Commissioner of Income-tax Vs. Nuchem Limited - Court Judgment

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head note: income tax act, 1961 . penalty under section 271(1)(c) - concealment assessment when additions deleted--the assessee field a return of loss. the ao made certain additions but the income still came to be nil. cit(a) however deleted some additions. ao initiated penalty proceedings in respect of the additions. however, the cit(a) set aside penalty on the ground that where in the return, income is negative or nil, penalty cannot be invoked. this view was also upheld by the tribunal. held: even in the absence of any positive income and tax being attracted, penalty for concealment could still be levied. income tax act, 1961 section 271(1)(c) - adarsh kumar goel, j.1. the revenue has preferred this appeal under section 260a of the income-tax act, 1961 (in short, 'the act'), against the order dated december 7, 2007, passed by the income-tax appellate tribunal, bench 'h', new delhi, in i.t.a. no. 1958(del) of 2007, for the assessment year 1995-96, proposing to raise the following substantial questions of law:(i) whether, on the facts and in the circumstances of the case, the hon'ble tribunal is justified in holding that the judgment in virtual soft systems limited v. cit : [2007] 289 itr 83 (sc) will apply even after the insertion of explanation 4 to section 271(1)(c) of the income-tax act, 1961, with effect from april 1, 1976?(ii) whether, on the facts and in the circumstances of the case, the hon'ble tribunal is right in deleting the penalty imposed under section 271(1)(c) of the income-tax act, 1961, on the ground that the total income of the assessee has been assessed at a loss figure?(iii) whether, on the facts and in the circumstances of the case, the hon'ble income-tax appellate tribunal is right in confirming the deletion of penalty under section 271(1)(c) by relying on the apex court decision in the case of virtual soft systems limited v. cit : [2007] 289 itr 83 (sc) though the issue of retrospectivity has been referred to the chief justice of the hon'ble supreme court as per (2008) 217 ctr (sc) 105?2. the assessee filed a return of loss. the assessing officer while deter mining the net income to be nil, made additions to the returned income. the commissioner of income-tax (appeals) deleted some of the additions. the assessing officer initiated penalty proceedings in respect of the additions, which were sustained by the commissioner of income-tax (appeals). on appeal, the commissioner of income-tax (appeals) set aside the penalty on the ground that where the return is of loss and income assessed is nil, there could be no penalty. this view has been upheld by the tribunal, inter alia, in view of the judgment of the hon'ble supreme court in virtual soft systems limited : [2007] 289 itr 83 (sc), wherein it was held that in the absence of any positive income and tax being attracted, penalty for concealment could not be levied.3. learned counsel for the revenue submits that the view taken in virtual soft systems limited : [2007] 289 itr 83 (sc) has since been overruled in a subsequent judgment of the hon'ble supreme court in cit v. gold coin health food private limited : [2008] 304 itr 308.4. in view of the above, the questions proposed have to be answered in favour of the revenue and against the assessee.5. accordingly, we set aside the view taken by the tribunal and remand the matter to the tribunal for decision on the remaining points, which may survive.6. the appeal is disposed of.