The ACIT, Circle-1, Bhavnagar V. Zeo Chem Pvt. Ltd., Bhavnagar

ITA 2909/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6777 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-04-2011
• Assessment Year: 1997-1998
• Appeal Filed On: 23-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTASR
• Keywords: Unexplained cash credit; Reasonable cause; Onus to prove
• Section: 143(3); 68; 12

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI M.K. SHRAWAT, JM AND D.C.AGRAWAL, AM ASSTT. C.I.T., CIRCLE-1, BHAVNAGAR. VS. ZEO CHEM (P) LTD.,C-275, GIDC, CHITRA, BHAVNAGAR. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI R. K. DHANESTA,SR.D.R. RESPONDENT BY:- SHRI VIMAL DESAI, AR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUNDS :- 1. THE LD. CIT(A) XX, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN CANCELING THE PENALTY OF RS.3,19,400/- LEVIED U/ S 271(1)(C) OF THE IT ACT BY THE AO WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 1.2 IN DOING SO, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE ASSESSEE COULD NOT SUBSTANTIA TE ITS EXPLANATION REGARDING THE VARIOUS ENTRIES APPEARING IN ITS BOOKS OF ACCOUNTS LEADING TO UPHOLDING OF THE ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDITS BY THE LD. CIT(A) AND THER EFORE THE SAID PENALTY U/S 271(1)(C) READ WITH EXPLANATION 1 WAS RIGHTLY LEVIED BY THE AO. 1.3 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CAN CELING THE SAID PENALTY ON THE GROUND THAT THE ISSUE IS DISPUT ABLE AND DEBATABLE WITHOUT APPRECIATING THAT THE CLAIM OF CA SH CREDITS INTRODUCED IN THE ACCOUNTS OF THE ASSESSEE WAS FOUN D TO BE FALSE AS EVEN THE IDENTITY OF THOSE CREDITORS COULD NOT B E ESTABLISHED. ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 2 1.4 IN DOING SO, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE DECISION OF THE HON. SUPREME COURT IN THE CASE OF UNION OF INDIA & OTHERS VS. DHARAMENDRA TEXTILE PROCESSORS & OTHERS REPORTED IN 306 ITR 277 IN WHICH THE HON. APEX COURT HAS HELD THAT WILLFUL CONCEALMENT IS NOT AN E SSENTIAL INGREDIENT FOR LEVY OF PENALTY U/S 271(1)(C). 2. THUS THE REVENUE IS AGGRIEVED AGAINST THE ORDER OF LD. CIT(A) DATED 29.07.2009 WHEREIN HE HAS CANCELLED THE PENAL TY LEVIED BY THE AO U/S 271(1)(C) OF RS.3,19,400/-. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF MANUFACTURING AND SALES OF INORGANIX CH EMICALS. IT FILED RETURN OF INCOME ON 24.11.1997 DECLARING LOSS OF RS .28,06,873/-. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 2 1.03.2000 DETERMINING TOTAL INCOME AT RS.33,66,149/-. THE MAT TER WENT BEFORE THE LD. CIT(A) WHO ALLOWED PART RELIEF TO THE ASSESSEE. BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT APPEALED BEFORE THE HON. ITA T. VIDE ITS ORDER IN ITA NO.2100/RJT/2002 ASST. YEAR 1997-98, M/S ZEO CH EM PRIVATE LIMITED VS. DCIT AND ITA NOS.2124 & 2125/RJT/2002 ASST. YEAR 1997- 98 & 98-99 ACIT VS. M/S ZEO CHEM (P) LTD. DATED 31 .05.2005 RESTORED THE MATTER BACK TO THE FILE OF AO FOR FURTHER VERIF ICATION. IN THE ASSESSMENT ORDER DATED 29/12/2006 PASSED UNDER SECT ION 143(3)/254 THE AO COMPUTED THE INCOME AS UNDER :- TOTAL INCOME AS PER ORDER GIVING EFFECT TO ITATS ORDER DTD.07.09.2005 RS.2,70,149/- ADD: UNEXPLAINED CASH CREDITS AND INTEREST THERE ON AS DISCUSSED ABOVE RS.7,42,785/- REVISED TOTAL INCOME RS.10,12,934/- LESS: BROUGHT FORWARD LOSS IS CLAIMED RS.52,89,199/- BUT ALLOWED TO THE EXTENT OF INCOME RS.10,12,934/- NET TAXABLE INCOME RS.NIL LOSS OF RS.42,76,265/- IS ALLOWED TO BE CARRIED FORWARD. ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 3 THUS THE AO PROPOSED AN ADDITION OF RS.7,42,786/- B EING UNEXPLAINED CREDIT AND INTEREST THEREON. THIS ADDITION RELATED TO SIX ITEMS OF CREDITS IN RESPECT OF WHICH AO HAD OBSERVED AS UNDER :- 30. DOLAR M. SHAH RS.25,000/-: THE ASSESSEE NOT G IVEN AND CONFIRMATION LETTER OR ADDRESS OF THE DEPOSIT. 31. SONAL KANAIYALAL SHAH RS.50,000/-: THE ASSESS EE NOT GIVEN AND CONFIRMATION LETTER OR ADDRESS OF THE DEPOSITOR . 32. DIPTIBEN V. JAYKUMAR RS.50,000/-: THE ASSE SSEE NOT GIVEN AND CONFIRMATION LETTER OR ADDRESS OF THE DEPOSITOR. 33. RAJ FIBRE GLASS LTD. RS.50,000/-: THE ASSESSEE NOT GIVEN AND CONFIRMATION LETTER OR ADDRESS OF THE DEPOSITOR. 34. M/S GAUTAM METAL WORKS RS.5,00,000/-: THE ASSESSEE SUBMITTED THAT SHRI DHARMENDRABHAI K. SHAH, PROP. O F M/S GAUTAM METAL CORP. EXPIRED ON 27.04.2002. COPY OF ACKNOWLEDGMENT OF RETURN OF INCOME FOR ASST. YEAR 1 997-98 IS FILED. BANK ACCOUNT NOT PRODUCED. FROM THE SUBMISSI ON FILED BY THE ASSESSEE IT IS NOTICED THAT SHRI DHARMENDRABHAI K. SHAH IS A SON OF SHRI KANTIBHAI SHAH WHO IS POPULARLY KNOWN AS SHRI KANTIBHAI VASANVALA AND IN FACT SHRI KANTIBHAI VASA NVALA IS UNDER HUGE DEBT AND HE HAS NO CREDITWORTHINESS. IT IMPLIES THAT A MAN WHO TAKE HUGE LOAN FROM THE PEOPLE CAN NEVER GIVE LOAN TO OTHERS. IN ORIGINAL ASSESSMENT STAGE ALSO THE AS SESSEE DID NOT PRODUCE THIS PERSON. 3. AS STATED ABOVE FOR DEPOSITORS OF SR.NO.29 TO 34 THE ASSESSEE FAILED TO DISCHARGE ITS ONUS TO PROVE THE GENUINENESS, CRE DITWORTHINESS AND EXISTENCE OF THE DEPOSITORS. THUS, IN VIEW OF THESE FACTS, ADDITION TO THE EXTENT OF RS.7,30,000/- IS MADE TO THE TOTAL INCOME OF THE ASSESSEE BEING A NON-GENUINE CASH CREDIT U/S 68 OF THE IT ACT. SINCE THE ABOVE DEPOSITS HELD AS UNEXPLAINED AND NON-GENUINE, AS A NATURAL C OROLLARY THE INTEREST PAID THEREON TO THE TUNE OF RS.12,785/- IS DISALLOW ED AND ADDED TO THE TOTAL INCOME. PENALTY PROCEEDINGS U/S 271(1)(C) IS INITIATED SEPARATELY FOR THE CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF THE INCOME. ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 4 IT SEEMS THAT MATTER BECAME FINAL AS LD. CIT(A) DIS MISSED THE APPEAL OF THE ASSESSEE BY CONFIRMING ADDITIONS AND NO FURTHER APPEAL CHANNEL WAS USED BY THE ASSESSEE. ACCORDING TO THE AO THE ASSES SEE FAILED TO DISCHARGE THE ONUS IN RESPECT OF THESE CREDITORS IN ASMUCH AS IT HAS WITHDRAWN THE APPEAL FILED BEFORE LD. CIT(A). HOLDI NG THAT THERE IS FILING OF INACCURATE PARTICULARS OF INCOME/CONCEALMENT OF PARTICULARS OF INCOME AO LEVIED THE PENALTY. 4. THE LD. CIT(A) DELETED THE PENALTY ON THE GROUND THAT ADDITION IS MADE ONLY DUE TO NON-SUBMISSION OF SOME INFORMATION AND FOR NOT PRODUCING SOME OF THE DEPOSITORS. ACCORDING TO THE LD. CIT(A) THE EXPLANATION OF THE ASSESSEE IS NOT FALSE OR MALA FI DE. 5. BEFORE US, THE LD. DR SUBMITTED THAT EXPLANATION -1 TO SECTION 271(1)(C) IS CLEARLY APPLICABLE INASMUCH AS ASSESSE E HAS FAILED TO FURNISH MATERIAL EVIDENCE WHICH WAS NECESSARY FOR COMPUTATI ON OF INCOME AND THAT EXPLANATION OF THE ASSESSEE CANNOT BE TERMED A S BONA FIDE. 6. AGAINST THIS, THE LD. AR SUBMITTED THAT CASE OF THE ASSESSEE IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CAUSE FOR ASST. YEAR 2001-02 AND IN ITA NO.1038/AHD/2010 PRONOUNCED ON 31.12.2010 AND ALSO THE DECISION OF THE TRIBUNAL IN ITA NO.392 9/AHD/2007 ASST. YEAR 1995-96 IN THE CASE OF MAXIMA SYSTEMS LTD. VS. ACIT PRONOUNCED ON 11.06.2010 WHEREIN IT IS HELD THAT AS PER CLAUSE (C) TO EXPLANATION-4 TO SECTION 271(1)(C) IF ASSESSED INCOME IS FINALLY NIL THEN NO PENALTY CAN BE LEVIED. 7. IN REJOINDER THE LD. DR SUBMITTED THAT IT IS EXP LANATION-4(A) TO SECTION 271(1)(C) WHICH WOULD BE APPLICABLE TO THE FACTS OF THE CASE AND ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 5 NOT EXPLANATION 4(C) AS ASSESSEES RETURNED INCOME IS LOSS IN WHICH CASE ONLY CLAUSE (A) WOULD BE APPLICABLE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE FIRST ISSUE T O BE DECIDED IS WHETHER THERE IS A CONCEALMENT OF INCOME OR DEEMED CONCEALM ENT OF INCOME WITHIN THE MEANING OF EXPLANATION-1 TO SECTION 271( 1)(C). WE NOTICE THAT IN THE CASE OF THE CREDITORS DOLAR M. SHAH, SONAL K . SHAH, DIPTIBEN V. JAYKUMAR AND RAJ FIBRE GLASS LTD. FROM WHOM THE ASS ESSEE HAS SHOWN TO HAVE BORROWED RS.25,000/-, RS.50,000/-, RS.50,000/- AND RS.50,000/- RESPECTIVELY, ASSESSEE HAS NOT GIVEN ANY CONFIRMATI ON LETTER OR ADDRESSES OF THE DEPOSITORS. IN OUR CONSIDERED VIEW THESE ARE THE MATERIAL EVIDENCE FOR THE PURPOSE OF MAKING ASSESSMENT AS IT WOULD HA VE ENABLED THE AO TO CARRY OUT THE ENQUIRIES. MERE CERTAIN CLAIMS MADE B Y THE ASSESSEE BUT NECESSARY PARTICULARS FOR VERIFICATION OF SUCH CLAI M HAVE NOT BEEN FILED BEFORE THE AO THEN THE ONLY INFERENCE WHICH CAN BE DRAWN WOULD BE THAT EITHER CLAIM IS FALSE OR ASSESSEE IS NOT COMPLETELY SUBMITTING THE DETAILS THUS PREVENTING THE AO FROM CARRYING OUT THE ENQUIR IES UNLESS ASSESSEE IS ABLE TO SATISFY THAT HE IS PREVENTED BY SUFFICIENT CAUSE FROM FURNISHING THE DETAILS REQUIRED BY THE AO AND SUCH A CASE IS FOUND GENUINE BY THE REVENUE AUTHORITIES. OTHERWISE NON-FURNISHING OF TH E DETAILS PREVENTING THE AO TO CARRY OUT ITS VERIFICATION WOULD BE THE C ASE COVERED WITHIN THE MEANING OF EXPLANATION-1 TO SECTION 271(1)(C) WHICH READS AS UNDER :- SEC. 271(1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (APP EALS) [OR THE COMMISSIONER] IN THE COURSE OF ANY PROCEEDINGS UNDE R THIS ACT, IS SATISFIED THAT ANY PERSON (A). (B). (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, OR (D) ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 6 HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY EXPLANATION -1 WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COM PUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER(APPEAL S) OR THE COMMISSIONER TO BE FALSE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND [FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT A LL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM], THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING TH E TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. THE CASE OF THE ASSESSEE WOULD FALL IN CLAUSE (B) O F EXPLANATION-1 TO SECTION 271(1)(C).THERE ARE THREE INGREDIENTS TO BE SATISFIED. (I) ONE IS ASSESSEE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE. (II) ASSESSEE FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE. (III) ALL THE FACTS RELATING TO THE EXPLANATION AND MATERIAL TO THE COMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. IN RESPECT OF CASH CREDITS, THE PARTICULARS REQUIRED T O BE FILED AND WHICH WOULD ESCAPE THE APPLICABILITY OF CLAUSE (B) TO EXP LANATION-1 WOULD BE COMPLETE NAME AND ADDRESS OF THE CREDITORS, HIS CON FIRMATION AND DETAILS OF THE BANK ACCOUNT THROUGH WHICH MONEY IS RECEIVED . THESE ARE MATERIAL INFORMATION WHICH ENABLES THE AO TO PROCEED FURTHER FOR VERIFICATION OF THE CLAIM OF CASH CREDIT. EVEN THEREAFTER IF AO IS NOT SATISFIED THEN ADDITION CAN BE MADE BUT SUCH ADDITION MAY NOT ATTR ACT PENALTY PROCEEDINGS AND IT MAY NOT BE CALLED AS DEEMED CONC EALED WITHIN THE MEANING OF EXPLANATION-1 TO SECTION 271(1)(C) BUT W HERE SUCH CONFIRMATION AND ADDRESS OF THE DEPOSITOR IS NOT FU RNISHED THEN THERE IS A ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 7 LACK OF DISCLOSURE OF SUCH PARTICULARS AND THE ADDI TION MADE IN THE CASE OF THE ASSESSEE WOULD ATTRACT EXPLANATION-1(B) TO SECT ION 271(1)(C). IN THE CASE OF M/S GAUTAM METAL WORKS FROM WHOM ASSESSEE H AS SHOWN TO HAVE BORROWED RS.5,00,000/- ASSESSEE FAILED TO PRODUCE T HE PARTICULARS OF THE BANK AND ALSO DID NOT REPLY TO THE ALLEGATION OF TH E AO THAT THIS CREDITOR HAS NO CREDITWORTHINESS AS IT IS ALREADY UNDER LOT OF DEBTS. HERE ALSO MATERIAL FACTS ARE MISSING WHEN ASSESSEE FAILED TO PRODUCE THE BANK ACCOUNT IN CONNECTION WITH THE ALLEGATION THAT THE CREDITOR IS ALREADY A POPPER. THUS IN OUR CONSIDERED VIEW CASE OF THE ASS ESSEE ATTRACTS EXPLANATION 1(B) TO SECTION 271(1)(C). 9. IN ORDER TO FIND OUT WHICH OF THE CLAUSES OF EXP LANATION-4 WOULD BE APPLICABLE TO THE FACTS OF THE CASE, WE CONSIDER EX PLANATION-4 TO SECTION 271(1)(C) AS STOOD IN ASST. YEAR 1997-98 AS UNDER : - EXPLANATION 4.-FOR THE PURPOSES OF CLAUSE (III) OF THIS SUB-SECTION, THE EXPRESSION 'THE AMOUNT OF TAX SOUGHT TO BE EVADED', -- (A) IN ANY CASE WHERE THE AMOUNT OF INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTI CULARS HAVE BEEN FURNISHED EXCEEDS THE TOTAL INCOME ASSESSED, MEANS THE TAX THAT WOULD HAVE BEEN CHARGEABLE ON THE INCOME IN RESPECT OF WH ICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED HAD SUCH INCOME BEEN THE TOTAL INCOME ; (B) IN ANY CASE TO WHICH EXPLANATION 3 APPLIES, MEA NS THE TAX ON THE TOTAL INCOME ASSESSED ; (C) IN ANY OTHER CASE, MEANS THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CH ARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME I N RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTI CULARS HAVE BEEN FURNISHED. ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 8 10. THEREAFTER FINANCE ACT, 2002, SUBSTITUTED NEW C LAUSE(A) W.E.F. 1.4.2003. THE NEW CLAUSE (A) READS AS UNDER :- (A) IN ANY CASE WHERE THE AMOUNT OF INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNI SHED 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 OR INACCURATE PARTICULARS HAVE BEEN FURNI SHED HAD SUCH INCOME BEEN THE TOTAL INCOME ; 11. A QUESTION ARISES AS TO WHETHER CLAUSE (A) AS S TOOD AFTER AMENDMENT BY FINANCE ACT 2002 WOULD ALSO BE APPLICABLE FOR AS ST. YEAR PRIOR TO ASST. YEAR 2003-04. HON. SUPREME COURT IN THE CASE OF CIT VS. GOLD COIN HEALTH FOOD (P) LTD. (2008) 304 ITR 308 (SC) H ELD THAT EXPLANATION-4 TO SECTION 271(1)(C)(III) OF THE I.T. ACT, 1961 REGARDING IMPOSITION OF PENALTY EVEN IF RETURNED INCOME IS LO SS IS CLARIFICATORY AND NOT SUBSTANTIVE. IT APPLIES EVEN TO ASST. YEAR PRIO R TO APRIL 1, 2003 THE DATE ON WHICH IT WAS BROUGHT INTO FORCE. WHAT THE F INANCE ACT 2002 INTENDED WAS TO MAKE THE POSITION EXPLICIT WHICH WA S OTHERWISE IMPLIED. HONBLE SUPREME COURT CONSIDERED THE EXPLANATORY NO TES WHICH EXPLAIN THAT THE ADDITION REPRESENTING THE CONCEALED INCOME HAD THE EFFECT OF REDUCING THE LOSS DECLARED IN THE RETURN OR CONVERT ING THE LOSS INTO INCOME THE TAX SOUGHT TO BE EVADED SHALL BE THE TAX THAT W OULD HAVE BEEN CHARGEABLE ON THE AMOUNT OF SUCH INCOME AS IF IT WA S THE TOTAL INCOME. HON. SUPREME COURT CONSIDERED THE NATURE OF AMENDME NT AND HELD THAT THE DATE WHEN THE AMENDMENT CAME INTO EFFECT DOES N OT CONCLUSIVELY DECIDE THE QUESTION AS FROM WHICH DATE THE AMENDMEN T WOULD BE APPLICABLE. HON. SUPREME COURT REFERRED TO EXPLANAT ION 4(A) AS INSERTED W.E.F. APRIL 1, 1976 AND EXPLANATION THERETO AND AL SO TO THE CIRCULAR ISSUED BY THE GOVERNMENT EXPLAINING THE INTENT FOR INSERTI ON EXPLANATION 4(A). THE HON. SUPREME COURT THEREAFTER HELD AS UNDER :- A COMBINED READING OF THE COMMITTEES RECOMMENDATI ONS AND THE CIRCULAR MAKES THE POSITION CLEAR THAT EXPLANATION 4(A) TO SECTION ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 9 271(1)(C) INTENDED TO LEVY THE PENALTY NOT ONLY IN A CASE WHERE AFTER ADDITION OF CONCEALED INCOME, A LOSS RETURNED, AFTE R ASSESSMENT BECOMES POSITIVE INCOME BUT ALSO IN A CASE WHERE ADDITION OF CONCEALED INCOME REDUCES THE RETURNED LOSS AND FINALLY THE ASSESSED INCOME IS ALSO A LOSS OR A MINUS FIGURE. THEREFORE, EVEN DURING THE PERIO D BETWEEN APRIL 1, 1976 AND APRIL 1, 2003, THE POSITION WAS THAT THE PENALTY WAS LEVIABLE EVEN IN A CASE WHERE ADDITION OF CONCEALED INCOME REDUCES THE RETURNED LOSS. WHEN THE WORD INCOME IS READ TO INCLUDE LOSSES AS HELD IN HARPRASADS CASE* IT BECOMES CRYSTAL CLEAR THAT EVEN IN A CASE WHERE ON ACCOUNT OF ADDITION OF CONCEALED INCOME THE RETURNED LOSS STAN DS REDUCED AND EVEN IF THE FINAL ASSESSED INCOME IS A LOSS, STILL PENAL TY WAS LEVIABLE THEREON EVEN DURING THE PERIOD APRIL 1, 1976, TO APRIL 1, 2003. EVEN IN THE CIRCULAR DATED JULY 24, 1976, REFERRED TO ABOVE, T HE POSITION WAS CLARIFIED BY THE CENTRAL BOARD OF DIRECT TAXES (IN SHORT THE CBDT). IT IS STATED THAT IN A CASE WHERE ON SETTING OFF THE CONCEALED INCOME AGAINST ANY LOSS INCURRED BY THE ASSESSEE UNDER ANY OTHER HEAD OF INCOME OR BROUGHT FORWARD FROM EARLIER YEARS, THE TOTAL INCO ME IS REDUCED TO A FIGURE LOWER THAN THE CONCEALED INCOME OR EVEN TO A MINUS FIGURE THE PENALTY WOULD BE IMPOSABLE BECAUSE IN SUCH A CASE THE TAX SOUGHT TO BE EVADED WILL BE TAX CHARGEABLE ON CONCEALED INCOME AS IF IT IS TOTAL INCOME. 12. IN RESPECT OF RETROSPECTIVITY THE HON. SUPREME COURT OBSERVED AS UNDER :- 14. THE PRESUMPTION AGAINST RETROSPECTIVE OPERATIO N IS NOT APPLICABLE TO DECLARATORY STATUTES . . . IN DETERMINING, THEREFOR E, THE NATURE OF THE ACT, REGARD MUST BE HAD TO THE SUBSTANCE RATHER THAN TO THE FORM. IF A NEW ACT IS TO EXPLAIN AN EARLIER ACT, IT WOULD BE WITHOUT OBJECT UNLESS CONSTRUED RETROSPECTIVELY. AN EXPLANATORY ACT IS GENERALLY PA SSED TO SUPPLY AN OBVIOUS OMISSION OR TO CLEAR UP DOUBTS AS TO THE ME ANING OF THE PREVIOUS ACT. IT IS WELL-SETTLED THAT IF A STATUTE IS CURATI VE OR MERELY DECLARATORY OF THE PREVIOUS LAW RETROSPECTIVE OPERATION IS GENERAL LY INTENDED. . . . AN AMENDING ACT MAY BE PURELY DECLARATORY TO CLEAR A M EANING OF A PROVISION OF THE PRINCIPAL ACT WHICH WAS ALREADY IM PLICIT. A CLARIFICATORY AMENDMENT OF THIS NATURE WILL HAVE RETROSPECTIVE EF FECT (IBID., PAGES 468- 69). 15. THOUGH RETROSPECTIVITY IS NOT TO BE PRESUMED AN D RATHER THERE IS PRESUMPTION AGAINST RETROSPECTIVITY, ACCORDING TO C RAIES (STATUTE LAW, 7TH EDN.), IT IS OPEN FOR THE LEGISLATURE TO ENACT LAWS HAVING RETROSPECTIVE ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 10 OPERATION. THIS CAN BE ACHIEVED BY EXPRESS ENACTMEN T OR BY NECESSARY IMPLICATION FROM THE LANGUAGE EMPLOYED. IF IT IS A NECESSARY IMPLICATION FROM THE LANGUAGE EMPLOYED THAT THE LEGISLATURE IN TENDED A PARTICULAR SECTION TO HAVE A RETROSPECTIVE OPERATION, THE COU RTS WILL GIVE IT SUCH AN OPERATION. IN THE ABSENCE OF A RETROSPECTIVE OPERAT ION HAVING BEEN EXPRESSLY GIVEN, THE COURTS MAY BE CALLED UPON TO CONSTRUE THE PROVISIONS AND ANSWER THE QUESTION WHETHER THE LEGISLATURE HAD SUFFICIENTLY EXPRESSED THAT INTENTION GIVING THE STATUTE RETROS PECTIVITY. FOUR FACTORS ARE SUGGESTED AS RELEVANT : (I) GENERAL SCOPE AND PURVIEW OF THE STATUTE ; (II) THE REMEDY SOUGHT TO BE APPLIED ; (III) THE F ORMER STATE OF THE LAW ; AND (IV) WHAT IT WAS THE LEGISLATURE CONTEMPLATED (PAGE 388). THE RULE AGAINST RETROSPECTIVITY DOES NOT EXTEND TO PROTECT FROM THE EFFECT OF A REPEAL, A PRIVILEGE WHICH DID NOT AMOUNT TO ACCRUED RIGHT (PAGE 392). THE ABOVE BEING THE POSITION, THE INEVITABLE CONCLU SION IS THAT EXPLANATION 4 TO SECTION 271(1)(C) IS CLARIFICATORY AND NOT SUBSTANTIVE. THE VIEW EXPRESSED TO THE CONTRARY IN VIRTUALS CAS E [2007] 9 SCC 665 IS NOT CORRECT. 13. IN VIEW OF THE EXPLICIT DECISION OF HON. SUPREM E COURT (LARGER BENCH) THE AMENDMENT BY THE FINANCE ACT, 2002 THOUG H STATED TO BE EFFECTIVE FROM 1.4.2003 WOULD BE APPLICABLE TO EARL IER ASST. YEAR ALSO MEANING THEREBY THAT IT WOULD BE APPLICABLE TO ASST . YEAR 1997-98 AS WELL. PRIOR TO THE DECISION IN GOLD COIN HEALTH FOO D (P) LTD. (SUPRA), HON. SUPREME COURT IN VIRTUAL SOFT SYSTEMS LTD. VS. CIT (2007) 289 ITR 83 (SC) HAD TAKEN A CONTRARY VIEW WHICH WAS OVER-RU LED IN GOLD COIL HEALTH FOOD (P) LTD. (SUPRA). EARLIER TO THE DECISI ON IN VIRTUAL SOFT SYSTEMS LTD. VS. CIT (SUPRA), HON. DELHI HIGH COURT IN CIT VS. ADITYA CHEMICALS LTD. AND OTHERS (2006) 283 ITR 458 (DEL) ANALYSED THE THEN EXISTING PROVISIONS OF EXPLANATION-4 AND HAD OBSERV ED AS UNDER :- THE LIABILITY TO PENALTY ARISES IF ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. THE LIABILITY FOR PENALTY IS NOT IN ANY MAN NER LINKED WITH WHETHER THE TOTAL INCOME ASSESSED IS POSITIVE OR NEGATIVE. EXPLANATION 4 TO SECTION ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 11 271(1)(C) OF THE INCOME-TAX ACT, 1961, DEALS WITH T HREE DIFFERENT AND DISTINCT SITUATIONS UNDER CLAUSES (A), (B) AND (C). CLAUSE (A) PERTAINS TO A SITUATION WHERE THE AMOUNT OF INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED EXCEEDS THE TOTAL INCOME ASSESSED. CLAUSE (B) DEALS WITH A SITUATION WHERE EXPLANATION 3 APPLIES. BY VIRTUE OF EXPLANATI ON 3, SINCE NO RETURN IS FILED BEFORE A SPECIFIED DATE, THE ENTIRE TAXABL E INCOME IS DEEMED TO BE THE CONCEALED INCOME AS THE RETURNED INCOME IS TAKE N TO BE ZERO, NOTWITHSTANDING THE FACT THAT A RETURN MAY IN FACT BE FILED AFTER THE STIPULATED DATE. CLAUSE (C) IS THE RESIDUAL CLAUSE AND DEALS WITH ALL CASES OF CONCEALED INCOME WHICH DO NOT FALL UNDER CLAUSE (A) OR (B). INCOME INCLUDES LOSS. FOR THE PURPOSES OF IMPOSITIO N OF PENALTY UNDER SECTION 271(1)(C), IT IS NOT AT ALL NECESSARY THAT ANY TAX IS PAYABLE ON THE TOTAL INCOME ASSESSED. IF IT WERE LINKED TO THE PAY MENT OF TAX THEN IT WOULD BE RELEVANT TO DIFFERENTIATE BETWEEN POSITIVE INCOM E OR NEGATIVE INCOME. BUT, AS PENALTY IS NOT LINKED TO THE FACTUM OF PAYM ENT OF TAX, IT IS NOT NECESSARY TO SPECIFY WHETHER THE TOTAL INCOME ASSES SED REFERS TO POSITIVE INCOME OR NEGATIVE INCOME. CIT V. C. R. NIRANJAN [1991] 187 ITR 280 (MAD) AND CIT V. N. KRISHNAN [1999] 240 ITR 47 (KER) DISSENTED FROM CIT V. ELPHI NSTONE SPG. AND WVG. MILLS CO. LTD. [1960] 40 ITR 142 (SC) DISTINGU ISHED AND EXPLAINED. THE ASSESSEE FILED A RETURN FOR THE ASSESSMENT YEAR 1989-90 SHOWING A LOSS OF RS. 2.36 CRORES AND ASSESSMENT WAS COMPLETE D AT A REDUCED AMOUNT OF LOSS OF RS. 1.21 CRORES. THE ASSESSING OF FICER LEVIED A PENALTY OF RS. 1.6 CRORES UNDER SECTION 271(1)(C). THE COMM ISSIONER (APPEALS) CONFIRMED THE LEVY OF PENALTY BUT REDUCED IT TO RS. 56.01 LAKHS. ON FURTHER APPEAL BY BOTH THE ASSESSEE AND THE DEPARTMENT, THE TRIBUNAL RELYING ON THE DECISION IN CIT V. PRITHIPAL SINGH [1990] 183 I TR 69 (P & H) CANCELLED THE PENALTY. ON APPEAL : HELD,_ (I) THAT PRITHIPAL SINGHS CASE [1990] 183 I TR 69 (P & H) WAS DECIDED ON THE MERITS WITH REGARD TO THE EXISTENCE OF CONCEALMENT AS AN ISSUE OF FACT AND THE COURT FOUND AS A FACT THAT THERE WAS NO CONCEALMENT IN TH AT CASE. IT COULD NOT BE GENERALISED THAT AS THE ASSESSED INCOME WAS A LOSS FIGURE THE A SSESSEE COULD NOT HAVE A MOTIVE FOR CONCEALMENT. THAT DECISION DID NOT AND COULD NOT ME AN THAT THERE MUST BE A TAX PAYABLE BEFORE A PENALTY CAN BE LEVIED. IT ONLY MEA NT THAT THE PENALTY AMOUNT WILL BE OVER AND ABOVE ANY TAX PAYABLE. THE EVENT THAT TR IGGERED A LIABILITY OF PENALTY WAS ENTIRELY DIFFERENT AND DISTINCT FROM THE TAXABLE EV ENT. IT DID NOT MEAN THAT TAX BEING PAYABLE IS A CONDITION PRECEDENT FOR THE PENALTY BE ING LEVIED. THE ASSESSMENT YEAR INVOLVED IN THAT CASE WAS 1970-71 AND EXPLANATION 4 TO SECTION 271(1)(C) DID NOT EVEN EXIST AT THAT TIME. THEREFORE, THE DECISION IN PRIT HIPAL SINGH COULD NOT BE A PRECEDENT OR AUTHORITY WITH REGARD TO THE INTERPRETATION OF E XPLANATION 4. THEREFORE, THE TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THAT THE DECI SIONS IN PRITHIPAL SINGHS CASE (183 ITR 69 AND 249 ITR 670) WOULD APPLY EVEN AFTER THE INSERTION OF EXPLANATION 4 TO ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 12 SECTION 271(1)(C) WITH EFFECT FROM APRIL 1, 1976. O BSERVATIONS ON EXPLANATION 4 TO SECTION 271(1)(C) IN CIT V. PRITHIPAL SINGH AND CO. [1990] 183 ITR 69 (P&H) HELD OBITER DICTA. 14. THUS, HON. DELHI HIGH COURT HELD ON THE THEN EX ISTING CLAUSE 4(A) THAT IT WOULD BE APPLICABLE WHERE ADDITION ON ACCOU NT OF CONCEALED INCOME IS MORE THAN TOTAL INCOME ASSESSED. IF WE AP PLY THE RATIO OF HON. DELHI HIGH COURT IN ADITYA CHEMICAL LTD. & OTHERS ( SUPRA)S CASE ON THE BASIS OF THE THEN EXISTING EXPLANATION 4(A) WE FIND THAT ADDITION IN THE PRESENT CASE IS OF RS.7,42,785/- WHICH IS MORE THAN THE ASSESSED INCOME OF RS.NIL. 15. WHEN WE CONSIDER TO APPLY NEW EXPLANATION 4(A) INTRODUCED BY FINANCE ACT, 2002 AND MADE EFFECTIVE PRIOR TO THE A SST. YEARS 2003-04 ALSO BY THE HON. SUPREME COURT IN GOLD COIN HEALTH FOOD (P) LTD. (SUPRA) WE FIND THAT RETURNED INCOME IN THE PRESENT CASE IS A LOSS OF RS.28,06,873/- AND ASSESSMENT HAS BEEN MADE AT RS.N IL. THUS THE ADDITION AS SUCH WOULD BE THE CONCEALED INCOME ON W HICH PENALTY IS LEVIABLE. 16. IN THIS REGARD WE MAY ANALYSE THE THREE CLAUSES OF NEW EXISTING EXPLANATION -4. CLAUSE (A) IS APPLICABLE IN A SITUA TION WHERE ADDITION (REPRESENTING CONCEALED INCOME OR INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED) REDUCES THE LOSS D ECLARED IN THE RETURN. IT MEANS RETURNED INCOME IS A LOSS AND ASSESSED INCOME IS ALSO A LOSS. THE SECOND SITUATION COVERED IN CLAUSE (A) IS WHERE ADD ITION CONVERTS LOSS DECLARED IN THE RETURN INTO THE INCOME. IN OTHER WO RDS RETURN INCOME IS A LOSS WHEREAS ASSESSED INCOME BECOMES A POSITIVE INC OME BY VIRTUE OF ADDITION. THIS CAN BE FURTHER UNDERSTOOD BY THE FOL LOWING EXAMPLE :- ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 13 TWO ASSESSEES HAVE DECLARED IN THE RETURN A LOSS SA Y RS.100/-. THE AO MAKES THE ADDITION IN ONE CASE OF RS.75/- AND ANOTH ER CASE OF RS.150/-. IN THE FIRST CASE ASSESSMENT WOULD BE DONE ON A LOSS O F RS.25/- AND IN THE OTHER CASE ASSESSMENT WOULD BE DONE ON AN INCOME OF RS.50/-. THUS THE FIRST ADDITION OF RS.75/- IN THE FIRST CASE HAD THE EFFECT OF REDUCING THE LOSS FROM RS.100/- TO RS.25/- AND IN THE SECOND CASE THE EFFECT IS TO CONVERT LOSS OF RS.100/- TO AN INCOME OF RS.50 BY VIRTUE OF ADDITION OF RS.150/-. EXPLANATION 4(A) THEN SAYS THAT THE TAX ON RS.75 WO ULD BE THE TAX SOUGHT TO BE EVADED FOR THE PURPOSE OF CALCULATION OF PENA LTY IN THE FIRST CASE AND IN THE SECOND SITUATION, TAX ON RS.150/- WOULD BE T HE TAX SOUGHT TO BE EVADED FOR THE PURPOSE OF CALCULATING THE PENALTY. 17. CLAUSE (B) TO EXPLANATION -4 IS APPLICABLE IN A SITUATION COVERED BY EXPLANATION-3 TO SECTION 271(1)(C). THUS WHERE ASSE SSEE FAILS WITHOUT REASONABLE CAUSE TO FURNISH WITHIN THE SPECIFIED TI ME RETURN OF INCOME U/S 153 ENTIRE TAXABLE INCOME IS DEEMED TO BE THE CONCE ALED INCOME AS THE RETURNED INCOME IS TAKEN TO BE THE ZERO. HON. DELHI HIGH COURT IN ADITYA CHEMICALS LTD. (SUPRA) HELD THAT SUCH ENTIRE TAXABL E INCOME WOULD BE CONCEALED INCOME NOTWITHSTANDING THE RETURN IS FILE D AFTER THE STIPULATED DATE. 18. CLAUSE (C) IS A RESIDUAL CLAUSE AND COVERS THOS E SITUATIONS WHICH DO NOT FALL UNDER CLAUSE (A) & CLAUSE (B). 19. THUS FOR THE PURPOSE OF CALCULATING TAX SOUGHT TO BE EVADED BY INVOKING EXPLANATION-4 ONE HAS TO FIRST GO TO CLAUS E (A). IF THE CASE FITS INTO CLAUSE (A) THEN CALCULATION OF TAX SOUGHT TO B E EVADED WOULD BE CARRIED OUT IN ACCORDANCE WITH WHAT IS STATED IN CL AUSE (A) AND ONE NEED NOT GO TO CLAUSE (B) OR CLAUSE (C). WHERE CLAUSE (A ) IS NOT APPLICABLE BUT CLAUSE (B) IS APPLICABLE BECAUSE ASSESSEE HAS FAILE D TO FURNISH A RETURN ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 14 WITHIN THE STIPULATED TIME THEN ONE NEED NOT GO TO CLAUSE (C) TO CALCULATE TAX SOUGHT TO BE EVADED. BUT WHERE FACTS OF A PARTI CULAR CAUSE DOES NOT FALL EITHER IN CLAUSE (A) OR CLAUSE (B) ONLY, THEN ONE HAS TO INVOKE CLAUSE (C). THE WORDS IN ANY OTHER CASE CLEARLY SIGNIFY THE INTENTION OF THE LEGISLATURE THAT CLAUSE (C) IS A RESIDUAL CLAUSE AN D WILL COME INTO PLAY WHEN A CASE DOES NOT FALL IN CLAUSE (A) AND IN CLAU SE (B). THE CLAUSE (C) PROVIDES THAT TAX SOUGHT TO BE EVADED WOULD BE THE DIFFERENCE BETWEEN TAX ON THE ASSESSED INCOME LESS TAX ON (ASSESSED INCOME MINUS ADDITION REPRESENTING CONCEALED) INCOME. THIS CAN BE EXPLAIN ED BY THE FOLLOWING EXAMPLE :- SUPPOSE AN ASSESSEE HAS DECLARED AN INCOME OF RS.10 0. THE AO PROPOSES AN ADDITION OF RS.75/- WHICH CONSISTED OF ADDITION OF RS.50/- IN RESPECT OF WHICH THERE IS A FINDING THAT ASSESSEE HAS CONCEALE D THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E OR IS OTHERWISE A DEEMED CONCEALMENT WITHIN THE MEANING OF EXPLANATIO N-1 TO SECTION 271(1)(C). IN THAT CASE TAX SOUGHT TO BE EVADED WOU LD BE THE DIFFERENCE BETWEEN THE TAX ON RS.175/- AND TAX ON RS.125/-. IT WILL NOT BE THE DIFFERENCE BETWEEN THE TAX ON RS.175/- AND TAX ON R S.100/- BEING THE RETURNED INCOME. IT IS CLEARLY LAID DOWN IN CLAUSE (C) THAT TAX SOUGHT TO BE EVADED WOULD BE THE TAX WHICH IS THE DIFFERENCE BET WEEN THE TAX ON ASSESSED INCOME LESS TAX ON (ASSESSED INCOME MINUS CONCEALED INCOME), AND NOT THE DIFFERENCE BETWEEN THE TAX ON ASSESSED INCOME AND TAX ON RETURNED INCOME. THUS THERE IS A DISTINCTION BETWEE N THE TOTAL ADDITION MADE AND ADDITION IN RESPECT OF WHICH THERE IS A FI NDING ABOUT CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. WHAT IS TO BE REDUCED FROM ASSESSED INCOME FOR THE PURPOSE OF CALCULATING TAX AS PER SECOND LIMB IN CLAUSE (C) IS ONLY THAT ADDITION IN RESPECT OF WHICH THERE IS A FINDING ABOUT CONCEALME NT AND NOT ENTIRE ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 15 ADDITION. THERE IS NO CONFUSION IN RESPECT OF TAX A S PER FIRST LIMB. IT IS THE TAX ON ASSESSED INCOME. 20. NOW CONSIDER THE FACTS OF THE PRESENT CASE. ONC E THERE IS A CLEAR FINDING IN THE ASSESSMENT ORDER DATED 29.12.2006 TH AT IN THE RETURN OF INCOME FILED ON 24.11.1997 ASSESSEE HAS DECLARED A LOSS OF RS.28,06,873/- AND THIS LOSS IS FINALLY REDUCED TO NIL AS PER SAME ASST. ORDER THEN IT WOULD BE A CASE COVERED UNDER CLAUSE (A). THE TAX O N AMOUNT OF ADDITION OF RS.7,42,785/- IN RESPECT OF WHICH THERE IS A FIN DING OF CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME, WOULD BE THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE. THE LD. AR HAS RELIED ON THE DECISION IN HIS OWN CASE IN ASST. YEAR 2001-02 IN I TA NO. 1038/AHD/2010 PRONOUNCED ON 31.12.2010 WHICH IN TUR N HAS RELIED THE DECISION OF THE TRIBUNAL B-BENCH IN THE CASE OF MAX IMA SYSTEMS LTD. VS. ACIT IN ITA NO.3929/AHD/2007 ASST. YEAR 1995-96 PRO NOUNCED ON 11.6.2010. IN THAT YEAR ASSESSEE HAD DECLARED NIL I NCOME IN THE RETURN AND NET TAXABLE INCOME WAS DETERMINED AT RS.3,34,31 4/- EVEN THOUGH AN ADDITION OF RS.27,46,643/- WAS MADE AND WHICH WAS REDUCED TO RS.3,34,314/- BY SETTING OFF OF UNABSORBED DEPRECIA TION OF THE PAST YEARS AT RS.24,12,329/-. ON THESE FACTS THE TRIBUNAL HAS HELD THAT CLAUSE (C) TO EXPLANATION-4 WOULD BE APPLICABLE. THERE IS NO DISP UTE WITH THIS PROPOSITION. THE CASE OF THE ASSESSEE IN THE PRESEN T ASST. YEAR WOULD NOT FALL IN CLAUSE (C) AS RETURNED INCOME IS A LOSS. TH ERE IS A DISTINCTION BETWEEN NIL INCOME AND LOSS RETURNED. CASE OF LOSS RETURN WOULD FALL IN CLAUSE (A) AND CASE OF NIL INCOME RETURNED WOULD FA LL IN CLAUSE (C).THE PRECEDENCE CITED BY LD. AR CANNOT BE APPLIED TO THE PRESENT ASSESSMENT YEAR AS IN THE PRESENT ASST. YEAR ASSESSEE HAS DECL ARED A LOSS. ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 16 21. IN MAXIMA SYSTEMS LTD. (SUPRA) ALSO THE TRIBUNA L HAD INVOKED CLAUSE (C) TO EXPLANATION-4 AS IN THAT CASE ALSO A RETURNED INCOME WAS NIL AND FINALLY ASSESSED INCOME WAS RS.3,28,357/-. 22. WE ACCORDINGLY HOLD THAT THERE IS A CASE OF DEE MED CONCEALMENT OF INCOME BY VIRTUE OF EXPLANATION 1(B) TO SECTION 271 (1)(C) AND TAX SOUGHT TO BE EVADED HAS TO BE CALCULATED BY INVOKING CLAUS E (A) TO EXPLANATION-4 TO SECTION 271(1)(C). SINCE THE CALCULATION DONE BY THE AO IS IN ACCORDANCE WITH CLAUSE (A), THEREFORE, HIS ORDER IS REQUIRED TO BE UPHELD AND THAT OF LD. CIT(A) IS SET ASIDE. 23. AS A RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 4/5/11. SD/- SD/- (M. K. SHRAWAT) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, FIT FOR PUBLICATION. DATED : 4/5/11. SD/- SD/- MAHATA/- J.M. A.M. COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NO.2909/AHD/2009 ASST. YEAR 1997-98 17 1.DATE OF DICTATION 25/4/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 2/5/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..