COMMISSIONER OF INCOME TAX Vs. A. HARIRAMAN

JUDGEMENT

(1.) THE above tax case appeal is directed against the order of the Income -tax Appellate Tribunal in dated 25.8.2005 made in ITA No. 1678/Mds/1999, raising the following substantial questions of law.

(2.) THE facts which led to the rise of the above appeal by the revenue are as under. The assessee publishes and prints five tamil magazines, apart from doing job works, in the name of M/s. Parvathy Publication and M/s. Parvathy Art Printers. The assessee filed the return admitting a loss of Rs. 9,45,242/ - for the assessment year 1992 -93. On perusal of the account books, the assessing officer came to the conclusion that an attempt had been made to reconcile paper purchases account by making transfer entries and inflation of paper purchases account etc. and treating the purchases of Rs. 3,07,172/ - and Rs. 4,00,723/ - made from Kothandapani Paper Stores and Karpagam Agencies as bogus purchases, added the same to the total income, thereby computing the loss at Rs. 19,874/ - and consequently, initiated penalty proceedings under section 271(1)(c) of the Act. Hence, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), who dismissed the appeal confirming the penalty levied. The Income Tax Appellate Tribunal, on appeal, allowed the appeal in favour of the assessee holding that quantum proceeding and penalty proceeding are separate and because of the quantum, penalty cannot be levied automatically. Hence, the present appeal by the revenue.

(3.) THE words 'in addition to tax, if any, payable him' employed in clauses (ii) and (iii) above and the words 'amount of tax sought to be evaded by reason of such concealment of particulars of his income' employed in clause (iii) of Section 271(1)(c) of the Act are the deciding factors for invoking penalty proceedings under Section 271(1)(c) of the Act. A plain reading of clauses (ii) and (iii) in Section 271(1)(c) of the Act, particularly in the context of the words 'in addition to tax, if any, payable him' employed in clauses (ii) and (iii) would make it clear that the penalty contemplated in all the above clauses is a measure of tax payable by the assessee. In other words, if no tax is payable by the assessee, there would be no penalty which could be levied on the assessee.