSMENT PROCEEDINGS AND THE SALE OF BAGASSE MADE OUTSIDE BOOKS OF ACCOUNT. 5. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). D ESPITE SERVICE OF NOTICE GIVEN FOR A NUMBER OF TIMES NONE APPEAR ED BEFORE THE CIT(A) ON BEHALF OF THE ASSESSEE. HOWEVER, A WRITTEN SUBMIS SION DATED 12-05-2009 WAS FILED. CONSIDERING THE NON-APPEARANCE OF T HE ASSESSEE AND THE WRITTEN SUBMISSION FILED BEFORE HIM EARLIE R THE CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO BY OBSERVING AS UNDER : 6.1. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE LAW AND ALSO THE MATERIAL AVAILABLE ON RECORD. THE RELEVANT DETAILS IN RESPECT OF THE ABOVE APPEAL HAVE ALREADY BEEN GIVEN IN THE EARLIER PARAGRAPHS. THE ONLY ISSUE WHICH IS AVAILABLE FOR ADJUDICATION IS IN RESPECT OF PENALTY LEVIED U/S 271(1)(C) OF THE IT. ACT AT ALMOST THE MINIMUM RATE OF @100% OF THE TAX SOUGHT TO BE EVADED IN THIS ASSESSMENT YEAR. THE BRIEF F ACTS ARE THAT THE APPELLANT COMPANY HAD FILED ITS RETURN OF INCOME AT LOSS OF RS.1,26,90,560/- ON 31-10-1989 (AS NOTED IN THE PENAL TY ORDER). THE ORIGINAL ASSESSMENT WAS COMPLETED ON 10.3.1992 AFTER MAK ING VARIOUS ADDITIONS, AGAINST WHICH THE APPELLANT HAD GONE IN AP PEAL. THE ASSESSING OFFICER ALSO HAD INITIATED PENALTY PROCEEDINGS U/S 271 (1)(C) OF THE IT. ACT. THE LD. CIT(A), NASIK BEFORE WHOM THE APPEAL WAS FILE D [DECIDED THE APPEAL ON 3.11.1995 GRANTING PART RELIEF. DEPARTMEN T AS WELL AS THE APPELLANT WENT IN APPEAL BEFORE THE ITAT AND BOTH T HESE APPEALS WERE DECIDED ON 26.7.2001 AND 20.9.2001. SOME OF THE ISSUE S IN BOTH THESE ORDERS WERE RESTORED TO THE ASSESSING OFFICER FOR FURTHER VERIFICATION AND ORDER. THE ASSESSING OFFICER COMPLETED THE ORDER U/S 143 (3) R.W.S. 254 ON 20.3.2003 AND IN AFORESAID ORDER ADDITIONS OF RS.1,90, 32,050 FOR SALE OF BAGASSE OUTSIDE BOOKS OF ACCOUNTS AND RS.9,62,150 FOR SHOR TAGE OF MOLASSES, WERE MADE. PENALTY U/S 271(1)(C) WAS AGAIN INI TIATED WHILE 4 ITA NO.1690/PN/2012 GIVING THE APPEAL EFFECT TO THE ORDER OF THE ITAT. IN RESPONSE TO THE SAID NOTICE U/S 271(1)(C), THE APPELLANT COMPANY REQUESTED TO KEEP THE PENALTY PROCEEDINGS IN ABEYANCE ON THE GROUND THAT APPEAL WA S FILED AGAIN WITH CIT(A)-I, PUNE. THE ASSESSING OFFICER KEPT THE PENALTY PROCEEDINGS UNDER ABSENCE TILL FINALIZATION OF THE APPEAL BY CIT(A)-I VIDE ORDER NO. PN/CIT(A)-L/AC CIR.AN/36/03-04 DATED 21.2.2005. NOT ICE WAS AGAIN ISSUED BY THE ASSESSING OFFICER ON 17.2.2006 BY THE REGIST ERED POST BUT THE SAME WAS RETURNED AS NONE RECEIVED THE NOTICE. THE ASSESSI NG OFFICER TOOK THE SERVICE AS VALID AND DECIDED THE PENALTY ON THE M ATERIALS AVAILABLE BEFORE HIM. THE ASSESSING OFFICER NOTICED THAT THE ADDI TION OF RS. 1,19,32,050 WAS FOR THE INCOME CONCEALED ON SALE OF BAGASSE MADE OUTSIDE BOOKS OF ACCOUNTS AND SIMILARLY, THE ANOTHER ADDITION OF RS.9,62,150 WAS FOR NOT BEING IN A POSITION TO EXPLAIN THE SHORTAGE OF MOLASSES FOUND DURING THE ASSESSMENT PROCEEDINGS. IN VIEW OF THIS MATERI ALS AVAILABLE BEFORE HIM, THE ASSESSING OFFICER LEVIED THE PENALTY U /S 271(1)(C) R.W. EXPLANATION 1 OF SECTION 271(1)(C). HOWEVER, HE HAS D ECIDED TO LEVY ALMOST THE MINIMUM OF THE PENALTY LEVIABLE U/S 271(1) (C) OF THE IT. ACT. THE DETAILED DISCUSSIONS MADE BY THE ASSESSING OFFICER IN T HE PENALTY ORDER CAN BE SEEN FROM THE EARLIER PARAGRAPH. APPELL ANT HAS NOT MADE ANY COMPLIANCE IN RESPONSE TO THE NOTICE ISSUED ON 3.1.2012 FIXING THE COMPLIANCE ON 19.1.2012, HOWEVER, THE MATERIALS SUBMI TTED BY THE APPELLANT VIDE THEIR LETTER DATED NIL FILED ON 12.5 .2009 WERE CONSIDERED. IT IS NOTED FROM THE MATERIALS PLACED ON RECORD THAT THE APPELLANT HAS SOUGHT TO EXPLAIN THE DIFFICULTY IT HAS BEEN FACING IN RUNN ING THE FACTORY DUE TO SHORT SUPPLY OF RAW MATERIALS AND ALSO BY PLACING ON RE CORD MATERIALS TO EXPLAIN THE ADDITIONS MADE FOR BAGASSE AND SHORTAGE OF MOLASSES. NO DOUBT IT IS AN ESTABLISHED FACT THAT ASSESSMENT PROCEED INGS AND PENALTY PROCEEDINGS ARE SEPARATE BUT IN THE PRESENT CASE IT IS EVIDENT THAT THE ADDITIONS ARE OF INCOME KEPT OUTSIDE BOOKS OF ACCOUNTS, FOR WHICH NO EXPLANATION OR EVIDENCE WERE AVAILABLE DURING ASSESSMEN T OR EVEN DURING THE PENALTY LEVIED BY THE ASSESSING OFFICER. THEREFORE, ANY EVIDENCE OR CLAIM NOW BEING MADE TO EXPLAIN THE BASIS OF ADDITION S, HAS TO BE TREATED AS AN AFTERTHOUGHT, WHICH CANNOT BE ACCEPTED. 6.2. ON CAREFUL CONSIDERATION OF THE FACTS OF THE CASE AND THE LAW, IT IS SEEN THAT THE PENALTY U/S.271(1)(C) WAS IMPOSED IN THE PRESENT CASE IN RESPECT OF ADDITIONS MADE FOR UNACCOUNTED INCOME FROM SALE OF BAGASSE AND ALSO FOR UNEXPLAINED SHORTAGE OF MOLASSES STOCK FOUND DURING ASSESSMENT. ON THAT BASIS THE ASSESSING OFFICER HAS CONCLUDED THAT THE APPELLANT HAS CONCEALED ITS INCOME AND THEREFORE, TO THAT EXTENT FURNISHED INACCURATE PARTICULARS OF INCOME. THE ASSESSING OFFICER THEREFORE HAS ALSO INVOKED EXPLANATION 1 TO SEC. 271(1)(C) FOR LEVYING THE PENALTY. SEC. 271(1)(C) OF THE IT. ACT PROVIDES FOR IMPOSITION OF P ENALTY WHEN THE ASSESSEE HAS CONCEALED INCOME OR WHEN THE ASSESSEE HAS FURNIS HED INACCURATE PARTICULARS OF INCOME. AS THE COURTS REQUIR ED THE DEPARTMENT TO NOT ONLY PROVE THE CONCEALMENT AND/OR FILING OF INACCURATE PARTICULARS OF INCOME BUT EVEN THE EXISTENCE OF MENS REA, THE LEG ISLATURE AMENDED THE PROVISIONS TO RELIEVE THE REVENUE FROM THE BURDEN OF PROVING THE MENS REA IN CERTAIN CASES AS DEFINED IN DIFFERENT EXPLANATIONS INTRODUCED IN THIS SECTION FROM TIME TO TIME. THE EXPLANATIONS CREATED R EBUTTABLE PRESUMPTION OF CONCEALMENT/ FILING OF INACCURATE PAR TICULARS ON THE ASSESSEE TO ESTABLISH THAT IT SHOULD NOT BE DEEMED TO HAVE CONCEAL THE INCOME OR FILE INACCURATE PARTICULARS OF INCOME. ONE SUCH A DEEMING FICTION EXISTS UNDER EXPLANATION 1 TO SEC.. 271(1)(C). THIS EXP LANATION ENVISAGES TWO SITUATIONS(A) FIRST, WHERE IN RESPECT OF ANY FACT S MATERIAL TO THE 5 ITA NO.1690/PN/2012 COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF T HE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFF ERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE AO OR THE CIT(A); AND (B) SE COND, WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL IN COME UNDER THE PROVISIONS OF THIS ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTI ATE THE EXPLANATION AND THE ASSESSEE FAILS TO PROVE THAT SUCH EX PLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. IN THE FIRST SITUATION, THE DEEMING FICTION IS TRIGGERED BY THE INACTION OF THE ASSESSEE BY HIS NOT GIVING THE EXPLANATION WITH RESPECT T O ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME, OR BY ACTION OF THE AO OR THE CIT(A) BY GIVING CATEGORICAL FINDING TO THE EFFECT THAT THE E XPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FI CTION IS TRIGGERED BY THE FAILURE OF THE ASSESSEE LEADING TO SATISFACTION OF CONDITIONS LAID DOWN IN CL. (B) OF EXPLANATION'1 NAMELY THAT THE ASSE SSEE IS NOT ABLE TO SUBSTANTIATE AN EXPLANATION IN RESPECT OF ANY FACT MAT ERIAL TO THE COMPUTATION OF TOTAL INCOME, AND THE ASSESSEE IS ALSO NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS BONA FIDE AND ALL THE FACTS RELAT ING TO THE SAME AND MATERIAL TO THE COMPUTATION OF TOTAL INCOME HAVE BE EN DISCLOSED BY THE ASSESSEE. WHEN THIS DEEMING FICTION COMES INTO PLAY, WHIC H CAN ONLY HAPPEN IN ONE OF THE ABOVE SITUATIONS, THE RELATED AD DITION OR DISALLOWANCE MADE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, FO R THE PURPOSES OF S. 271(1)(C), IS DEEMED TO REPRESENT THE INCOME IN RESPEC T OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. THUS, IT I S BY VIRTUE OF EXPLANATION 1 TO SEC. 271(1)(C) ONLY THAT THE ASSESSING OFFICER HAS BEEN GIVEN A RIGHT TO RAISE A PRESUMPTION TO DEEM CERTAIN SUM ADDED TO INCOME OR DISALLOWED IN COMPUTING THE INCOME OF A PERSON, TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONC EALED, IF THE ASSESSEE DID NOT FURNISH AN EXPLANATION OR WHEN EXPLANATION F URNISHED WAS FOUND TO BE FALSE; AND ALSO WHEN SUCH PERSON OFFERS AN EXPLAN ATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH E XPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THE PENALTY UNDER SEC. 271(1)(C) IS A PENALTY FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS, OR, UNDER THE E XTENDED DEFINITION BY THE VIRTUE OF EXPLN. 1 TO SEC. 271(1)(C), FOR A DEEM ED CONCEALMENT OF INCOME. AS A COROLLARY TO THIS LEGAL POSITION, UNLESS IT IS ESTABLISHED THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACC URATE PARTICULARS OR IT IS ESTABLISHED THAT, ON THE FACTS OF THE CASE, CONCEALME NT OF INCOME CAN BE DEEMED IN ACCORDANCE WITH THE PROVISIONS OF THE EXPLA NATION, PENALTY CANNOT BE IMPOSED UNDER SECTION 271 (1)(C). 6.2. THE FACTS OF THE PRESENT CASE ARE NOW TESTED VIS-A -VIS THE ABOVE LEGAL POSITION TO EXAMINE WHETHER THE PRESENT CASE IS C OVERED UNDER THE MAIN PART OF THE PROVISIONS OR UNDER THE DEEMING PROV ISIONS OF EXPLANATION 1 OF SECTION 271(1)(C) OR NOT. 6.3. THE NECESSARY PRECONDITION FOR IMPOSITION OF PENA LTY UNDER THE MAIN PROVISIONS OF SEC. 271(1)(C) IS THAT THE A.O. SHOUL D SATISFY HIMSELF THAT THE APPELLANT CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE EXPRESSION 'CONCEALMENT OF INCOME 1 HAS NOT BEEN DEFINED IN THE ACT, BUT THE NATURAL MEANING OF THE EXPRESSION 'CONCEALMENT' IS TO KEEP FROM BEING SEEN, FOUND, OBSERVED, OR DISCOVERED'. IT WOULD, THEREFORE, FOLLOW THAT THE EXPRESSION CONCEALMENT OF INCOME, IN ITS NATURAL SENSE AND GRAMMATICAL MEANING, IMPLIES AN INCOME WHICH IS BEING HIDDEN, 6 ITA NO.1690/PN/2012 CAMOUFLAGED OR COVERED UP SO THAT IT CANNOT BE SEEN, FOUND, OBSERVED OR DISCOVERED. IN THE PRESENT CASE, THE ASSESSING OFFICER, HA S FOUND DURING THE ASSESSMENT PROCEEDING THAT THE APPELLANT HAS SOLD BAGASSE O UTSIDE BOOKS OF ACCOUNTS AND HAS NO EXPLANATION FOR THE SHORTAGE OF MOLASSES FOUND DURING THE SCRUTINY OF THE BOOKS. THEREFORE, IT IS APP ARENT THAT THE ASSESSING OFFICER HAS BEEN ABLE TO FULFILL THE CONDITION S PRESCRIBED IN THE MAIN SEC, 271(1)(C). DESPITE THAT THE ASSESSING OFFICER HAS ALSO INVOKED EXPLANATION 1, TO STRENGTHEN THE PENALTY ORDER AND T O PLUG ANY ESCAPE ROUTE THAT THE APPELLANT MAY TRY TO FIND TO ESCAPE F ROM THE LEVY OF PENALTY. FROM THE FACTS OF THE CASE IT IS APPARENT THAT THE APP ELLANT HAD NO EXPLANATION FOR EITHER OF THE TWO ADDITIONS MADE BY THE ASSESSING OFFICER DURING THE TWO CYCLES OF ASSESSMENT AND APPEAL THROUGH WHICH THIS ASSESSMENT ORDER OF A.Y. 1989-90 HAS PASSED THROUGH. THE SUBMISSIONS; MADE BY THE APPELLANT DURING APPEAL TO CLAIM THAT T HE BAGASSE WAS USED TO RUN THE BOILER ON THE BASIS OF CERTAIN DOCUMENTS CREAT ED BY APPELLANT ITSELF CANNOT BE ACCEPTED IN THE FACTS OF THIS CASE. SUCH SE LF SERVING EVIDENCES/ EXPLANATIONS AT THIS LATE STAGE, CAN EVEN BE NOT CONSID ERED FOR VERIFICATION. THE APPELLANT CAN ALSO BE CONSIDERED TO HAVE FAILED T O HAVE ANY ACCEPTABLE EXPLANATION FOR THE ADDITIONS MADE AND THEREFORE, EX PLANATION 1 ALSO CAN BE CONSIDERED TO BE APPLICABLE IN THE FACTS OF THIS C ASE. FOR THE ABOVE REASON, GROUND NO. 1 OF THE APPELLANT HAS TO BE DISMISSE D. THE DECISION OF THE SUPREME COURT GIVEN IN THE CASE OF DHARMENDRA TE XTILE PROCESSORS, EVEN AFTER THE CLARIFICATIONS GIVEN IN THE CASE OF RE LIANCE PETRO PRODUCTS LTD., CAN BE CONSIDERED TO BE APPLICABLE IN THIS CASE, ON THE BASIS OF WHICH THE PENALTY CAN BE HELD TO HAVE BEEN CORRECTLY LEVI ED. GROUND NO. 1 IS DISMISSED. 6.4. THE APPELLANT IN THEIR SUBMISSIONS HAS ALSO CLAIMED THAT THE PENALTY IS NOT LEVIABLE AS PER THE RATIO OF THE DECI SION GIVEN BY THE HON'BLE SUPREME COURT IN THE CASE OF VIRTUAL SOFT SYSTEM LTD. (2007) 289 ITR 83 (SC). THE CLAIM OF THE APPELLANT IS THAT THE APPELLA NT HAD NO POSITIVE INCOME OR TAXABLE INCOME IN THIS YEAR AND IN THE ABS ENCE OF THE SAME PENALTY CANNOT BE LEVIED. THIS ASPECT OF THE CLAIM OF THE APPELLANT WAS ALSO CONSIDERED. IT IS NOTED THAT THE COURTS HAVE TAKEN DIV ERGENT VIEWS ON THIS ISSUE. DIFFERENT COURTS INCLUDING THE P&H HIGH COURT IN THE CASE OF CIT.VS. PRITHPAL SINGH & CO. (1990) 183 ITR 69 (P&H) HAS HEL D THAT THE PENALTY CANNOT BE LEVIED IN THE CASE WHERE THE RETURN INCOME IS AT LOSS. HOWEVER, DIVERGENT VIEWS WERE TAKEN BY OTHER COURTS INCLUDING KERALA HIGH COURT IN THE CASE OF CIT VS. INDIA SEAFOODS (1976) 105 ITR 708 (KER). IN THIS CASE THE KERALA HIGH COURT WHILE DEALING WITH A CASE WHER E THE FINAL INCOME WAS A LOSS, UPHELD THE LEVY OF PENALTY WITH REFERENCE TO THE LAW AS IT STOOD IN 1968, EVEN WHEN THERE WAS NO EXPLANATION 4. IT W AS HELD THAT THE EXPLANATION IS CLARIFICATORY IN NATURE. THIS VIEW WA S AGAIN FOLLOWED BY THE KERALA HIGH COURT IN THE CASE OF CIT VS. ROWTHER BRO S. (1979) 119 ITR 353. THOUGH THE DECISION OF THE P&H HIGH COURT WAS G IVEN WITHOUT CONSIDERING THE DECISION OF THE KERALA HIGH COURT AS T O THE EFFECT OF THE CHANGE BROUGHT ABOUT IN THE LAW IN 1968 OR THE EXPL ANATION INTRODUCED LATER BUT THIS VIEW WAS MORE OR LESS AFFIRMED BY THE S UPREME COURT IN PRITHPAL SINGH & CO. (2001) 249 ITR 670 (SC). HOWEV ER, THE SUPREME COURT IN THE CASE OF VIRTUAL SOFT SYSTEM LTD. VS. CIT, QUOTED ABOVE, CONSIDERED THE DIFFERENT ASPECTS OF THIS ISSUE IN DETAIL AND IT HAS BEEN UPHELD THAT THE RULE OF PRITHPAL SINGH & CO.'S CASE SH OULD APPLY FOR YEARS PRIOR TO A.Y. 2003-04 WHERE THERE IS NO POSITIVE TOTA L INCOME EVEN AFTER ADDITIONS. THIS AMENDMENT BROUGHT BY FINANCE ACT 2002 WAS HELD TO BE PROSPECTIVE IN NATURE, APPLICABLE FROM A.Y. 2003-04. THE NOTES AND CLAUSES 7 ITA NO.1690/PN/2012 ISSUED TO CLAIM THAT THE AMENDMENT IS CLARIFICATORY OR DECLARATORY IN NATURE WAS NOT ACCEPTED. AFTER THIS JUDGMENT OF HON'B LE SUPREME COURT, IT IS NOW UNDERSTOOD THAT NO PENALTY CAN BE LEVIED WHERE THE LOSS IS OVERSTATED UPTO A.Y. 1976-77. AFTER THE AMENDMENT MA DE IN 1976, IF THE LOSS GET; CONVERTED INTO A POSITIVE INCOME, THE PENALT Y CAN BE HELD LEVIABLE AS PER THE DECISION OF THE MODI CEMENT LTD. VS. UNION OF INDIA (1972) 193 ITR 91 (DEL). FROM A.Y. 2003-04 PENALTY CAN BE LEVI ED EVEN IF THE LOSS IS OVER STATED, IRRESPECTIVE OF THE FACT WHETHER THE FIN AL OUTCOME IS A LOSS; OR A INCOME. IN THE PRESENT CASE, APPARENTLY THE RETURN WAS FILED AT A LOSS AND THE FINAL ASSESSED INCOME BECAME POSITIVE AFTER THE ADDI TIONS. IN VIEW OF THE ABOVE, SINCE THE CASE OF THE APPELLANT IS FALLING IN A.Y. 1989-90, THE PENALTY IS REQUIRED TO BE UPHELD IN VIEW OF THE DECI SION OF THE MODI CEMENT LTD., QUOTED SUPRA. THE FINDING OF THE SUPREM E COURT GIVEN IN THE CASE OF VIRTUAL SOFT SYSTEM LTD. WILL NOT APPLY IN TH E SENSE HAS BEEN CLAIMED. FOR THE REASONS DISCUSSED, EVEN ON THIS CONSIDERA TION THE GROUND NO. 1 OF THE APPELLANT CANNOT BE ALLOWED AND IS TREA TED AS DISMISSED. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE A ND PERUSED THE MATERIAL ON RECORD AND FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) SUSTAINING THE PENALTY LEVIED BY THE AO U/S.271(1)(C) OF THE IT. ACT. IT IS AN ADMITTED FACT THAT IN THE INSTANT CASE TH E ASSESSEE HAS SOLD BAGASSE OUTSIDE BOOKS OF ACCOUNT AMOUNTING TO RS.1,1 9,32,050/-. SIMILARLY, THE ASSESSEE WAS ALSO UNABLE TO EXPLAIN THE SHO RTAGE OF MOLASSES STOCK AT RS.9,62,150/-. THE EXPLANATION OF THE AS SESSEE BEFORE THE CIT(A) THAT ASSESSEE WAS FACING DIFFICULTY IN RUNNIN G THE FACTORY DUE TO SHORT SUPPLY OF RAW MATERIALS IN OUR OPINIO N CANNOT BE A GROUND FOR MAKING SALES OUTSIDE THE BOOKS OF ACCOUNTS AN D NON SUBMISSION OF DETAILS FOR SHORTAGE OF MOLASSES STOCK. SINC E THE ORDER OF THE CIT(A) IN OUR OPINION IS A REASONED ONE WHICH HAS BE EN REPRODUCED IN THE PRECEDING PARAGRAPHS, THEREFORE, WE FIN D NO INFIRMITY IN THE ORDER OF THE CIT(A) CONFIRMING THE LEVY OF PENA LTY U/S.271(1)(C) OF THE IT. ACT. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 8 ITA NO.1690/PN/2012 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10-07-2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) ! / JUDICIAL MEMBER / ACCOUNTANT MEMBER IQ.KS PUNE ; ! DATED : 10 TH JULY, 2015. LRH'K &'(!)*+%) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # # $ ( ) -I, IQ.KS / THE CIT(A)-I, PUNE 4. # # $ -I, IQ.KS / THE CIT-I, PUNE 5. '() **+, , # +, , IQ.KS / DR, ITAT, B PUNE; 6. )./ 0 / GUARD FILE. &# , / BY ORDER , ' * //TRUE COPY// ' * //TRUE COPY// 123 *4 +5 / SR. PRIVATE SECRETARY # +,, IQ.KS / ITAT, PUNE